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Nebraska Supreme Court Advance Sheets

306 Nebraska Reports

ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.

Cite as 306 Neb. 947

Ash Grove Cement Company, appellee, v. 

Nebraska Department of Revenue 

et al., appellants.

Lyman-Richey Corporation, appellant, v. 

Nebraska Department of Revenue 

et al., appellees.

___ N.W.2d ___

Filed August 28, 2020. Nos. S-19-669, S-19-674, S-19-675.

1. Administrative Law: Judgments: Appeal and Error. In an appeal 

under the Administrative Procedure Act, an appellate court may reverse, 

vacate, or modify the judgment of the district court for errors appearing 

on the record.

2. ____: ____: ____. When reviewing an order of a district court under 

the Administrative Procedure Act for errors appearing on the record, 

the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor 

unreasonable.

3. Administrative Law: Statutes: Appeal and Error. The interpretation 

of statutes and regulations presents questions of law, in connection with 

which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below.

4. Statutes: Legislature: Intent. In construing a statute, a court must 

determine and give effect to the purpose and intent of the Legislature 

as ascertained from the entire language of the statute considered in its 

plain, ordinary, and popular sense.

5. Statutes. A court must attempt to give effect to all parts of a statute, 

and if it can be avoided, no word, clause, or sentence will be rejected as 

superfluous or meaningless.

6. ____. Statutes relating to the same subject matter will be construed so 

as to maintain a sensible and consistent scheme, giving effect to every 

provision.

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

09/04/2020 02:27 AM CDT
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7. Taxation: Presumptions. An exemption from taxation is never 

presumed.

8. Taxation: Proof. The burden of showing entitlement to a tax exemption 

is on the applicant.

9. Statutes: Taxation. Statutory tax exemption provisions are to be 

strictly construed, and their operation will not be extended by judicial 

construction.

10. ____: ____. An exemption from taxation must be clearly authorized by 

the relevant statutory provision.

11. Judgments: Appeal and Error. An appellate court, in reviewing a district court’s judgment for errors appearing on the record, will not substitute its factual findings for those of the district court where competent 

evidence supports those findings.

12. Administrative Law: Statutes. Agency regulations properly adopted 

and filed with the Secretary of State of Nebraska have the effect of 

statutory law.

13. Statutes: Words and Phrases: Appeal and Error. An appellate court 

attempts to give effect to each word or phrase in a statute and ordinarily 

will not read language out of a statute.

14. Statutes: Legislature: Intent. The intent of the Legislature may be 

found through its omission of words from a statute as well as its inclusion of words in a statute.

Appeals from the District Court for Lancaster County: John 

A. Colborn, Judge. Affirmed.

Douglas J. Peterson, Attorney General, and L. Jay Bartel, for 

Nebraska Department of Revenue et al.

Nicholas K. Niemann, Kristopher Covi, and Matthew R. 

Ottemann, of McGrath, North, Mullin & Kratz, P.C., L.L.O., for 

Ash Grove Cement Company and Lyman-Richey Corporation.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, 

Papik, and Freudenberg, JJ.

Funke, J.

The Nebraska Department of Revenue; Tony Fulton, in his 

capacity as Tax Commissioner; and the State of Nebraska (collectively the Department) appeal the order of the district court 

for Lancaster County finding that the production of aggregate 
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ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.

Cite as 306 Neb. 947

by Ash Grove Cement Company (Ash Grove) qualifies as 

“processing” under the Nebraska Advantage Act (NAA), Neb. 

Rev. Stat. §§ 77-5701 to 77-5735 (Reissue 2009 & Cum. 

Supp. 2016).

Lyman-Richey Corporation (Lyman-Richey), a wholly 

owned subsidiary of Ash Grove, separately appeals, challenging the court’s finding that its aggregate production does not 

qualify as “manufacturing” under the NAA and denying its 

claims for overpayment of sales and use tax.

The appeals are without merit. We affirm.

BACKGROUND

In June 2012, Ash Grove and its subsidiaries applied to the 

Department for an agreement with the commissioner for a tier 

2 project as defined under § 77-5725(1)(b). In December 2016, 

the commissioner and Ash Grove executed an agreement for 

the project, which included NAA tax incentives.

Ash Grove’s project encompassed multiple locations, including administrative locations, cement manufacturing locations, 

maintenance locations, and concrete production locations. It 

is undisputed that one or more of the activities at these locations constitute qualified business under the NAA, making Ash 

Grove eligible for tax incentives. Under § 77-5715(1)(c), for a 

tier 2 project, “qualified business” means any business engaged 

in the “assembly, fabrication, manufacture, or processing of 

tangible personal property.”

Because Lyman-Richey is wholly owned by Ash Grove, Ash 

Grove is eligible to include Lyman-Richey in its application 

for NAA tax incentives. The project included nine locations at 

which Lyman-Richey produces aggregate. Generally, aggregate 

consists of sand and gravel. Lyman-Richey sells aggregate 

products used for things like manufacturing concrete, manufacturing asphalt, masonry and mortar, road gravel, and golf 

course top dressing. A significant portion of Lyman-Richey’s 

aggregate products are used by Lyman-Richey or a related 

entity at its concrete production locations.
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ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.

Cite as 306 Neb. 947

To produce aggregate, Lyman-Richey uses excavation equipment at a designated site to expose the water table, forming a 

lake, and then extracts raw slurry from the lake. Raw slurry 

is a naturally occurring mixture consisting of sand and gravel 

particulates, mud, waste products, and debris. Lyman-Richey 

uses dredging equipment to initially break down, clean, and 

segregate sand and gravel. The dredging equipment includes a 

ladder with a “cutter head,” which spins and loosens the raw 

slurry. Pumps transport the materials through inbound pipelines 

to a Lyman-Richey plant for further operations.

The particulates reach classifier tanks that sort the materials 

into different mixtures, producing various aggregate products 

according to the precise “recipe” or specification of customers. The plant equipment has rotary screens, which filter the 

particulates by size. The raw slurry hits the screens that catch 

gravel with dirt and clay in it and discharge mud, rocks, or 

waste. Larger materials are sent through a “log washer” to turn, 

scrub, and break up clay and dirt particles. The sand and gravel 

particulates pass through a dewatering operation, which mixes 

the sand and gravel back together and removes mud and clay 

particles. Pumps return waste products through outbound pipes 

to the lake. Conveyors stockpile the finished sand and gravel 

aggregate products, which are loaded into trucks and weighed 

on a scale. Customers are billed according to weight.

At times, Lyman-Richey uses crushing equipment on the 

sand and gravel. Lyman-Richey has three crushers, which are 

often transported and used to crush aggregate at customer 

locations.

In August 2016, the Department issued Ash Grove a notice 

of deficiency determination, stating that the aggregate production locations are not engaged in qualified business under the 

NAA. Ash Grove timely protested. While the dispute between 

Ash Grove and the Department over the scope of the NAA 

project was pending, Lyman-Richey filed claims for overpayment of sales and use tax for 2011 based on Nebraska’s 

manufacturing machinery and equipment exemption under 

Neb. Rev. Stat. §§ 77-2701.47(1)(a) and (b) and 77-2704.22 
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(Reissue 2018). The commissioner consolidated the matters 

and conducted an administrative hearing lasting 3 days.

Commissioner’s Decision

The commissioner first considered whether the activities at 

the aggregate production locations constitute “manufacturing” 

under the NAA. Neb. Rev. Stat. § 77-2701.46 (Reissue 2018) 

defines “[m]anufacturing,” in part, as “an action or series of 

actions performed upon tangible personal property . . . which 

results in that tangible personal property being reduced or 

transformed into a different state, quality, form, property, or 

thing.” (Emphasis supplied.) Ash Grove and Lyman-Richey 

argued that because they take raw slurry from the ground, 

clean and sort the material, and extract desirable sizes of sand 

and gravel, they transform and reduce the raw slurry into a 

different state, quality, form, property, or thing. The commissioner disagreed and concluded that the aggregate production 

activities cannot be considered “manufacturing.” The commissioner concluded that the aggregate products are not “reduced” 

or “transformed,” but, rather, that they remain sand and gravel 

before and after extraction. The commissioner found that the 

aggregate production activities described mining, not manufacturing. Under 316 Neb. Admin. Code, ch. 1, § 107.03C (2017), 

manufacturing does not include “[m]ining, quarrying, and any 

other activity performed in severing raw materials or other 

property from the ground.”

The commissioner conceded that Lyman-Richey’s crushing 

activities do constitute “manufacturing.” The commissioner 

also found that some, but not all, of the aggregate production 

locations qualified for NAA tax incentives on separate grounds, 

under § 77-5715(1)(e) and (4). Thus, the commissioner granted 

in part and denied in part Ash Grove’s protest.

The commissioner denied Lyman-Richey’s claims for overpayment, finding that because the aggregate production locations are not engaged in “manufacturing,” Lyman-Richey 

failed to prove entitlement to the manufacturing machinery 

or equipment exemption. The court found that the claims for 
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ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.

Cite as 306 Neb. 947

overpayment were for 2011 and that Lyman-Richey failed to 

adduce evidence that crushing occurred in 2011.

District Court Order

Ash Grove and Lyman-Richey separately sought judicial 

review of the commissioner’s final decision pursuant to the 

Administrative Procedure Act, Neb. Rev. Stat. §§ 84-901 to 

84-920 (Reissue 2014 & Cum. Supp. 2016). Upon consolidation of the matters, the issue before the court was whether 

the aggregate production locations were engaged in qualified 

business under the NAA even if they do not crush gravel. 

Following a hearing, the court issued an order reversing the 

commissioner’s determination partially excluding the aggregate 

production locations from the NAA project on the basis that 

they are not engaged in qualified business and affirming the 

commissioner’s denial of Lyman-Richey’s claims for overpayment of sales and use tax.

The court agreed with the commissioner that the aggregate 

is the relevant property for consideration and that the cleaning, sorting, and blending of aggregate does not qualify as 

“manufacturing” under the NAA. The court noted that no 

Nebraska appellate court has decided whether the production of aggregate products is considered “manufacturing” and 

that the decisions of courts in other jurisdictions are mixed, 

but concluded the majority of courts have found that aggregate production does not constitute “manufacturing.” 1 The 

court agreed with the commissioner that removing mud and 

water from the aggregate and blending particles together did 

1 See, Tilcon-Warren Quarries v. Com’r of Revenue, 392 Mass. 670, 467 

N.E.2d 472 (1984); Solite Corp. v. County of King George, 220 Va. 661, 

261 S.E.2d 535 (1980); Rock of Ages Corporation v. Com’r of Taxes, 

134 Vt. 356, 360 A.2d 63 (1976); Iowa Limestone Co. v. Cook, 211 Iowa 

534, 233 N.W. 682 (1930); Inhabitants of Leeds v. Maine Crushed Rock 

& Gravel Co., 127 Me. 51, 141 A. 73 (1928). Compare, Dolese Bros. v. 

State ex rel. Com’n, 64 P.3d 1093 (Okla. 2003); Stoneco, Inc. v. Limbach, 

53 Ohio St. 3d 170, 560 N.E.2d 578 (1990); Kobyluck Bros. v. Planning & 

Zoning Com’n, 167 Conn. App. 383, 142 A.3d 1236 (2016).
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not “reduce” or “transform” the aggregate, and it stated that 

“[t]he aggregate remained what it was before Lyman-Richey 

extracted it from the earth, albeit cleaner and grouped with 

different particles.”

However, the court found that the aggregate production 

locations are engaged in the qualified business of “processing” under § 77-5715(1)(c) of the NAA. In doing so, the court 

rejected the Department’s argument that the terms “manufacturing” and “processing” have the same meaning according to 

an energy source exemption regulation, 316 Neb. Admin. Code, 

ch. 1, § 089.02A (2017). The court found that the regulation 

was not at issue. In interpreting the plain and ordinary meaning 

of the word “processing” as used in § 77-5715(1)(c), the court 

relied upon cases from other jurisdictions to conclude that 

“processing” does not require the reduction or transformation 

of tangible personal property. 2 The court defined “‘[p]rocess’” 

as “‘to subject to a particular method, system, or technique of 

preparation, handling, or other treatment designed to effect a 

particular result . . . ,’” 3 and it found that the activity at the 

aggregate production locations met that definition of “processing.” As a result, the court found that the commissioner erred 

by partially excluding the nine aggregate production locations 

from Ash Grove’s NAA project. Because the court found that 

the aggregate production locations were engaged in the qualified business of “processing” tangible personal property, the 

court did not address other grounds raised by Ash Grove for 

qualification under the NAA.

The district court affirmed the commissioner’s denial of 

Lyman-Richey’s claims for overpayment based on the manufacturing machinery and equipment exemption, finding that 

2 Com., Dept. of Taxation v. Orange-Madison Coop., 220 Va. 655, 261 

S.E.2d 532 (1980); Tetra Tech EC, Inc. v. WI Dept. of Revenue, 373 Wis. 

2d 287, 890 N.W.2d 598 (Wis. App. 2016).

3 Nucor Steel v. Leuenberger, 233 Neb. 863, 873-74, 448 N.W.2d 909, 915 

(1989), quoting Webster’s Third New International Dictionary, Unabridged 

1808 (1981).
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ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.

Cite as 306 Neb. 947

Lyman-Richey failed to prove that its machinery or equipment is used in “manufacturing.” The Department and LymanRichey filed separate appeals. We granted the Department’s 

petition to bypass and consolidated the cases for argument 

and disposition.

ASSIGNMENTS OF ERROR

Lyman-Richey assigns, restated, that the court erred in finding that the aggregate production locations are not engaged in 

“manufacturing” under the NAA and in denying its claims for 

overpayment of sales and use tax based on the manufacturing 

machinery or equipment exemption.

The Department assigns that the court erred in finding the 

aggregate production locations are engaged in “processing” 

under the NAA.

STANDARD OF REVIEW

[1,2] In an appeal under the Adminstrative Procedure Act, 

an appellate court may reverse, vacate, or modify the judgment 

of the district court for errors appearing on the record. 4 When 

reviewing an order of a district court under the Administrative 

Procedure Act for errors appearing on the record, the inquiry 

is whether the decision conforms to the law, is supported 

by competent evidence, and is neither arbitrary, capricious, 

nor unreasonable. 5

[3] The interpretation of statutes and regulations presents 

questions of law, in connection with which an appellate court 

has an obligation to reach an independent conclusion irrespective of the decision made by the court below. 6

ANALYSIS

[4-6] These appeals require us to interpret the meaning 

of the statutory terms “manufacturing” and “processing” as 

4 Woodmen of the World v. Nebraska Dept. of Rev., 299 Neb. 43, 907 

N.W.2d 1 (2018).

5 Id.

6 Id.
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ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.

Cite as 306 Neb. 947

used in § 77-5715(1)(c) of the NAA. We determine a statute’s 

meaning based on its text, context, and structure. In construing 

a statute, a court must determine and give effect to the purpose 

and intent of the Legislature as ascertained from the entire 

language of the statute considered in its plain, ordinary, and 

popular sense. 7 A court must attempt to give effect to all parts 

of a statute, and if it can be avoided, no word, clause, or sentence will be rejected as superfluous or meaningless. 8 Statutes 

relating to the same subject matter will be construed so as 

to maintain a sensible and consistent scheme, giving effect to 

every provision. 9

[7-10] An exemption from taxation is never presumed. 10

The burden of showing entitlement to a tax exemption is on 

the applicant. 11 Statutory tax exemption provisions are to be 

strictly construed, and their operation will not be extended 

by judicial construction. 12 An exemption from taxation must be 

clearly authorized by the relevant statutory provision. 13

With these principles in mind, we consider the relevant 

statutes to determine, first, whether the aggregate production 

locations are engaged in “manufacturing”; second, whether 

Lyman-Richey is entitled to overpayment of sales and use 

tax under Nebraska’s manufacturing machinery and equipment 

exemption; and third, whether the aggregate production locations are engaged in the qualified business of “processing” 

under the NAA.

As our analysis will show, in Nebraska, the term “manufacturing” is specifically defined by statute, and applying the 

7 Id.

8 Id.

9 Id.

10 Lackawanna Leather Co. v. Nebraska Dept. of Rev., 259 Neb. 100, 608 

N.W.2d 177 (2000).

11 Id.

12 Woodmen of the World, supra note 4.

13 Id.
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ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.

Cite as 306 Neb. 947

facts in this case to that definition leads us to the straightforward conclusion that the aggregate production locations are 

not engaged in “manufacturing” under the NAA. And, because 

the aggregate production locations are not engaged in “manufacturing,” Lyman-Richey’s claims for overpayment under the 

manufacturing machinery and equipment exemption are without merit.

However, our analysis in interpreting the word “processing” 

as used in the NAA is more complex. We acknowledge that 

the meanings of “manufacturing” and “processing” are closely 

related. But we determine in this case that the terms are not 

synonymous. This case turns on whether any relevant differences between the terms exist. Here, the terms differ because 

“manufacturing” requires that tangible personal property be 

reduced or transformed into a different state, quality, form, 

property, or thing, and “processing” does not. As we will discuss later in more detail, in the absence of a statute or regulation indicating the contrary, the most natural reading of “proc

essing” is that which subjects property to a particular method 

or treatment in order to prepare such property for market. 

Under the circumstances and issues presented for resolution in 

this case, a clear distinction exists between the terms “manufacturing” and “processing” under the NAA. The aggregation 

production locations are not engaged in “manufacturing”; they 

are engaged in “processing.”

Aggregate Production Not 

Manufacturing

The NAA provides tax incentives to taxpayers that are 

engaged in qualified business and have fulfilled employment and investment obligations in Nebraska. The Legislature 

enacted the NAA, 2005 Neb. Laws., L.B. 312, §§ 23 to 

56, in order to (1) encourage new businesses to relocate 

to Nebraska; (2) retain existing businesses and aid in their 

expansion; (3) promote the creation and retention of new, 

quality jobs in Nebraska, specifically jobs related to research 
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and development, manufacturing, and large data centers; 

and (4) attract and retain investment capital in the State 

of Nebraska. 14

The NAA created six tiers of projects. 15 The incentives for 

tier 2 projects generally include refund of sales and use tax, as 

well as tax credits for reduction of income tax and employee 

withholding taxes. 16 To receive tier 2 benefits, a taxpayer must 

commit to investing at least $3 million and hiring at least 30 

new employees. 17 An interested taxpayer must file an application requesting an agreement with the commissioner. 18

Qualification for incentives under the NAA requires the taxpayer to be engaged in a “qualified business,” 19 which includes, 

among other things, “[t]he assembly, fabrication, manufacture, 

or processing of tangible personal property.” 20 Any term used 

in the NAA shall have the same meaning as used in chapter 

77, article 27, of Nebraska’s statutes. 21 A statute in chapter 77, 

article 27, defines “‘[m]anufacturing’” as “an action or series 

of actions performed upon tangible personal property, either by 

hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, 

form, property, or thing.” 22 “Tangible personal property means 

personal property which may be seen, weighed, measured, 

felt, or touched or which is in any other manner perceptible to 

the senses.” 23

14 § 77-5702.

15 See § 77-5725.

16 See, id.; § 77-5726.

17 § 77-5725(1)(b).

18 § 77-5723.

19 See id.

20 See § 77-5715.

21 § 77-5704.

22 § 77-2701.46.

23 Neb. Rev. Stat. § 77-2701.39 (Reissue 2018).
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ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.

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Initially, the parties disagree as to what tangible personal 

property is alleged to be manufactured. Lyman-Richey contends that it is engaged in manufacturing because it reduces or 

transforms raw slurry into aggregate. The Department, however, contends that the aggregate is merely part of the raw 

slurry extracted from the lake. The commissioner stated that 

raw slurry is essentially ground that has been soaked in a lake 

and described the raw slurry as part of the real estate of the 

extraction site. 24 The district court concluded that raw slurry 

is not the relevant personal property, but that the aggregate is 

the relevant personal property. As a result, the district court 

focused on whether the aggregate was subjected to the activities listed in the statutory definition of “manufacturing.”

We agree with the district court’s conclusion that the relevant tangible personal property is the aggregate. Therefore, 

to show that it is engaged in “manufacturing,” Lyman-Richey 

must show that it reduces or transforms the aggregate into a 

different state, quality, form, property, or thing.

Because Nebraska appellate courts have not previously 

decided whether aggregate production is considered “manufacturing” under § 77-2701.46 for purposes of the NAA, the 

parties cite to definitions of “manufacturing” from other states’ 

case law. 25 In Lyman-Richey’s lead case, Dolese Bros. v. State 

ex rel. Tax Com’r, the Supreme Court of Oklahoma considered 

whether a plant’s method of producing sand constituted manufacturing for purposes of Oklahoma’s manufacturing equipment 

and property exemption. Similar to Lyman-Richey’s aggregate production operations, the plants in Oklahoma extracted 

sand from water passed through plant equipment for screening, classifying, blending, and dewatering. 26 The court found 

that the sand plants were engaged in manufacturing, because 

24 See Wheelock & Manning OO Ranches, Inc. v. Heath, 201 Neb. 835, 272 

N.W.2d 768 (1978).

25 See, Dolese Bros., supra note 1; Solite Corp., supra note 1.

26 See Dolese Bros., supra note 1.
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although natural sand and blended sand were composed of 

the same materials, the blended sand was “‘new and different 

from the form of the material used in making it.’” 27 However, 

Nebraska’s statute is different from Oklahoma’s “68 O.S. Supp. 

1993, § 1352(I),” which defined “manufacturing” to mean 

“‘every operation commencing with the first production stage 

of any article of tangible personal property and ending with the 

completion of tangible personal property having the physical 

properties which it has when transferred by the manufacturer 

to another.’” 28

The Department directs us to the Supreme Court of 

Virginia’s decision in Solite Corp. v. County of King George.

 29

The court in that case found that extracting, crushing, washing, screening, grading, and blending of sand and gravel 

did not constitute manufacturing. The court defined the term 

“manufacturing” as “transform[ing] the new material into an 

article or a product of substantially different character.” 30 The 

court quoted a definition of manufacturing used by the U.S. 

Supreme Court in Anheuser-Busch Assn. v. United States,

 31

which states that manufacturing requires “‘transformation; a 

new and different article must emerge, “having a distinctive 

name, character or use.”’” In Anheuser-Busch Assn., the Court 

determined that producing a cork for use in bottling beer did 

not constitute manufacturing because “[a] cork put through the 

claimant’s process is still a cork.” 32 In Solite Corp., the court 

found that although washing, screening, and grading removed 

impurities and segregated grades of sand and gravel, the 

27 Id. at 1104 (emphasis omitted).

28 Id. at 1101.

29 Solite Corp., supra note 1.

30 Id., 220 Va. at 663, 261 S.E.2d at 536.

31 Id., citing Anheuser-Busch Assn. v. United States, 207 U.S. 556, 28 S. Ct. 

204, 52 L. Ed. 336 (1908).

32 Anheuser-Busch Assn., supra note 31, 207 U.S. at 562.
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operations did not transform the sand and gravel into a product 

of substantially different character. 33

However, Virginia’s definition of manufacturing requiring “a 

product of substantially different character” imposed a higher 

standard than Nebraska’s definition. For example, the court 

in Solite Corp. found that crushing rock did not constitute 

manufacturing, 34 but here, the commissioner has conceded that 

crushing activities constitute manufacturing.

Statutory language is to be given its plain and ordinary 

meaning, and we will not resort to interpretation to ascertain the 

meaning of statutory words which are plain, direct, and unambiguous. 35 To “reduce” is “to diminish in size, amount, extent, 

or number.” 36 To “transform” is “to change the outward former 

appearance” or “to change in character or condition.” 37

Lyman-Richey’s sole argument that it “reduces” or “transforms” the aggregate, and thus meets the definition of “manufacturing” under § 77-2701.46, is that its aggregate production 

physically changes the aggregate. However, the record indicates 

that Lyman-Richey failed to meet its burden to prove that the 

aggregate production reduces or transforms the aggregate.

Ash Grove conducted tests of the aggregate to determine 

whether there were any “mineralogical and physical differences due to Lyman[-]Richey plant operational practices, 

including, but not limited to washing, sieving, blending and 

particle attrition processes.” Ash Grove’s technical center tested 

samples of raw slurry, aggregate product, and road gravel. The 

director of the technical center testified that he did not identify 

any differences in the samples. He testified, “[W]e tr[ied] to 

33 Solite Corp., supra note 1. See, also, Rock of Ages Corporation, supra

note 1.

34 See Solite Corp., supra note 1.

35 Tran v. State, 303 Neb. 1, 926 N.W.2d 641 (2019).

36 Webster’s Third New International Dictionary 1905 (1993).

37 Id. at 2427.
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use our in-house equipment to define what’s the difference 

between slurry and then the gravel samples. We cannot. So we 

said it’s inconclusive.”

Ash Grove engaged an engineering professor to conduct the 

test with equipment used in a laboratory at the University of 

Nebraska-Lincoln. The professor gave varied testimony as to 

whether the testing showed the angularity, texture, or sphericity 

of the raw slurry particles differed from that of the aggregate. 

The professor testified that the raw slurry was more angular 

than the finished product. This was contrary to the report 

submitted to the hearing officer. When questioned about the 

discrepancy, the professor testified that the report was incorrect. Upon further questioning, the professor stated that the raw 

slurry was less angular, but still seemed unclear about whether 

the report was correct.

The record supports the district court’s determination that 

Ash Grove’s tests lacked credibility and that Lyman-Richey 

failed to meet its burden of proving a reduction or transformation of aggregate particles due to its “inconsistent and 

contradictory” evidence. The court found that any scuffing of 

the aggregate particles due to the cleaning, sorting, and blending of aggregate was incidental and not the result of a plan or 

design. The court stated, “Removing mud and water from the 

aggregate and blending the particles together did not diminish 

them; markedly change their appearance or form; or convert 

them into something new. The aggregate remained what it was 

before Lyman-Richey extracted it from the earth, albeit cleaner 

and grouped with different particles.” The court concluded that 

the aggregate production did not constitute “manufacturing” 

under the NAA.

[11] Our standard of review in an appeal from a district 

court’s de novo on the record decision under the Administrative 

Procedure Act is deferential. An appellate court, in reviewing 

a district court’s judgment for errors appearing on the record, 

will not substitute its factual findings for those of the district 
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court where competent evidence supports those findings. 38 Our 

review shows that there was competent evidence in the record 

for the district court’s decision. It was neither arbitrary, capricious, nor unreasonable.

Because we conclude Ash Grove and Lyman-Richey failed 

to sustain their burden to prove that they “reduced” or “transformed” the aggregate under Nebraska’s statutory definition of 

“manufacturing” provided in § 77-2701.46, we need not rely 

on definitions of “manufacturing” from other jurisdictions. The 

district court correctly affirmed the commissioner’s conclusion 

that, independent of crushing aggregate, the aggregate production locations are not engaged in “manufacturing” tangible 

personal property under the NAA.

Lyman-Richey Not Entitled 

to Exemption

Lyman-Richey contends that the machinery and equipment 

at the aggregate production locations is exempt from sales and 

use tax. The Nebraska Revenue Act of 1967 39 imposes a sales 

tax on the gross receipts of retail sales of tangible personal 

property sold in this state 40 and a use tax when tangible personal property purchased outside of Nebraska is stored, used, 

or consumed in Nebraska. 41 The general theory behind the 

sales and use taxes is to impose a tax on each item of property, unless specifically excluded, at some point in the chain of 

commerce. 42 If the item is purchased in Nebraska, the sales tax 

applies. If the item is purchased outside of Nebraska, the use 

tax applies. 43

38 Abay, L.L.C. v. Nebraska Liquor Control Comm., 303 Neb. 214, 927 

N.W.2d 780 (2019); Tran, supra note 35.

39 See Neb. Rev. Stat. §§ 77-2701 to 77-27,135.01, 77-27,222, 77-27,235, 

77-27,236, 77-27,238, and 77-27,239 (Reissue 2018 & Supp. 2019).

40 See § 77-2703(1).

41 § 77-2703(2).

42 Lackawanna Leather Co., supra note 10.

43 Id.
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The Legislature has exempted certain sales and uses from 

taxation. 44 Section 77-2704.22 provides:

(1) Sales and use taxes shall not be imposed on the 

gross receipts from the sale, lease, or rental and on the 

storage, use, or other consumption in this state of manufacturing machinery and equipment.

(2) Sales and use taxes shall not be imposed on the 

gross receipts from the sale of installation, repair, and 

maintenance services performed on or with respect to 

manufacturing machinery and equipment.

[12] “Manufacturing machinery and equipment means any 

machinery or equipment purchased, leased, or rented by a 

person engaged in the business of manufacturing for use in 

manufacturing . . . .” 45 The Department has promulgated 316 

Neb. Admin. Code, ch. 1, § 107.03 (2017), for the manufacturing machinery and equipment exemption, which states in part 

that “[m]anufacturing requires a physical change to the tangible personal property and does not include an increase in the 

value of a product without a physical change.” Agency regulations properly adopted and filed with the Secretary of State of 

Nebraska have the effect of statutory law. 46

Lyman-Richey argued before the district court that the regulation is invalid because it alters the statutory definition of 

“manufacturing” found in § 77-2701.46. 47 On appeal, LymanRichey does not challenge the regulation, but argues that it 

meets the regulation’s physical change requirement. LymanRichey argues that the machinery and equipment at the aggregate production locations are manufacturing machinery and 

equipment under § 77-2701.47(1)(a) and (b).

44 See, generally, §§ 77-2704.02 to 77-2704.30.

45 § 77-2701.47(1).

46 Tran, supra note 35.

47 See Switch & Co. v. Nebraska Dept. of Rev., 278 Neb. 763, 773 N.W.2d 381 

(2009) (administrative agency cannot use its rulemaking power to modify, 

alter, or enlarge provisions of statute that it is charged with administering).
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Lyman-Richey contends that it is “engaged in the business of manufacturing” under § 77-2701.47(1), because the 

machinery and equipment at the aggregate production locations are used in connection with the concrete production 

locations, which are engaged in manufacturing. However, 

as observed by the commissioner and the district court, 

§ 77-2701.47(1)(a) includes “[m]achinery or equipment for 

use in manufacturing to produce, fabricate, assemble, process, 

finish, or package tangible personal property.” (Emphasis 

supplied.) Lyman-Richey does not qualify for the exemption 

under § 77-2701.47(1)(a), because the aggregate production 

machinery or equipment must be used in manufacturing as 

defined in § 77-2701.46.

As explained above, there is competent evidence in the 

record to support the district court’s conclusion that LymanRichey failed to prove a reduction or transformation of tangible 

personal property and therefore is not engaged in manufacturing as defined in § 77-2701.46. It follows that Lyman-Richey 

failed to prove that its aggregate production machinery or 

equipment is used in manufacturing as defined in Neb. Admin. 

Code, ch. 1, § 107.03, which, in addition to requiring reduction or transformation of tangible personal property, requires 

physical change to tangible personal property. There is competent evidence in the record to support the finding that LymanRichey failed to prove physical change to the aggregate and 

thus cannot claim entitlement under the exemption.

Section 77-2701.47(1)(b) includes “[m]achinery or equipment for use in transporting, conveying, handling, or storing 

by the manufacturer the raw materials or components to be 

used in manufacturing or the products produced by the manufacturer.” Lyman-Richey contends that all of the equipment 

at the aggregate production locations is used to transport, 

convey, handle, or store the aggregate products used at the 

concrete production locations. Both the commissioner and 

the district court found that Lyman-Richey’s broad claim, 

encompassing all of the aggregate production equipment, 
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lacks evidentiary support. As the district court articulated, 

the fact that Lyman-Richey sends a significant portion of its 

aggregate to the concrete production locations alone is insufficient proof that all the aggregate equipment is used to transport, convey, handle, or store the raw material. For example, 

Lyman-Richey did not explain why its excavation, dredging, or waste handling equipment would qualify. Under the 

Department’s regulations, the term “manufacturing” does not 

include “[m]ining, quarrying, and any other activity performed 

in severing raw materials or other property from the ground” 48

or “[s]orting, cleaning, or repackaging of property, or breaking 

bulk quantities of property into smaller units or packages.” 49

In addition, Lyman-Richey is not a manufacturer within the 

meaning of “[m]achinery or equipment for use in transporting, conveying, handling, or storing by the manufacturer . . .” 

under § 77-2701.47(1)(b). The aggregate production equipment merely produces one of the three ingredients, along with 

water and cement, used at other locations that manufacture 

concrete. The aggregate’s later use in manufacturing concrete 

does not establish that the aggregate production locations are 

engaged in manufacturing. 50 This assignment of error is without merit.

Aggregate Production 

Is Processing

The final issue to consider is whether the aggregate production locations are engaged in “processing” under the NAA. 

Section 77-5715(1)(c) provides that “qualified business” 

includes “[t]he assembly, fabrication, manufacture, or proc

essing of tangible personal property.” The NAA does not 

define the term “processing” or its relationship with the term 

48 316 Neb. Admin. Code, ch. 1, § 107.03C.

49 316 Neb. Admin. Code, ch. 1, § 107.03J (2017).

50 See NBZ Enterprises v. City of Shakopee, 489 N.W.2d 531 (Minn. App. 

1992).
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“manufacture.” Although § 77-5733 of the NAA authorizes 

the commissioner to adopt rules and regulations necessary to 

carry out the NAA, the commissioner has not adopted any regulations with respect to “processing” as used in the NAA.

In Nucor Steel v. Leuenberger,

 51 this court determined that a 

manufacturer was not entitled to a sales and use tax exemption, 

because it failed to prove that refractories used in steel production were an essential ingredient of a manufactured product. 

We found that even if the refractories were an essential ingredient, the refractories were not used in a product which had 

been manufactured, processed, or fabricated for ultimate sale at 

retail. We stated that “‘[m]anufacture,’” in the ordinary sense, 

means “‘to make (as raw material) into a product suitable for 

use . . . to make from raw materials by hand or by machinery 

. . . to produce according to an organized plan and with division of labor . . . .’” 52 We defined “‘[p]rocess’” to mean “‘to 

subject to a particular method, system, or technique of preparation, handling, or other treatment designed to effect a particular result . . . .’” 53

Here, the district court employed the § 77-2701.46 definition 

of the term “manufacturing,” as “an action or series of actions 

performed upon tangible personal property . . . which results in 

that tangible personal property being reduced or transformed 

into a different state, quality, form, property, or thing.” The 

district court also recited the Nucor Steel definition of the 

term “processing” in its order, as well as quoting a contemporary dictionary definition which states that “‘process’” means 

a “‘series of actions, changes, or functions bringing about 

a result’ or a ‘series of operations performed in the making or 

treatment of a product.’” 54

51 Nucor Steel, supra note 3.

52 Id. at 873, 448 N.W.2d at 915, quoting Webster’s Third New International 

Dictionary, Unabridged (1981).

53 Id. at 873-74, 448 N.W.2d at 915, quoting Webster’s, supra note 52.

54 See Nucor Steel, supra note 3.
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The district court cited to cases from other jurisdictions that 

indicate “processing” does not require the reduction or transformation of personal property. 55 In Com., Dept. of Taxation v. 

Orange-Madison Coop.,

 56 the Virginia Supreme Court held that 

machinery, fuel, and equipment used by a farm cooperative in 

its feed plants were exempt from sales and use tax, because 

the mixing together of grains and additives in the production of feed qualified as processing within the meaning of the 

exemption at issue. In doing so, the court utilized the following 

definition of “processing” from “Webster’s Third International 

Dictionary (1966)”:

“to subject to a particular method, system, or technique 

of preparation, handling or other treatment designed to 

effect a particular result: put through a special process: 

as . . . (1): to prepare for market, manufacture, or other 

commercial use by subjecting to some process (processing cattle by slaughtering them) (processed the milk by 

pasteurizing it) (processing grain by milling) (processing 

cotton by spinning) (2): to make usable by special treatment (processing rancid butter) (processing waste material) (processed the water to remove impurities).” 57

The Virginia court stated that based on this definition of 

“processing,” unlike “manufacturing,” “processing” does not 

require transformation of raw material into an article of substantially different character, but instead requires that the product undergo treatment rendering the product more marketable 

or useful. 58 The court found the mixing together of grain and 

additives in the production of feed resulted in a more marketable and useful product.

55 Orange-Madison Coop., supra note 2; Tetra Tech EC, Inc., supra note 2.

56 Orange-Madison Coop., supra note 2.

57 Id. at 658, 261 S.E.2d at 534.

58 See id.
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Other courts have pointed out that the essential part of 

Webster’s definition of processing is, in substance, to prepare 

raw material for market. 59

Relying on the definition of “processing” from Nucor Steel, 

and having considered other definitions of “processing,” the 

district court here concluded that the plain and ordinary meaning of the term “processing” as it appears in § 77-5715(1)(c) 

does not require reduction or transformation of tangible personal property. 60 The court found that the washing and mixing 

of the aggregate subjected the aggregate to a particular method 

of preparation or treatment, the purpose and result of which 

was to produce desirable aggregate according to the specification of customer demands. While there is no market for raw 

slurry, Lyman-Richey cleaned and blended the aggregate to 

make it marketable. Therefore, the court found that the aggregate production locations are engaged in “processing.”

The Department argues the court erred in finding that “proc

essing” as used in § 77-5715(1)(c) does not require the reduction or transformation of tangible personal property into a different state, quality, form, property, or thing. The Department 

contends, pursuant to Metropolitan Utilities Dist. v. Balka,

 61

that “manufacturing” and “processing” both require the transformation or conversion of materials into a different state 

or form.

In Balka, this court held that a utility district’s use of electricity to transport treated water into storage did not constitute “manufacturing” or “processing” under Neb. Rev. Stat. 

§ 77-2704.13 (Cum. Supp. 1992), which provided a sales and 

59 See Fischer Artificial Ice & C. Stor. Co. v. Iowa Tax Com’n, 248 Iowa 

497, 81 N.W.2d 437 (1957) (citing cases). See, also, Palace Laundry, Inc. 

v. Chesterfield County, 276 Va. 494, 666 S.E.2d 371 (2008) (processing 

requires product to undergo treatment rendering it more marketable 

or useful).

60 Nucor Steel, supra note 3.

61 Metropolitan Utilities Dist. v. Balka, 252 Neb. 172, 560 N.W.2d 795 

(1997).
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use tax exemption for sales and purchases of electricity and 

other fuel sources “when more than fifty percent of the amount 

purchased is for use directly in processing, manufacturing, or 

refining tangible personal property, in the generation of electricity.” Citing an energy source utility exemption under 316 

Neb. Admin. Code, ch. 1, § 089.02A(1) (1994), the commissioner in Balka determined that the electricity used by the utility district to transport already treated water into storage was 

not used for manufacturing or processing. The district court 

agreed, and we affirmed on appeal.

In our analysis in Balka, we quoted a portion of § 089.02A(1), 

stating: “‘[Manufacturing or processing is] an action or series 

of actions performed upon tangible personal property, either 

by hand or machine, which results in that tangible personal 

property being reduced or transformed into a different state, 

quality, form, property, or thing.’” 62 We stated that “[a]lthough 

construction of a statute by a department charged with enforcing it is not controlling, considerable weight will be given 

to such a construction, particularly when the Legislature has 

failed to take any action to change such an interpretation.” 63

We found that § 089.02A(1) is congruous with the generally 

accepted definitions of manufacturing and processing and that 

such definitions are in conformance with § 77-2704.13. We 

cited a treatise stating that “‘[t]he terms “manufacturing” and 

“processing” imply essentially a transformation or conversion 

of material or things into a different state or form from that in 

which they originally existed—the actual operation incident to 

changing them into marketable products.’” 64

The Department argues that based on this court’s accept

ance of § 089.02A(1) and the quote from a treatise in Balka, 

we should understand § 77-2704.13 (Reissue 2018) to define 

62 Id. at 176, 560 N.W.2d at 799.

63 Id.

64 Id., quoting 68 Am. Jur. 2d Sales and Use Tax § 146 (1993).
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processing as requiring transformation of material into a different state or thing. The Department contends that pursuant 

to § 77-5704, this court should apply this reading of processing under § 77-2704.13 to the NAA. We are not persuaded by 

this argument.

Neither this court in Balka nor the Department in its brief 

here considered the entire text of the Department’s energy 

source utility exemption regulation. The full text provides:

Processing or manufacturing is defined as an action 

or series of actions performed upon tangible personal 

property, either by hand or machine, which results in 

that tangible personal property being reduced or transformed into a different state, quality, form, property, or 

thing. Processing includes grain drying and feed grinding in a commercial facility, and the freezing of food 

products. Processing or manufacturing does not include 

repairing property, building erection, cold storage of 

food products, or the preparation of food for immediate 

consumption. 65

Although the Legislature may not have responded to the 

Department’s regulation at the time of Balka, § 77-2704.13(2), 

as amended by 2016 Neb. Laws., L.B. 774, § 4, provides:

Sales and purchases of such energy sources or fuels when 

more than fifty percent of the amount purchased is for 

use directly in processing, manufacturing, or refining, in 

the generation of electricity, in the compression of natural 

gas for retail sale as a vehicle fuel, or by any hospital. 

For purposes of this subdivision, processing includes 

the drying and aerating of grain in commercial agricultural facilities[.]

(Emphasis supplied.)

Even though we agree with the district court’s general 

conclusion that the energy source utility exemption does not 

directly shed light on the meaning of words used in the NAA, 

65 316 Neb. Admin. Code, ch. 1, § 089.02A (2017) (emphasis supplied).
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we find that § 77-2704.13(2) undermines the Department’s 

argument, as the text of the statute does not resemble the rule 

advocated by the Department based on its regulation. The 

Legislature chose not to define “manufacturing” in this statute, 

and it did not define “processing” other than stating that proc

essing includes the drying and aerating of grain in commercial 

agricultural facilities. Based on § 77-2704.13(2), we accept 

that for purposes of the NAA, processing includes drying and 

aerating grain, and reject the Department’s argument that based 

on its regulation and our quote from a treatise in Balka that 

under the NAA, “processing” requires transformation of material into a different state or thing. Neither the Department 66 nor 

this court 67 has the authority to add language to a statute that is 

not there. When questioned at oral argument about its position 

that “manufacturing” and “processing” contain the same meaning, the Department failed to explain how drying or aerating 

grain would result in a reduction or transformation of property. 

Taxpayers dry and aerate grain to prepare the grain for market, 

but such does not transform the grain into a different state 

or thing. 68

The Department also argues that the district court interpreted “processing” too broadly and that as a result, the 

meaning of assembly, fabrication, and manufacturing under 

§ 77-5715(1)(c) become subsumed within processing. The 

Department has a legitimate concern about the breadth of the 

meaning of “processing” under the NAA. If the meaning of 

the term “processing” truly is understood to include everything 

that subjects property “‘to a particular method . . . or other 

66 See, Stewart v. Nebraska Dept. of Rev., 294 Neb. 1010, 885 N.W.2d 723 

(2016); Kerford Limestone Co. v. Nebraska Dept. of Rev., 287 Neb. 653, 

844 N.W.2d 276 (2014).

67 See Nebraska Life & Health Ins. Guar. Assn. v. Dobias, 247 Neb. 900, 531 

N.W.2d 217 (1995).

68 See Matter of Collingwood Grain, Inc., 257 Kan. 237, 891 P.2d 422 

(1995).
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treatment designed to effect a particular result . . . ,’” 69 then 

the term risks swallowing the meaning of other terms listed 

under § 77-5715(1)(c). A court must attempt to give effect to 

all parts of a statute, and if it can be avoided, no word, clause, 

or sentence will be rejected as superfluous or meaningless. 70

Therefore, we must interpret “processing” so that its meaning 

does not interfere with the meaning of the other activities listed 

under § 77-5715(1)(c).

The dictionary definitions aid in our interpretation, because 

they help to provide the plain and ordinary meaning of “proc

essing.” We often turn to dictionaries to ascertain a word’s 

plain and ordinary meaning. 71 In addition, when interpreting a 

statute, the statutory language must be understood in context. 72

Here, the context shows that “manufacturing” and “processing” 

have related but distinct meanings.

The U.S. Supreme Court was confronted with the difference between manufacturing and processing in East Texas 

Lines v. Frozen Food Exp. 73 In that case, the Court considered 

the processing of chickens and found that a chicken that has 

been killed and dressed by removing the feathers and entrails 

is still a chicken, but one that is now ready for market. The 

Court held that it could not conclude that this processing which 

merely makes the chicken marketable turns it into a manufactured commodity.

The Court noted that “‘[m]anufactur[ing] implies a change, 

but every change is not manufactur[ing], and yet every 

69 Nucor Steel, supra note 3, 233 Neb. at 873-74, 448 N.W.2d at 915, quoting 

Webster’s Third New International Dictionary, Unabridged 1808, supra

note 3.

70 Woodmen of the World, supra note 4; Concrete Indus. v. Nebraska Dept. of 

Rev., 277 Neb. 897, 766 N.W.2d 103 (2009).

71 State v. Gilliam, 292 Neb. 770, 874 N.W.2d 48 (2016).

72 See Rogers v. Jack’s Supper Club, 304 Neb. 605, 935 N.W.2d 754 (2019).

73 East Texas Lines v. Frozen Food Exp., 351 U.S. 49, 76 S. Ct. 574, 100 L. 

Ed. 917 (1956).
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change in an article is the result of treatment, labor and 

manipulation. . . . There must be transformation; a new and 

different article must emerge, “having a distinctive name, 

character, or use.”’” 74 The Court further noted that “[a]t some 

point processing and manufacturing will merge. But where the 

commodity retains a continuing substantial identity through 

the processing stage we cannot say that it has been ‘manufactured’ . . . .” 75

The Minnesota Court of Appeals considered the difference 

of manufacturing and processing in the context of gravel 

and sand. 76 The appellate court held that gravel processing 

includes only the crushing, sorting, and washing of gravel 

and not its later use in manufacturing ready-mix concrete. 

“The processing of the on-site gravel is distinct from the 

manufacturing of the gravel and sand with off-site materials 

into concrete. The crushing, sorting, and washing of the virgin gravel is a method of preparation producing a particular 

result. . . . The result is gravel suitable for manufacturing into 

ready-mix concrete.” 77

These decisions provide context from tax law governing 

manufacturing and processing businesses, which we consider 

in interpreting the Legislature’s decision to include both activities under the NAA.

Finally, the structure of § 77-5715(1)(c) indicates that the 

types of activities listed must retain an independent meaning 

that is distinct from the other activities. The list of qualified 

businesses under § 77-5715(1)(c) are connected with the word 

“or.” The word “or,” when used properly, is disjunctive. 78

Statutory context can overcome the ordinary, disjunctive 

74 Id., 351 U.S. at 53.

75 Id., 351 U.S. at 54.

76 NBZ Enterprises, supra note 50.

77 Id. at 535 (citations omitted).

78 In re Application No. OP-0003, 303 Neb. 872, 932 N.W.2d 653 (2019).
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meaning of “or.” 79 Here, context favors the ordinary disjunctive meaning of “or,” indicating that the NAA covers taxpayers engaged in any of the qualified business activities under 

§ 77-5715(1)(c). 80

[13] The Department’s interpretation that “manufacturing” 

and “processing” have the identical meaning is contrary to the 

rules of statutory construction. The Department would have 

“manufacturing” swallow “processing,” leaving “processing” 

meaningless. An appellate court attempts to give effect to 

each word or phrase in a statute and ordinarily will not read 

language out of a statute. 81 It is generally held that the statutes 

exempting property from taxation should be strictly construed 

in favor of taxation, but should not be interpreted unreasonably. 82 “‘[P]rocessing’ has to mean something.” 83

[14] The intent of the Legislature may be found through 

its omission of words from a statute as well as its inclusion 

of words in a statute. 84 If the Legislature had intended for 

manufacturing and processing to have the same meaning, it 

could have included processing in the definition of manufacturing under § 77-2701.46 or separately defined processing to 

79 Encino Motorcars, LLC v. Navarro, ___ U.S. ___, 138 S. Ct. 1134, 200 L. 

Ed. 2d 433 (2018).

80 See, Tetra Tech EC, Inc., supra note 2 (use of different words joined by 

disjunctive connector “or” normally broadens coverage of statute to reach 

distinct, although potentially overlapping sets); Kobyluck Bros., supra 

note 1, 167 Conn. App. at 393, 142 A.3d at 1242 (“[w]e agree with the 

court that [the word ‘or’] suggests that the drafters of the regulations 

intended to attach different meanings to the terms ‘manufacture’ and 

‘processing’”).

81 Doty v. West Gate Bank, 292 Neb. 787, 874 N.W.2d 839 (2016); Werner v. 

Cty. of Platte, 284 Neb. 899, 824 N.W.2d 38 (2012).

82 See, Ho-Chunk Nation v. WI Dept. of Revenue, 317 Wis. 2d 553, 766 

N.W.2d 738 (2009); Sharp v. Tyler Pipe Industries, Inc., 919 S.W.2d 157 

(Tex. App. 1996).

83 Tetra Tech EC, Inc., supra note 2, 373 Wis. 2d at 301, 890 N.W.2d at 605.

84 Kerford Limestone Co., supra note 66.
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require reduction or transformation of property into a different 

thing or state. There is no applicable regulation setting forth 

the meaning of processing in the context of the NAA, and the 

only notable statutory definition of processing does not indicate that reduction or transformation of property into a different thing or state is required.

We hold that in the context of the NAA, “manufacturing” 

and “processing” have distinct meanings. “Manufacturing” 

means “an action or series of actions performed upon tangible personal property, either by hand or machine, which 

results in that tangible personal property being reduced or 

transformed into a different state, quality, form, property, or 

thing.” 85 According to the definition of processing previously 

endorsed by this court in Nucor Steel, as modified by precedent 

from the U.S. Supreme Court, 86 the term “processing” means to 

subject to a particular method, system, or technique of preparation, handling or other treatment designed to prepare tangible 

personal property for market, manufacture, or other commercial use which does not result in the transformation of property 

into a substantially different character.

In this matter, the record indicates that the aggregate was 

subjected to a particular method for cleaning, sorting, and 

blending, but the aggregate was not transformed into a substantially different character. As a result, we conclude that 

the district court correctly found that in producing aggregate, 

without crushing, Ash Grove and Lyman-Richey are engaged 

in the qualified business of processing under the NAA. There 

is competent evidence in the record to support the district 

court’s conclusion that the cleaning, sorting, and blending of 

aggregate according to customer specifications subjected the 

aggregate to a particular treatment which prepared the aggregate for market.

85 § 77-2701.46.

86 See, East Texas Lines, supra note 73; Anheuser-Busch Assn., supra note 

31; Nucor Steel, supra note 3.
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CONCLUSION

Although Ash Grove does not engage in “manufacturing” 

when it produces aggregate without crushing, it does engage 

in the qualified business of “processing” under the NAA. 

The district court did not err in reversing the commissioner’s 

partial exclusion of the aggregation production locations from 

the NAA project. Lyman-Richey failed to prove entitlement to 

overpayment of sales and use tax based on the manufacturing 

machinery and equipment exemption.

Affirmed.