# SUPREME COURT OF MISSOURI en banc

FENIX CONSTRUCTION COMPANY of ) ST. LOUIS and FIVE STAR READY

- ) MIX CONCR E TE COMPANY and ) HORSTMEYER ENTERPRISES, INC., ) ) Appellants, ) ) vs. ) No. SC93915 ) DIRECTOR of REVENUE , ) ) Respondent. )
P ETITION FOR REVIEW OF A DECISION OF THE ADMINISTRATIVE HEARING COMMISSION The Honorable Sreenivasa Rao Dandamudi, Commissioner Opinion issued November 25, 2014 Fenix Construction Company of St. Louis, Five Star Ready

- Mix Concrete Company and Horstmeye r En terprises, Inc., (collectively, Taxpayers ) sought refunds for sales and use taxes paid on materials used to construct tilt

- up concrete
walls. Taxpayers asserted that the materials fell within the section 144.054.2 1 tax exemption for materials used in “manufacturing

... any product.” The d irector denied the refund claims. The Administrative Hearing Commission ( AHC )

1 All statutory citations are to RSMo Supp. 2009.determined that the tax exemption was inapplicable because the tilt

- up concrete walls were not a “product” as that term is used in section 144.054.2. 2 The AHC’s
decision is affirmed.
I. Facts Fenix is a construction contractor that performs concrete construction services, including the construction of “tilt

- up” concrete wall panels. Tilt

- up work involves casting concrete and reinforced st eel wall panels on the ground and then tilting the wall panels into position as walls of the building. Tilt

- up wall panels
are made at the construction site because it is cost

- prohibitive to construct them
off

- site and transport them to the construction s ite

. According to Fenix, each panel is custom made for the specific job in accordance with the detailed specifications of the customer. In 2011 and 2012, Taxpayers filed sales tax refund claims for their purchases of materials used in the tilt

- up pro cess. The d irector of revenue denied those claims. The AHC also denied the refund claims. Taxpayers filed a petition
for review.
II. Standard of Review
The AHC ’s decision will be affirmed if: (1) it is authorized by law; (2) it is supported by compete nt and substantial evidence based on the whole record;

2 Taxpayers filed separate refund claims with the d irector of r evenue. Each claim was denie d. The AHC consolidated the claims. This Court has jurisdiction because resolution of this appeal requires construction of the revenue laws of the s tate of Missouri. Mo. Const. art. V, sec

. 3.(3) mandatory procedural safeguards are not violated; and (4) it is not clearly contrary to the reasonable expectations of the legislature. Section 621.193. This Court reviews the AHC’s interpreta tion of section 144.054.2 de novo. Aquila Foreign Qualifications Corp. v. Dir

. of Revenue , 362 S.W.3d 1, 3 (Mo. banc 2012). Tax exemptions are strictly construed against the taxpayer. Id. The taxpayer bears the burden of proving clearly and unequivoca lly that the exemption applies. Id. Any doubt regarding the applicability of an exemption is resolved in
favor of taxation. Id

. III. Analysis Section 144.054.2 provides s ales and use tax exemptions for “materials used or consumed in the manufacturing, processing, compounding, mining, or producing of any product ....” Thus, Taxpayers must demonstrate, clearly and unequivocally, that the tilt

- up concrete wall panels are a manufactured product. The legislature has not defined the word “product” as it is used in chapter
144. 3 “Absent a statutory definition, the primary rule of statutory interpretation is to give effect to legislative intent as reflected in the plain language of the statute.”

3 The other issue that was presented in this case to the AHC was whether construc ting tilt

up walls constitutes “ manufacturing, processing, or produci ng” for purposes of Section 144.054.2. Sec tion 144.054.2 contains no language pertaining to construction. Rather, the plain and ordinary language of section 144.054.2 shows intent to exempt materials used in the manufacturing process in an industrial setting, as opposed to construction sites. Had the legislature intended to exempt construction activities , it could have included terminology referencing construction activities as it has done in other statutes included in chapter 144. Because the AHC chose not to address this issue, and this Court a ffirms the determination that a tilt

- up wall is not a “ product ” within the meaning of sec tion 144.054.2, it is not necessary to resolve that issue in this case.Brinker Missouri, Inc. v. Dir. of Revenue , 319 S.W.3d 433, 43 7

- 38 (Mo. banc 2010). When interpreting a statutory tax exemption, the interpretation must adhere to the requirement of strict construction. Balloons Over the Rainbow, Inc. v. Dir. of Revenue , 427 S.W.3d 815, 825 (Mo. banc 2014). Although chapter 144 do es not define the term “product,” this Court has, for nearly 20 years, held that the term “product” means “an output with a market
value.” Mid

- America Dairymen, Inc. v. Dir

. of Revenue , 924 S.W.2d 280, 283 (Mo. banc 1996); see also Int ’l Bus. Mach ines Cor p. v. Dir. of Revenue , 958 S.W.2d 554, 557 (Mo. banc 1997 ) , E& B Granite, Inc. v. Dir

. of Revenue, 331 S.W.3d 314, 316 (Mo. banc 2011). To prove that a particular good or service constitutes a “product,” the taxpayer does not have to actually market the p roduct , but “it is incumbent on the taxpayer to prove the existence of a market, whether or not the product is actually marketed by the taxpayer.” Mid

- America Dairymen , 924 S.W.2d at 283. A “market” is “a sphere within which price

- making forces operate and in which exchanges in title tend to be followed by actual movement of goods.”
W EBSTERS ’ S T HIRD N EW I NTERNATIONAL D ICTIONARY 1383 (1966). A strict construction of the term “product” as used in section 144.054.2 indicates that the fundamental quality defining a product as an “output with a market value” is that the price of the alleged product is set primarily by competing buyers and sellers. The fact that the price of a product is set primarily by competing buyers andsellers necessarily implies that a good or service qualifies as a product only if it can be marketed to various buyers. The record in this particular case demonstrates that Taxpayers have not proven the existence of a market for their tilt

- up concrete walls. At the AHC hearing, Fenix’ s founder testified as follows: Q: Now, given that each wall panel is designed for a particular building, you can’t sell that wall panel to any other person could you?
A: No. Q: And there is no market of people going

– somebody doesn’t dri ve to your site and look at [the] left corner of that bu i lding and say that’s amazing. I’ll offer you double what the contractor is paying you for that panel? A: That’s never happened. Q: And it is really unlikely to happen, isn’t it, because that pan el is designed for that particular building isn’t it?
A: Yes. The foregoing testimony demonstrates that Fenix’s construction of tilt

- up concrete wall panels for particular buildings does not yield a marketable product for purposes of section 144.054.2 . The walls are constructed on site, can be used only for that particular building , and have no t demonstrated actual or potential market value to any buyer other than the building owner. The tilt

- up wall panels are not a product pursuant to section 144.0 54.2

. 4

4 Taxpayers assert that the fact that Fenix can sell its tilt

- up walls demonstrat es the existe nce of a market. The fact that Fenix can sell its walls may demonstrate a market forIt was “incumbent on [Taxpayers ] to prove the existence of a market” for
its t ilt

- up wall panels , and Taxpayers did not do so. See Mid

- America Dairymen , 924 S.W.2d at 283. The AHC det ermined correctly that Taxpayers did not
establish that Fenix’ s tilt

- up concrete wall panels are a “product” for purposes of
section 144.054.2. 5 The AHC’s decision denying the refund claim is affirmed.

_________________________________ RICHARD B. TEITELMAN, Judge

All concur.

Fenix’s construction services . The refund claim is, however, premised on the assertion that tilt

- up walls are a marketable “product.” As noted, Taxpayers have not demons trated a market for the walls themselves, each of which is designed for a particular part of a particular building and has no demonstrated use beyond the specific construction project for which the wall was constructed.

5 This result is not inconsistent with E& B Granite

. 331 S.W.3d 314 (Mo. banc 2011). In E& B Granite , the issue was whether granite countertops were “products” so that the taxpayer was exempt from sales and use taxes on its purchase of granite slabs used to make the countertops. Id. at 315

. The d irector conceded that the countertops were “output[s] with a market value” and, instead, argued that the installed countertops were not products because they were not tangible personal property. Id. at 316

. E.B. Granite did not analyze whether the countertops were “outputs with a market value.”