Title: Aquila Foreign Qualifications Corp. v. Dir. of Revenue
Citation: N/A
Docket Number: SC91784
State: Missouri
Issuer: Missouri Supreme Court
Date: March 6, 2012

SUPREME COURT OF MISSOURI 
en banc 
 
 
AQUILA FOREIGN 
 
 
 
) 
QUALIFICATIONS CORPORATION,  
) 
 
 
 
 
) 
 
No. SC91784 
 
 
 
Respondent,  
 
) 
 
 
 
 
 
 
 
) 
vs. 
 
 
 
 
 
 
) 
 
 
 
 
 
 
 
) 
DIRECTOR OF REVENUE, 
 
 
) 
 
 
 
 
 
 
 
) 
 
 
 
Appellant. 
 
 
) 
 
PETITION FOR REVIEW OF A DECISION OF THE  
ADMINISTRATIVE HEARING COMMISSION 
The Honorable Karen A. Winn, Commissioner 
 
Opinion issued March 6, 2012 
 
 
The issue before this Court is whether a convenience store is exempt from sales 
and use tax for the electricity it purchases for its food preparation operations.  Although 
section 144.054.21 provides a tax exemption for the “processing” of products, this Court 
holds that the legislature did not intend the term “processing” to include retail food 
preparation in section 144.054.2.  The decision of the administrative hearing commission 
(“commission”) is reversed. 
 
 
                                             
 
1 All citations to section 144.054 are to RSMo Supp. 2010 unless otherwise noted. 
I. Background 
Casey’s Marketing Company d/b/a Casey’s General Stores is a convenience store 
engaged in the retail sale of gas, grocery items, various nonfood items, and prepared 
foods.  Aquila Foreign Qualifications Corporation is a utility company selling electricity 
to residential and commercial customers, including Casey’s.  Casey’s filed a refund claim 
with the director of revenue for one month’s tax paid for a portion of electricity Aquila 
sold to two Casey’s locations in Grain Valley and Greenwood.  The director denied the 
claim.  At Casey’s request, Aquila filed a complaint challenging the director’s final 
decision denying Casey’s refund claim for state sales and use tax paid.  The commission, 
in reversing the director’s final decision, decided that a portion of Casey’s purchased 
electricity is exempt from state sales and use tax under section 144.054.2.  The 
commission held that the language of section 144.054 was intended to exempt a broad 
range of activities, and Casey’s food preparation operations are “processing” within the 
meaning of 144.054.2.  The director appeals.2 
Casey’s food preparation operations are minimal.  Many of its food products are 
pre-cooked and only require reheating before consumption.3  A few items are frozen raw 
and are required to be heated to temperature before the items are ready for consumption.4  
                                             
 
2 This Court has jurisdiction pursuant to article V, section 3 of the Missouri Constitution. 
3 For example, Casey’s serves “popcorn chicken.”  To prepare this product for consumption, 
breaded, pre-cooked frozen pieces of chicken are removed from a freezer and reheated in the 
oven.  When hot, the chicken is placed in a paper cup and placed in a warmer until it is 
purchased by the consumer. 
4 Both the “breaded pork sandwiches” and the “breaded chicken sandwiches” contain breaded 
patties that are frozen raw and placed in a fryer for a specified period of time. At the end of the 
frying period, they are placed on a bun, wrapped, and placed in a warmer until the sandwiches 
are purchased by the consumer. 
A few more items require the addition of water along with the application of heat or the 
freezing of water before the items are ready for consumption.5   
Casey’s serves two food products that require additional preparation steps beyond 
the addition of water or the application of heat.  Pizzas are prepared by mixing water and 
pre-measured flour in a mixer.  The resulting dough is cut into portions, weighed, and 
rolled into a flattened shape. A pizza pan is sprayed with nonstick cooking spray, and the 
dough is placed on the pan.  Sauce, cheese, and other toppings are placed on top of the 
dough, and the pizza is baked in the oven.  The pizza is then placed in a warmer and is 
either sold whole or by the slice.   
Cake donuts also require a few additional steps beyond the addition of water or the 
application of heat.  First, the cake donut flour is measured and mixed in a mixer with 
water to form cake donut dough.  The dough is placed into a hopper, and then a cutter 
cuts, forms, and drops the dough into a fryer.  The donuts are flipped once during the 
frying process and are then dropped onto a donut tray.  Once the donuts are cooled, they 
are iced, topped, and placed in a display case for sale.  
In this appeal, the director contends Casey’s is not exempt from state sales and use 
tax on the portion of electricity it purchases for its food preparation operations under 
section 144.054.2.  Casey’s, however, claims it is exempt from sales and use tax on its 
purchases of electricity under section 144.054.2 because it engages in “processing” as 
defined by section 144.054.1(1).   
                                             
 
5 Coffee and cappuccinos are both prepared by adding hot water to ground coffee and 
cappuccino mix, respectively.  Casey’s also freezes water and bags ice for sale to the consumer. 
3 
II. Standard of Review 
To determine whether Casey’s is entitled to a tax exemption, this Court must 
interpret a revenue statute. As statutory interpretation is a question of law, this Court 
reviews the commission’s interpretation of section 144.054.2 de novo. Brinker Mo., Inc. 
v. Dir. of Revenue, 319 S.W.3d 433, 435 (Mo. banc 2010).  Tax exemptions are strictly 
construed against the taxpayer.  Id. at 436.  Exemptions are only allowed on clear and 
unequivocal proof, with the burden of proof falling on the taxpayer claiming the 
exemption. Id. at 437.  Any doubt is resolved in favor of taxation. Id. 
III. Analysis 
At issue in this case is whether the electricity Casey’s purchases for the 
preparation of certain food items qualifies for a tax exemption.  Section 144.054.2 
exempts from state sales and use tax “electrical energy and gas … used or consumed in 
the manufacturing, processing, compounding, mining, or producing of any product ….”   
To determine whether Casey’s is entitled to a sales and use tax exemption on 
electricity purchased for its food preparation operations, this Court must determine 
whether Casey’s engages in “processing” under section 144.054.2.  Although section 
144.054.1(1) provides a statutory definition of “processing,” the definition itself is 
ambiguous.   
“A statute is ambiguous when its plain language does not answer the current 
dispute as to its meaning.” Derousse v. State Farm Mut. Auto. Ins. Co., 298 S.W.3d 891, 
895 (Mo. banc 2009).  Section 144.054.1(1) provides that “processing” is “any mode of 
treatment, act, or series of acts performed upon materials to transform or reduce them to 
4 
a different state or thing ….” (emphasis added).  Section 144.054 offers no further 
guidance as to what it means “to transform or reduce” materials.  Because the definition 
of “processing” provided in section 144.054.1(1) is unclear as to the scope of the 
activities it encompasses, this Court must construe the statute to resolve the ambiguity.6  
This Court resolves ambiguities in statutes by determining the intent of the 
legislature and by giving effect to its intent whenever possible. Derousse, 298 S.W.3d at 
895.  In determining legislative intent, no portion of a statute is read in isolation, but 
rather is read in context to the entire statute, harmonizing all provisions. Id.; see also Util. 
Serv. Co., Inc. v. Dep’t of Labor & Indus. Relations, 331 S.W.3d 654, 658 (Mo. banc 
2011). This Court may apply rules of statutory construction to resolve any ambiguities if 
the legislative intent is undeterminable from the plain meaning of the statutory language. 
Derousse, 298 S.W.3d at 895. Further, construction of a statute should avoid 
unreasonable or absurd results.  Akins v. Dir. of Revenue, 303 S.W.3d 563, 565 (Mo. banc 
2010).   
 
There is little precedent analyzing section 144.054, but this Court has interpreted a 
related exemption under similar facts.  In Brinker, a restaurant conglomerate argued that 
kitchen equipment, silverware, chairs and other furniture purchased for use in its 
                                             
 
6 The parties disagree as to the scope of activities that are included within the definition of 
“processing.”  While Casey’s argues that all of its food preparation operations fall within the 
statutory definition of “processing,” this interpretation would exempt from sales and use taxation 
virtually all electricity used to power activities that modify consumer products in any way.  On 
the other hand, the director posits that the definition of “processing” includes only industrial-type 
processing operations and not the mere preparation of food. 
5 
restaurants were exempt from state sales and use tax under sections 144.030.2(4)-(5).7 
319 S.W.3d at 435.  Section 144.030.2(5) provides a sales and use tax exemption on 
machinery and equipment “purchased and used to establish new or to expand existing 
manufacturing, mining or fabricating plants in the state if such machinery and equipment 
is used directly in manufacturing, mining or fabricating a product which is intended to be 
sold ultimately for final use or consumption ….”8  Brinker found that restaurants are not 
“plants” exempt from taxation under sections 144.030.2(4)-(5) because restaurants do not 
“fabricate,” “manufacture,” or “mine” products to be sold ultimately for final use or 
consumption. 319 S.W.3d at 436.  Instead, Brinker held that restaurants “prepare,” 
“furnish,” or “serve” food to the public at retail. Id. at 438.  
 
Essential to Brinker’s holding was the lack of the terms “restaurant,” 
“preparation,” “furnishing,” or “serving” in section 144.030.2.  Id. at 438.  Had the 
legislature intended to exempt those activities from taxation, it would have included those 
terms in the statute. Id.  Pursuant to Brinker, restaurants are not exempt from sales and 
use tax under sections 144.030.2(4)-(5).  Id.   
 
Casey’s notes sections 144.030.2(4)-(5), which were at issue in Brinker, differ 
from the statute at issue here in that the Brinker statutes do not include an exemption for 
“processing.”  Casey’s contends the inclusion of “processing” in section 144.054.2 brings 
it within the sales and use tax exemption.  Further, Casey’s argues that the inclusion of 
both the term “processing” in the statute here and the statutory definition of “processing” 
                                             
 
7 All citations to section 144.030 are to RSMo 2000 unless otherwise noted. 
8 Section 144.030.2(4) provides the same exemption for “replacement machinery.” 
6 
provided in section 144.054.1(1) make Brinker’s interpretation of other revenue statutes 
inapposite to the interpretation of section 144.054.   
Although this Court recognizes that neither the term “processing,” nor its statutory 
definition, appear in sections 144.030.2(4)-(5), Brinker is still instructive as to the 
analysis of section 144.054.  As Brinker stated, if the legislature intended to exempt 
“restaurants” from sales and use tax on electricity purchased to “prepare,” “furnish,” or 
“serve” food, it would have included language in the statute to indicate that intent.9  For 
example, the legislature enacted section 144.020.1(6) to tax the sale of meals at a 
restaurant by imposing sales tax on “meals and drinks furnished at any … restaurant, 
eating house, drugstore, … or other place in which … meals or drinks are regularly 
served to the public.” (emphasis added).   In contrast, section 144.054 contains no 
reference to “restaurants” and no reference to “preparing,” “furnishing,” or “serving” 
food.  Instead, the legislature exempted from sales and use tax electrical energy and gas 
used or consumed in “manufacturing,” “processing,” “compounding,” “mining,” or 
“producing.” Section 144.054.2.   
Further, this Court’s interpretation of “processing” is guided by the statutory 
maxim of noscitur a sociis – a word is known by the company it keeps. Pollard v. Bd. of 
Police Comm’rs, 665 S.W.2d 333, 341 n.13 (Mo. banc 1984).  It is “often wisely applied 
where a word is capable of many meanings in order to avoid the giving of unintended 
breadth in statutory construction.” Id. (internal quotation marks and citation omitted).  
                                             
 
9 Casey’s is a restaurant insofar as it prepares and serves food to customers. (See WEBSTER’S 
THIRD NEW INTERNATIONAL DICTIONARY UNABRIDGED 11936 (3d ed. 1993) (defining restaurant 
as “an establishment where refreshments or meals may be procured by the public.”)).   
7 
Section 144.054.2 lists “processing” along with “manufacturing,” “compounding,” 
“mining,” and “producing.”  The industrial connotations of those terms in section 
144.054.2 indicate that the legislature did not intend “processing” to include food 
preparation for retail consumption.10   To so interpret section 144.054.2 would give it 
unintended breadth.  If the legislature intended “processing” to encompass retail food 
sales by restaurants or convenience stores, it could have used terms such as “preparing,” 
“furnishing,” or “serving.” See Brinker, 319 S.W.3d at 438.  But instead it chose 
industrial-type terms, such as “manufacturing,” “processing,” “compounding,” “mining,” 
or “producing.” Section 144.054.2.  The legislative intent is further reflected in the 
Missouri Code of State Regulations.  12 CSR 10-110.621(5)(A) expressly states: “A 
restaurant preparing food for immediate consumption is not exempt [under section 
144.054].  Therefore, all state and local taxes apply.”   
IV. Conclusion 
                                             
 
10 This Court has previously interpreted the meaning of the term “processing” before the 
statutory definition of 144.054.1(1) was enacted.  In Hudson Foods v. Director of Revenue, this 
Court found “there is little to no difference between the terms ‘processing’ and ‘manufacturing,’ 
as a practical matter.” 924 S.W.2d 277, 278 n.1 (Mo. banc 1996) (analyzing mass-poultry 
processing facilities).  In Mid-America Dairymen, Inc. v. Director of Revenue, this Court also 
stated that “the meaning of the term ‘processing’ is ordinarily included within the meaning of the 
more general and inclusive term ‘manufacturing.’” 924 S.W.2d 280, 283 (Mo. banc 1996) 
(analyzing milk processing activities) (internal quotation marks and citation omitted).  Although 
these definitions of “processing” do not control the statutory definition of “processing” under 
section 144.054.2, they do provide insight into the legislative intent of section 144.054.2. “When 
the legislature enacts a statute referring to terms that have had other judicial or legislative 
meaning attached to them, the legislature is presumed to have acted with knowledge of that 
judicial or legislative action.” Cook Tractor Co., Inc. v. Dir. of Revenue, 187 S.W.3d 870, 873 
(Mo. banc 2006).   
8 
9 
Giving effect to the legislative intent and strictly construing the exemption against 
the taxpayer, this Court holds that the preparation of food for retail consumption is not 
“processing” within the meaning of section 144.054.2.  Casey’s is not entitled to a sales 
and use tax exemption on electricity it purchased to power its food preparation 
operations.  The decision of the commission is reversed. 
 
 
_________________________________  
Mary R. Russell, Judge 
Breckenridge, Fischer, Stith and Draper, JJ., concur;  
Price, J., dissents in separate opinion filed;  
Teitelman, C.J., concurs in opinion of Price, J. 
 
SUPREME COURT OF MISSOURI 
en banc 
 
 
AQUILA FOREIGN 
 
 
 
) 
QUALIFICATIONS CORPORATION,  
) 
 
 
 
 
) 
 
No. SC91784 
 
 
 
Respondent,  
 
) 
 
 
 
 
 
 
 
) 
v. 
 
 
 
 
 
 
) 
 
 
 
 
 
 
 
) 
DIRECTOR OF REVENUE, 
 
 
) 
 
 
 
 
 
 
 
) 
 
 
 
Appellant. 
 
 
) 
 
 
DISSENTING OPINION 
 
 
I respectfully dissent. The outcome of this case turns on whether Casey’s 
Marketing Company d/b/a Casey’s General Stores engages in “processing.” 
“Processing” is the most generic of terms that the General Assembly could have 
chosen when writing the energy tax exemption provision in section 144.054.2, 
RSMo Supp. 2010. As the principal opinion points out, “processing” is defined in 
the statute, and the statutory definition confirms that the General Assembly 
intended the scope of that word to be as broad as possible: 
1. As used in this section, the following terms mean: 
(1) “Processing”, any mode of treatment, act, or series of acts 
performed upon materials to transform or reduce them to a different 
state or thing, including treatment necessary to maintain or preserve 
such processing by the producer at the production facility .... 
 
Section 144.054.1, RSMo Supp. 2010. Casey’s mixes pizza dough and cooks 
pizzas, mixes donut dough and fries donuts, heats other food products, and freezes 
ice. Under section 144.054.1(1)’s definition, mixing, cooking, frying, heating, and 
freezing all constitute “processing.” All these activities involve Casey’s 
performing a “series of acts” on raw “materials” in order to “transform” them into 
a “different state” in which consumers are willing to purchase them. 
 
The term “processing” is broad, but it is not ambiguous. Its application to 
the activities in which Casey’s engages could not be clearer. “[C]ourts have a duty 
to read statutes in their plain, ordinary and usual sense .... Where there is no 
ambiguity, this Court does not apply any other rule of construction.” MC Dev. Co. 
v. Cent. R-3 Sch. Dist. of St. Francois Cnty., 299 S.W.3d 600, 604 (Mo. banc 
2009) (internal quotation marks and citations omitted). The Court’s resort to the 
maxim of noscitur a sociis is, thus, inappropriate here. 
Reliance on Brinker Missouri, Inc. v. Dir. of Revenue, 319 S.W.3d 433 
(Mo. banc 2010), is also inappropriate. Whether or not Brinker was rightly 
decided,1 that case is not controlling here because it interpreted a different term 
appearing in a different statute. In Brinker, the issue was whether a restaurant’s 
kitchen equipment, tables, chairs and dishes were exempt from the state use and 
sales taxes. The answer turned on whether those items were “[m]achinery and 
                                             
 
1 See Brinker, 319 S.W.3d at 441 (Price, C.J., dissenting). 
2 
3 
equipment ... purchased and used to establish new or to expand existing 
manufacturing, mining or fabricating plants ... if such machinery and equipment is 
used directly in manufacturing, mining or fabricating a product which is intended 
to be sold ultimately for final use or consumption ....” Section 144.030.2(5), 
RSMo 2000. Neither “plant” nor “manufacturing” were statutorily defined. The 
Brinker Court held that restaurants are not “plants” and that cooking food does not 
constitute “manufacturing.” But in the instant case, the issue is the interpretation 
of “processing,” which, as noted above, is statutorily defined and unambiguous. 
 
I would affirm the decision of the Administrative Hearing Commission. 
 
  ________________________________  
William Ray Price, Jr., Judge