### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE March 17, 2004 Session NORANDAL USA, INC.

v. RUTH E. JOHNSON , COMMISSIONER OF REVENUE FOR THE STATE OF

TENNESSEE
An Appeal from the Chancery Court for Davidson County No. 01-1226-III Ellen Hobbs Lyle, Chancellor

No. M2003-00559-COA-R3-CV - Filed August 20, 2004

This is a sales tax case. The plaintif f owns an

aluminum sheet and f

oil manufa

cturing plant. Located in the plant are two multi-tonroll grinders. In 1987, the defendant commissioner of revenue took the position that the roll grinders and roll grinder supplies were exempt fromsales tax, b ecause the roll gr

inders c onstitu

ted “indu strial machinery,” which were exempt. In 1995, howeve r, the department

of revenue conducted an audit of the plaintiff and changed

its position, concluding that the roll grinders were “equipm ent used for maintenance,” which is an exception to the industrial machinery

exemption. Accordingly, the plaintiff was assessed for sales tax on

roll grinder supplies purchased

between 1995 and 1998. T he plaintiff paid the assessment under protest and filed the instantlawsuit, seeking to recover the sales tax paid on roll grinder

supplies for the audit period. The trial court upheld the decision of the department

of revenue, concluding that the roll g rinders were “equipment

used for maintenance.” From that order, the plaintiff now a ppeals. We affirm, finding that the rol l grinde

rs fit with

in the “e quipment u sed for maintena nce” exc eption an

d that, consequently, roll g

rinder supplies are subject to sales tax.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court is Affirmed

H OLLY M. K IRBY , J., delivered the opinion of the Court, in whichW. F RANK C RAWFORD , P.J., W.S., and A LAN E. H IGHERS , J., joined.

Gerald B. Kirksey

and Timothy H. Nichols, Br entwoo d, Tennessee, for the appe llant, Norandal USA, Inc.

Paul G. Summers , Att orney General and Rep orter, Michael E. Moore, Solicitor General, and Michae l W. Catalano, Associate Solicitor General, Nashville, Tennessee, f or the appelle e, Ruth

E. Johnson, Commissioner for the State of Tennessee.1 The reas on th e la rge a lumi num bl ocks a re cal led “ sows” is not a pparent in t he re cord.
-2- OPINION

OnJanuary

1, 1979, Pla

intiff/Ap pell an t Norandal USA, Inc. (“ Norandal”) acquired an aluminum sheet an

d foil manu

factur ing plan t (“the p lant”) in

Huntingdon, Tennessee. At the pla nt, Norandal operates two large machines called “roll g rinders,” which cost a totalof approximately $4 million. An understanding of the function of the ro ll grinde

r in the a luminum man

ufactur ing proc ess is necessary

to the resolution of the issues in this case.

The processingof

aluminum sheets beg

ins with la

rge al uminum blocks, calle d sows. 1 Sows
are melted at precise temperatures, and the molten a lum inum is deposited onto the surface of two large caster

rolls of a casting machine . The ca ster roll s rotate i n opposite

directions. A ty

pical pa ir of caste r rolls ha ve a .22 in

ch gap betwee n them. As t

he alumin um flows th

rough the caste

r rolls, the liquid aluminum is cooled and bec omes a solid shee

t. The soli d sheet, w

hich is stil l very

hot, exits the cast

er rolls a nd is wound

into a lar

ge coil . This is a c ontinuous p rocess . The casting machine generally

stops casting aluminum only when the caster rolls are change d or when the caster needs maintenance. During the casting proce ss , a liquid solution of water and graphite is continuously applied to the cast

er rolls. The soluti on lubric ates the surfac e of the c aster ro lls so that t he metal, which is changing from a liquid to a solid state, will not stick to the rolls. The lubrication also prevents the production of

an uneven or substandard product. The lubrication solution is continuously filtered and re-circulated and flows over the surf ace of the caster

rolls through microscopic grooves g round into the surface of the caster rolls. The micr oscopic grooves are cre ated by the roll g ri nders , the subject of this lawsuit. The roll grinders also create a camber or slight c onvex curv ature in the rolls, making the rolls slightly larg er in diameter in the center. Over time, bec ause of the extreme heat and force placed on the caster rolls during the manufa cturing proces s, the mi croscopic grooves wear
aw ay, and the c aster ro lls tend to lose their camber. Consequently , they must be reg round by t he roll grinde r on a re gular b asis.

Once the aluminum sheeting has been wound into coils, the coils are

cooled a nd stored until further process ing. All c ast coil in the plant is initially

process ed by

cold rolli ng in the mill known
as the 911 Sheet Mill (“911 Mill”). Each pass through t he 911 Mill red uces the thickness of the aluminum sheeting

by a bout fifty percen t (50%). The rolli

ng proc ess throu

gh the 9 11 Millmay

not be continuou s; it may

be inter rupted by heat tr ea tment in large ovens located at the plant, which modifies the grain structure in the aluminum sheets.

The 911 Mill uses four rolls, called mill rolls. T

wo of the rolls, whi ch conta

ct and compress the aluminum, are work rolls. The other two rolls, called back-up rolls, are large r, and support

the work rolls. Bo th the wor

k rolls an d the back-up roll s have micro scopic grooves on their surface. They ar e initially ground by

the roll grinders and must be periodically reground.2 The roll grinders create between 60 and 320 groo ves per inch on the roll surfaces, depending on the

desired fini sh on the aluminum. The more peaks and valleys ground on a roll, t he smoother the appearance of the finished pro duc t. The caster ro lls have fe wer p eaks a nd va lleys per inch tha n the o ther ro lls, while the 9 22 M ill rolls gene rally have the mo st peak s and valleys p er inch and m ake a smo other finished p rod uct.
-3- Ge ne ra ll y, the alumin

um sheetin

g and f oil must be further processed on another mill, the 921 Mill and/or th e 922 Mill. These a re alsocold rolling mills with two working rolls and two back-up rolls. These ha

ve micro sc opic gr ooves on their surface as well. As on the 911 Mill, both the working rolls and

the back -up rolls a re initia lly g round by the roll g rinders and must be perio dically reground.

Inorder to be ground

by t he roll g rinders , the rolls

must be re

moved fr om the ca ster or mi ll by a fork lift and taken to the roll grinder. The r oll grinders are located in an are a adjacent to the maintenance area. T

he micro scopic g

rooves, also called “peaks and valley s,” that are ground

onto the surfac e of the r

olls are c oncentr

ic and pe rpendic ular to the

axis of the r

olls. 2 If t he rolls w ere polished completely smooth, or if the g rooves w ere not g

round co ncentri cally

around the rolls, the caster or mill would not have the proper amount of “bite” when the lubricating liquid is introduced onto the s urface

of the ro ll s. In

that cas e, the metal would s lide on the rolls, mak

ing the process difficul tto start and resulting in impermissible variations in the thickness of the product and a reduction in production speed.

As we ha ve in di ca te d, bo th ca st er ro ll s a nd mi ll ro ll s a re gr ou nd in it ia ll y be fo re th ey a re pl aced into ser vice. Caster rolls must be reground after a bout two to four weeks of use. On the mills, the work

ing roll s are ground after only 60 to 72 hours of use, while the back-up rolls are gener ally regro und ever y th ree to f our months . On rar

e occas ions, the c aster a

nd mill rolls must be reground in order to remove a surface def ect caused by

damage to the roll, or they may be re ground with a partic ular con centra tion of g rooves to meet cus tomer de

mand for a certa intype of finish on the product. The roll grinde rs never directly touch the

finished product. The comp lete manufacturing process f

rom molten

aluminum to

finished product t akes abo ut four to six weeks.

Under Te nn es se e s al es ta x s ta tu te s, “i nd us tr ia l m ac hi ne ry” is exempt from sales tax. Tenn. Code Ann. § 67-6-206(a) (2003). I n 1984, the Tennessee legislature amended thesales tax statutes to redef ine the te rm “indus trial mac

hinery ” as follows:

Ma ch in er y, apparatus and equipment with all associated parts, appurtenances and
access orie s, inc luding hydra ulic fluids, lubricating oils, and greases nece ssary for op e rationand maint

enance , repair

parts an

d any necessa ry repair or taxable installation labor

therefor, which is necessary to, and primarily for , the fabrication or processingof tangible personal property for resale and consumption off the premises

.

. . .3 Th e curr ent ver sion o f “industria l mach inery,” c odified at sectio n 67 -6-10 2(a) (14 ), is virtually ide ntical to

the form er ver sion, co dified a t section 67-6 -102 (13 )(A) ( Sup p. 20 01)

. -4- Tenn. Code Ann. § 67-6-102(a)(14)(A) (2003)

. 3 The legislature has also identified two exceptions to the indus tria l mac hinery

exemp tion f

rom sa les ta x:
Such industria

l machinery neces sary to and primar ily for the fabr

ication or processing of tangible personal property for resale and consumption off the premises . . . does notinclude machinery, apparatus and equipment u sed prior to or afte r equipment exempted by s ubdivis ion (a)(1 4)(D)( ii) , and does not include equipment used for maintenance or the convenience or comfort of worke rs[.]

Tenn. Co de . A nn . § 67 -6 -1 02 (1 4) (F ) ( 20 03 ). Th us , a ny ma chinery that is “use d prior to or after” certain types of industrial machiner y, as well as mac

hinery that can be considered

“equipment used for m ainte

nanc e” of indus tria l mac hinery , is su

bjec t to sa

les ta x.
Since 1984, Norandal has taken the position with the Defendant/Appellee Commissioner of Rev enue for the State of Tennessee (“Commissioner”) that roll g rinding equipment is “industrial
ma ch in er y” under

the sales tax statute, and, therefore, the machines and the supplies are exempt from sales tax. Consequently, Noranda l has not pa

id sales ta xes on roll g

rinding equipmen

t and suppl ies. In1987, the Tennessee Dep art ment of Revenue (“Department”) conduc ted a compliance audit on Norand al for the period from January 1984 through December 1986. The Depa rtment’s auditor disallowed

Norandal’s claimed exemptions on various items, including exemptions o

n rollgrinding supplies. The audi

tor took th e position

th at the roll grinding supplies were not exempt under the sales and use tax exemption for industrial machinery. N orandal disputed this, and on December 17, 1987, a taxpay

er conf erence was held . On Dec ember 23 , 1987, Ass ist ant Commissioner Joe Huddleston(“Huddleston”) issued a letter to Norandal in which he concluded that the “roll grinders . . . qualify as industrial machine ry exempt from tax.” During the next seven years, in reliance on Huddleston’s 1987 letter, Norandal did not pay sales tax on roll gr

inding su pplies. In 1995, the Department audited N orandal for the period from January 1, 1991, th

rough A pril 30, 1995. On July 27, 1995, Norandal received a letter fr om Herbert L. Tate (“ Tate”) , Tax Audit M anage r of the D epartme

nt of Reve

nue, in wh

ich Tate took a position different from the position taken by Hu ddleston i n his 1987 le

tter. I n his July 1995 lette

r, Tate concluded

that roll grinding supplies are maintenance items, not industrial machinery, and that they are, therefore, taxable. In a subsequent letter date d August 29, 1995, Tate informed Norandal that taxes on roll grinders and supplies would only be assessed prospectively

from July 27, 1995.

OnAugust 25, 1995, Norandal requested an informal conference

to discuss Tate’s letter of July 27, 1995. Though other issues were resolved in the meeting, the roll g rinder supply issue was notresolved. Almost a yea r later, on July 23, 1996, Norandal requested a Department Letter Ruling on the issue.4 Though this amount is relat ively modest, Norandal informed the t rial court t

hat its decision was important becaus e it

wil l gu ide bot

h th e Commis sion er an d Norandal as t o the tax abil ity of roll gri nders purch ased a nd use d by Norandal at t

he Hunt ing don pla nt a s par t of a pla nt e xpans ion t

hat occurr ed af

ter the audi t per iod.
-5- OnJune 6, 1997, the Department issued the requested letter ruling. The ruling concluded that roll grinders were

not exempt from sales tax as industrial machinery , and that therefore, roll grinding supplies were likewise not tax exempt. Norandal later met with the Department regarding the letter rulin g, and the D epartme

nt submitte d to Norandal a series of questions regarding Noranda l’s use of the roll gr

inders. On Novembe

r 3, 1997, Noranda

l respond ed to the D epartm en t’s que st io ns. In addition, Norandal provided the Department with logs of roll g rinder usage for the period fr om March 21, 1998, through May 9, 1998.

On Ja nuary 26, 1999, the De partment issued a Notice of Assessment to Norandal. Th e original amount of

the asse ssment wa s $824,328 .55, but a later reco nciliation concluded that Norandal had timely

paid all but $27,020 in state tax and $10,293 in local option sales tax. The total amount of tax and i

nterest was $50,038, which Norandal paid. This total included $4,926.87 for taxes and inter

est on rol l grindi

ng mate rials and supplies. This is the tax which Norandal disputes.

OnApril19, 2001, N orandal filed this lawsuit, seeking to recover the $4,926.87 in disputed sales tax paid on roll grinding supplies for the period beginning May 1, 1995, throug h April 30, 1998 (“the audit period”). 4 The parties filed cross-motions for summary judgment. The parties agree d that the material facts were not in di spute, and that the issue is one of statutory c onstruction and the applicationof the statute to the undisputed facts. The parties filed a Joint Statement of Undisputed Material Facts, including numerous evidentiary e xhibits which were notch al le ng ed by e it he r p ar ty. Each party also submitted a

Supp lemental Statement of Undisputed Material Facts, also without objection. On October 31, 2002, the trial court heard oral ar gument on the parties’ motions and took the matte r under a dvisemen t.

OnJanuary 31, 2003, the trial court issued a memorandum op inion de nying Nor andal’s motion and granting

the Commissioner’s motion for summary judgment. The tr ial court held that the roll grinders and roll grinder supplies wer e “equipment used for maintenance” and, the refo re , were taxable. T

he trial c ourt rea soned tha t the roll g

rinders were to o remote from the industrial machinery

to qualify

for the “ industria

l mac hinery

” exemption

from sale s tax. I

n respons e to Norandal’s argume

nt that the roll gr inders c onstitute

machinery, not e quipment, the trial cou rt held that the “equipment used for maintenance” exemption was intended to extend to machinery or ap paratus that is used on another item to render the latter ready or competent for service and in a state of efficiency

and upkeep. Because the roll g rinders make the rolls read y o r competent for service or action, the trial court found that they fit within the definition of “equipment used for maintenance.” The trial court further noted that the roll grinders we re located in an are a adjac ent to the maintena

nce are a of the p lant, sep arate from the manufacturing

process, indicating that they were intended for maintenance. Based o n those fac tors, the trial court held that the roll grinders fit the definition of “equipment used for maintenance,” and, c onsequently, they do not qualify as industrial
ma ch in er y. Becau se roll

grinders do not qualify

as industrial machinery , the trial court reasoned, the-6-

roll g rindi ng supplies are not exempt as being necessary for the operation an maintenance of industrial machine

ry . In li ght of it s holding , the tr ial cou rt found it unnecessary to reach the Commissioner’s alternative argument that the roll gr inders were not

exempt from taxation be cause they constituted

mach inery or e quipment “used prior to or after” industrial machinery . Norandal now appeals the trial court’s decision.

Onappeal, Norandal argue s that the trial court

erred in determining that roll grinders do not constitute industrial machinery. Norandal contends that the Commissioner’s initial 1987 decision to exempt roll grinder supplies from sales tax was co rrec t, and that courts must adhere to that decisionunless it w as paten tly wrong. Noranda

l next arg

ues that the trial c ourt incorrectly determined

that roll grinde rs constit ute “equ ipment use d for main

tenance ,” beca

use roll grinders are
ma ch in er y, not e quipm ent. Since the exception applies only to equipment, not machiner y, the exception would not a

pply to roll g rinders

. Noranda

l further maintains

that the r oll grinders are not used for maintenance. Rather, N orandal asserts t he roll g rinders ’ primar

y f unction is a part of the usual manufacturing process, and the y a re rar ely used to repair damaged rolls. Finally , Norandal claims that the trial court erred in rely ing on the fact that the roll grinders ar e located near the maintenance shop in

the plant in re aching

its conclu sion. I

n respons e, the Comm

issioner a rgues t hat,
even if the trial court erred

in determining that roll grinders are “ equipment used for maintenance,” Norandal is still not e

ntitled to a

n exemption , becau se ro ll gr in de rs co ns ti tu te “m ac hi ne ry, apparatus and equipment used

prior to o r after

” the man ufactur ing proc ess.
We review the grant o f summary judgmen t de novo on the record, with no presumption of
correctness. Union Carbide Corp. v. Huddleston , 854 S.W.2d 87, 91 (Tenn. 1993). In construing
a statute, we must

“ascertain and give eff

ect to the legislature’s intent without unduly restricting or expa ndin g a

statute’s coverage bey

ond its intended scope.” Owens v. Sta te , 908 S.W.2d 923, 926 (Tenn. 1995). We m

u st apply the “natural and ordinary meaning of the languag e used . . . in the statute, unless an ambiguity r equires resort elsewhere to asce rtain l egislative intent.” Browder v. Morris , 975 S.W .2d 3 08, 311 (Tenn. 1983). Tax statutes are genera lly construed in favor

of the taxpayer. See Moto-Pep, Inc. v. McGoldrick , 303 S.W.2d 326, 3 30 (T enn. 1957) . How ever , “[i]n
a suit aga inst t he State by

a taxpay er claim ing exemp tion from t

axation, th e taxing s tatute is construed strictly agains t the taxpay

er. The burden is on the taxpa

ye r to estab li sh his exemption. The presumption is agai nst the exe mp tion, and exemption from taxation will not be read into a taxing statute by implication.” Tennessee Farmers’ Coop. v. State ex rel. Jackson , 736 S.W.2d 87, 90 (Ten n. 198 7) (qu otin g Hamilton Nat’l Bank v. McC

anless , 144 S.W.2d 768, 769-70 (T enn

. 1940)). The p la intiff has “the heavy and exacting burden of proving the er ror in the assessment.” Stratton v. Jackson , 707 S.W.2d 865, 867 (Tenn. 1986).

Norandal first ar

gues tha t t he Commissioner’s initial 1987 conclusion that roll grinders constitute industrial machinery w

as consistent with the legislative intent to enlarge the meaning of the term. Norandal notes that the 1987 decision remaine d unchall enged

until 1995, and comme

nts that the 1995 r

eview c oincided

with a cha

nge in p olitical a

dmi nistratio ns and a search by the Department

of Revenue for

additiona

l source s of reve

nue for t he State. Noranda

l claims th at this Courtmust adhere to the Department’s long-standing interpretation of the statutes unless it was-7-

patently wrong. Because the statute r emained unchanged betwee n 1987 and 199 5, Noranda l contends , there was no reason for the De partmen t to change its position on roll grinders. Rather, Norandal argue s, the Commi ssioner s hould hav e given its 1987 inte

rpreta tion of the

statute persuasive weight

unless it was palpably er

roneous. See New England Mut. Life Ins. Co. v. Reece , 83 S. W. 2d 2 38, 242 (Te nn. 193 5). Inresponse , the Commis sioner c laims that the legislative history of the statute does not support the interpretation advocated by Norandal. Rather, in amending the st atute in 1984 to redefine the term “industrial machinery ,” the legislature intended to clarify the definition and promote a more consistent interpretation of the term.

This Court has r

ecently discusse d the 1984

modifica tion of the

defin ition of

“industrial machinery.” East

man Ch em. Co. v. Chumley , No. M2002 -021 14-CO A-R3 -CV, 2004 W L51822 (Tenn. Ct. App. Jan. 12, 2004). The Eastman court noted:

Prior to 1984, the industrial machinery e xemption was limited to “machinery . .

. whichis directly and

primarily utilized in fabricating or processing tangible persona l propert y for res ale.” I

n 1984, th e Ten nessee General Assembly amended the exemption to cover

“machinery , apparatus and equipment with all a ssociate d parts, appurtenances and accessories . . . which is necessary to, and primarily for, the fabrication

or processing of

ta ngible personal property for resale and consumption off the premises.”

Id. at *6. Therefore, if any “machinery , apparatus [or] equipment” fits within the definition of the 1984 version o f the stat

ute, then it is “indus trial machine ry” unless it fits into an exception. The Eastman c ourt , citing to statements of the sponsor of the amendment, Senator Milton Hamilton, explained that the original definition of “industrial machinery ” had been subj ectto varying interpre tations. Prior

to the amendment, Senator Hamilton stated, in order to be deemed “industrial machinery,” the mach ine was generally required to touch the finished product during the manufacturing

process. T he new d efinition, Senator Hamilton claimed, would “clarify the definition
so that industries coming into Tenne ssee, or expanding

inthis state, would have a uniform standard for determining whether their machiner y will be taxed.” Id.

From a review of the legislative history, it is apparent that the 1984 amendment broadened the definition of “industrial machinery ” to the extent that it vitiated the requirement that the machine
come into physical contact wit h t he f in is hed pro duc t i n or der to fit wit hi n t he d efi ni ti on. Inaddition to broadening the definition , however, the amendment also put parameters on it by excluding “equipment

used for maintenance”and “machinery , apparatus and equipment used prior to or after” fromthe definition of

exempt industrial machinery. The legislative discussions cited by N orandal do not relate to these exceptions. Therefore, while it is helpful to an understanding of the underlying purpose of the 1984 amendments, the legislative history does not speak to the issues in this case. In addition, although we take note of the Commissioner’s initial 1987 interpretation of the statute, we are not bound by it simply because it remained unc hanged for

sev era l yea rs. In Carr v. Chrysler Credit Corp. , 541 S.W.2d 152 (Tenn. 1976), the taxpayer ar gued that it was entitled to an-8-

exemption from state transfer tax that it had been receiving for six y

ears until the taxing au

thority changed its position. The parties agreed that the chang e in the taxing authority’s interpr etation was notthe result of a

change in the wording of the applicable statute. Carr , 541 S.W.2d at 154. The taxpayer argue d that, if

the statute were deemed to be ambiguous, then the pr ior interpretation of the exemption statute should

have been given controlling weight because it had bee n established for s ix ye ars. The Tennessee Supreme Court rejected that position. The Cour t made it c lear tha t, while great weight should be given to an administrative decision interpre ting a ta xing statu te, “it is p ossible for offi cials charg ed with the interpre tation and administr

ation of r evenue laws to change their interpretations and to re-examine them, despite previous interpretation and construction extending
over a period of many y

ears.” Id. at 155. The Court went on to conclude, “We, therefore, feel that
we are obligated to construe the statute in question accor ding to the legislative intent, as best it can be as certained from the words used. Prior administrative interpreta tions and rules of statutory constructionare merely

aids in attempting to arrive at the leg islative i ntent, an d no one of

them is controlling.” Id. at 156. Ultimately, the Court held that the statute was a mbiguous, and that the interpretation disallowing the exemption was the proper one. Id.

Inthis case , we note

that Tennessee Code Annotated § 67-1-108, effe ctive March 13, 1986, expressly contemplates that the Department may change its position

as to t axa

bility of privile ges. SeeIllinois Cent. Gulf R.R. v . State , 805 S.W.2d 746, 749 (Tenn. 1991) (holding that section 67-1- 108 is not to

be applie d retroa

ctively ). That st atute pr ovides:

If the commissioner changes the policy of the department as to the taxability of any privilege, such policy chang e shall be applied to the exerc ise of such privileges occurring after the date of such policy

change only , unless otherwise provided by law.

Tenn. Code Ann. § 67-1-108 (2003). Under the statute, the Com miss ioner may cha

nge the Department’s position as to taxability , so long as the change is

applied prospect

ively only . In th

is case, the Commissi oner com plied with

th is s tatute by

assessin g Nora ndal for the sale s tax on roll grinder supplies purchased after 1995, when the Commissioner changed

the Department’s position
on the interpretation of the statutory term “industrial machinery .” Thus, under the circ umstance s, we co ncl ude that the Department’s previous interpretation that viewed r oll grinders as industrial machi nery, whi le pers uasiv e, is n ot con troll ing.

Norandal next arg

ues that t he roll grinders cannot be deemed “ equipment used for maintenance,” because roll grinders are not “equipment;” rather, they are “machinery .” Because the maintenance exception applies only to equipment, Norandal claims, the exception is inapplicable. Norandal points o ut t ha t t he “u se d p ri or to or af te r” ex ce pt io n a pp li es sp ec if ic al ly t o “ ma ch in er y, apparatus and equipment.” The maintenance ex ception, however, applies only to “equipment.” Becau se “machinery

” and “apparatus” are spe cifically excluded fr om the maintena

nce exce ption in the statute, N orandal

argue s, then the

legisla ture must have inte

nded to limit the application of that
ex ce pt io n t o e qu ip me nt on ly.-9-

In Eastman , supra , this Court determined that, a lth ough the dictionary definitions of the terms “machinery ,” “app aratus, ” and “e quipment” differ slightly , the ter ms are “ essentia

lly syn ony mo us.” Eastman , 2004 WL 51822, at *7. The Eastman court endorsed the definition of “equipme nt” used in Tibbals Flooring Co. v. Olsen , 698 S.W.2d 60 (T enn. 1985) ( Tibbals I ), in whichthe Tennessee Supreme Court stated, “ ‘[E]quipment ’ is ‘the p hys ical res ources s erving to equip a person

[such as] the

implement s (as machinery or tools) u sed in

an operation or activity

. .

. .” Tibbals I

, 698 S.W. 2d at 62. Under this definition, “equipment” would include “machinery .” Though the dictionary def inition of terms serves as a useful starting point, “[t]he meaning of statutory terms must ultimately be derived from the context in which they appear .” Eastman , 2004 WL 51822, at

*6. In this case, we must determine whether the roll grinders use d by Noranda l constitute “equipment” within the “equipment used for ma intenance” exception to the industrial machinery

exemption. Under the definition of “equipment” set out in Tibbals I a nd endor sed in Eastman , the definition of “equipment” includes “machinery ” used to equip a person. “Equip,” as recognized

by the trial court, is “to make ready or competent for service or action or against a need: prepare.” Ci

ting Webster’ s Ninth Ne

w Colleg iate Dic tionary . In a ccorda nce with t his under sta

ndin g of the term, “equipme

nt used for maintenance” would in cl ud e a ny type of equipment, including
ma ch in er y, that

makes someone or

something

ready for ser vice or a ction. The

roll gr inders in this
caseclearly

make the caster and mill rolls ready for production. Therefore, from our review of the plain language of the statute, the statutory purpose, and the meaning and context of the term under scrutiny, we must conclude that the roll grinders are encompassed in the te rm “equipment.” Norandal next argues that the “equipment used for maintenance” exception does not a

pply because the roll grinders are not used for maintena nce. Rather, they

ar e usedprimarily for the fabrication

of the tangible product and, therefore, constitute industrial machinery . We recognize that the statute no longer requires th at a machine come into phy sical contact with the finished product inorder to be considered industrial machinery . Other factors, however, must be considered when determining whether a machine is used primar ily for fabr

ication, or primarily for

maintenance.

The dictionary def

inition is, once again, a

useful starting point. “Mainta in” is def ined as “ to keep in an exist ing state (as of repair, eff iciency, or va

lidity): preserve f

rom failure or decline . . . ([maintain] machinery) .” W EBSTER ’ S N EW C OLLEGI ATE D ICTI ONARY 687 (1981). The roll grinders at issue here are used to grind the caster and mill rolls before production starts, and then used peri odicall y

to regr ind the ro lls after

the peak s and vall ey s wear d own. Occ asionally

, the roll grinders are als o used to r

epair a damage d roll, or

to crea te a diff erent mic roscopic groove in the roll s to meet a c ustomer’ s specif

ic reque st for a c ertain ty pe of fin ish on the p

roduct. U

nder the se circumst ances, we must conclude that the roll grinders are use d to maintain the rolls, in that they keep them in a state of repair so that they will be fit for pr

oduction. This ty

pe of utili zation is akin to a machine or appa

ratus use d to sharp en th e bl ade on a manufacturing machine . The sharpener maintains the blade for the manufacturing process, but the sharpener is not a manufacturing machine itself. In the

same way

, the roll g

rinders make the rolls fit f or produc tion, i.e. , they

maintain th e rolls, butare not used for the production process itself. There fore, the roll gr inders a t issue in th

is5 W e nee d no t add ress N oran dal’s ar gume nt that the tria l court e rred in relying o n the fac t that the ro ll

grinders were located near the maint enance shop of the plant, because that factor was not consi dered in reaching our

con clusion

. -10- casemust be considered “equipment used for maintenance.” Consequently, the roll gr inder supplies are not e xempt from s ales tax. T

his holding

preter mits all othe

r issues r aised in th

is appea l. 5

The decision of the trial court is affirmed. Costs on appeal are taxed to Appellant Norandal US A, Inc ., an d i ts su re ty, fo r w hi ch ex ec ut io n m ay i ss ue , i f n ec es sa ry.

___________________________________ HOLL Y M. KIRBY, JUDGE