Court Opinion

ID: 4566700
Source: CourtListenerOpinion
Date Created: 2020-09-18 13:06:44.490188+00
Date Added: 2024-06-11T09:23:25.414857
License: Public Domain

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
09/18/2020 08:06 AM CDT

                                                        - 947 -
                               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 sup-
                    ported 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 con-
                    clusion 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.
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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

 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 dis-
    trict court’s judgment for errors appearing on the record, will not substi-
    tute 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 inclu-
    sion 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 (col-
lectively the Department) appeal the order of the district court
for Lancaster County finding that the production of aggregate
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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

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, challeng-
ing 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, includ-
ing administrative locations, cement manufacturing locations,
maintenance locations, and concrete production locations. It
is undisputed that one or more of the activities at these loca-
tions 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, manu-
facturing 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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         Nebraska Supreme Court Advance Sheets
                  306 Nebraska Reports
       ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
                     Cite as 306 Neb. 947

   To produce aggregate, Lyman-Richey uses excavation equip-
ment 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 custom-
ers. 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 produc-
tion 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 over-
payment 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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         Nebraska Supreme Court Advance Sheets
                  306 Nebraska Reports
       ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
                     Cite as 306 Neb. 947

(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 commis-
sioner disagreed and concluded that the aggregate production
activities cannot be considered “manufacturing.” The commis-
sioner 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 manufac-
turing. 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 over-
payment, finding that because the aggregate production loca-
tions 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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            Nebraska Supreme Court Advance Sheets
                     306 Nebraska Reports
          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 consolida-
tion 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 overpay-
ment of sales and use tax.
   The court agreed with the commissioner that the aggregate
is the relevant property for consideration and that the clean-
ing, 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 produc-
tion 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 aggre-
gate 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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            Nebraska Supreme Court Advance Sheets
                     306 Nebraska Reports
          ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
                        Cite as 306 Neb. 947

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 “process-
ing” under § 77-5715(1)(c) of the NAA. In doing so, the court
rejected the Department’s argument that the terms “manufac-
turing” 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 “process-
ing.” 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 quali-
fied 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 manu-
facturing 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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           Nebraska Supreme Court Advance Sheets
                    306 Nebraska Reports
         ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
                       Cite as 306 Neb. 947

Lyman-Richey failed to prove that its machinery or equip-
ment is used in “manufacturing.” The Department and Lyman-
Richey 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 find-
ing 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 irrespec-
tive 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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             Nebraska Supreme Court Advance Sheets
                      306 Nebraska Reports
          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 sen-
tence 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 loca-
tions are engaged in the qualified business of “processing”
under the NAA.
   As our analysis will show, in Nebraska, the term “manu-
facturing” 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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         Nebraska Supreme Court Advance Sheets
                  306 Nebraska Reports
       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 straightfor-
ward conclusion that the aggregate production locations are
not engaged in “manufacturing” under the NAA. And, because
the aggregate production locations are not engaged in “manu-
facturing,” Lyman-Richey’s claims for overpayment under the
manufacturing machinery and equipment exemption are with-
out 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 differ-
ences 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 dis-
cuss later in more detail, in the absence of a statute or regula-
tion 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 “manu-
facturing” 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 employ-
ment 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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             Nebraska Supreme Court Advance Sheets
                      306 Nebraska Reports
           ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
                         Cite as 306 Neb. 947

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 applica-
tion requesting an agreement with the commissioner. 18
   Qualification for incentives under the NAA requires the tax-
payer 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 prop-
erty 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.
                        Cite as 306 Neb. 947

   Initially, the parties disagree as to what tangible personal
property is alleged to be manufactured. Lyman-Richey con-
tends that it is engaged in manufacturing because it reduces or
transforms raw slurry into aggregate. The Department, how-
ever, 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 activi-
ties listed in the statutory definition of “manufacturing.”
   We agree with the district court’s conclusion that the rel-
evant 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 “manu-
facturing” 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 manu-
facturing for purposes of Oklahoma’s manufacturing equipment
and property exemption. Similar to Lyman-Richey’s aggre-
gate production operations, the plants in Oklahoma extracted
sand from water passed through plant equipment for screen-
ing, 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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           ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
                         Cite as 306 Neb. 947

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, wash-
ing, 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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           ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
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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 unam-
biguous. 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 “trans-
forms” the aggregate, and thus meets the definition of “manu-
facturing” 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 differ-
ences 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 incor-
rect. 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 transfor-
mation 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 blend-
ing 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, capri-
cious, nor unreasonable.
   Because we conclude Ash Grove and Lyman-Richey failed
to sustain their burden to prove that they “reduced” or “trans-
formed” 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 produc-
tion 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 per-
sonal 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 prop-
erty, 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 manu-
      facturing 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 manufactur-
ing machinery and equipment exemption, which states in part
that “[m]anufacturing requires a physical change to the tan-
gible personal property and does not include an increase in the
value of a product without a physical change.” Agency regula-
tions 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 regu-
lation is invalid because it alters the statutory definition of
“manufacturing” found in § 77-2701.46. 47 On appeal, Lyman-
Richey does not challenge the regulation, but argues that it
meets the regulation’s physical change requirement. Lyman-
Richey argues that the machinery and equipment at the aggre-
gate 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 busi-
ness of manufacturing” under § 77-2701.47(1), because the
machinery and equipment at the aggregate production loca-
tions 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 Lyman-
Richey failed to prove a reduction or transformation of tangible
personal property and therefore is not engaged in manufactur-
ing 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 reduc-
tion or transformation of tangible personal property, requires
physical change to tangible personal property. There is compe-
tent evidence in the record to support the finding that Lyman-
Richey 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 equip-
ment 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 manu-
facturer.” 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 insuf-
ficient proof that all the aggregate equipment is used to trans-
port, convey, handle, or store the raw material. For example,
Lyman-Richey did not explain why its excavation, dredg-
ing, 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 transport-
ing, conveying, handling, or storing by the manufacturer . . .”
under § 77-2701.47(1)(b). The aggregate production equip-
ment 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 with-
out merit.

                    Aggregate Production
                         Is Processing
   The final issue to consider is whether the aggregate produc-
tion 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 reg-
ulations 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 produc-
tion were an essential ingredient of a manufactured product.
We found that even if the refractories were an essential ingre-
dient, 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 divi-
sion of labor . . . .’” 52 We defined “‘[p]rocess’” to mean “‘to
subject to a particular method, system, or technique of prepara-
tion, handling, or other treatment designed to effect a particu-
lar 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 contempo-
rary 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 trans-
formation 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 produc-
tion 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 (process-
      ing cattle by slaughtering them) (processed the milk by
      pasteurizing it) (processing grain by milling) (processing
      cotton by spinning) (2): to make usable by special treat-
      ment (processing rancid butter) (processing waste mate-
      rial) (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 sub-
stantially different character, but instead requires that the prod-
uct 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 market-
able 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 mean-
ing of the term “processing” as it appears in § 77-5715(1)(c)
does not require reduction or transformation of tangible per-
sonal 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 specifica-
tion 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 aggre-
gate 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 reduc-
tion or transformation of tangible personal property into a dif-
ferent state, quality, form, property, or thing. The Department
contends, pursuant to Metropolitan Utilities Dist. v. Balka, 61
that “manufacturing” and “processing” both require the trans-
formation or conversion of materials into a different state
or form.
   In Balka, this court held that a utility district’s use of elec-
tricity to transport treated water into storage did not consti-
tute “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 elec-
tricity.” Citing an energy source utility exemption under 316
Neb. Admin. Code, ch. 1, § 089.02A(1) (1994), the commis-
sioner in Balka determined that the electricity used by the util-
ity 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 enforc-
ing 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 dif-
ferent state or thing. The Department contends that pursuant
to § 77-5704, this court should apply this reading of process-
ing 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 trans-
      formed into a different state, quality, form, property, or
      thing. Processing includes grain drying and feed grind-
      ing 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 agricul-
      tural 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 mate-
rial 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 mean-
ing, 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 inter-
preted “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 differ-
ence 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 manufac-
tured 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 ‘manufac-
tured’ . . . .” 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 vir-
gin 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 activi-
ties 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 disjunc-
tive meaning of “or,” indicating that the NAA covers taxpay-
ers 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 unreason-
ably. 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 manufac-
turing 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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           ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
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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 indi-
cate that reduction or transformation of property into a differ-
ent 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 tan-
gible 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 prepara-
tion, handling or other treatment designed to prepare tangible
personal property for market, manufacture, or other commer-
cial 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 sub-
stantially 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 aggre-
gate 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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       ASH GROVE CEMENT CO. v. NEBRASKA DEPT. OF REV.
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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.