Court Opinion

ID: 7827261
Source: CourtListenerOpinion
Date Created: 2022-09-07 18:10:18.032109+00
Date Added: 2024-06-11T16:30:53.914929
License: Public Domain

RAY THORNTON, Justice, dissenting. There are two issues in this case: (1) whether packaging materials purchased out of state qualify for sale-for-resale tax exemptions, and (2) whether machinery and equipment used in manufacturing an article of commerce qualify for a tax exemption. The majority denies the exemption for packaging materials because of its conclusion that no resale occurs in current market conditions, leaving open the possibility of a tax exemption if the market for the product improves. The majority then decides that the machinery and equipment purchased out of state and used in manufacturing articles of commerce do not qualify for an exemption under Ark. Code Ann. § 26-53-114(a)(1)(A) (Supp. 1999). This interpretation violates the principles of statutory interpretation and the decisions of the United States Supreme Court, and therefore, I respectfully dissent. Ark. Code Ann. § 26-53-114(a)(l)(A) provides: (a) There is specifically exempted from the taxes levied in this subchapter: (1)(A) Machinery and equipment used directly in producing, manufacturing, fabricating, assembling, processing, finishing,' or packaging of articles of commerce at manufacturing or processing plants or facilities in the State of Arkansas . . . but only to the extent that the machinery and equipment is purchased and used for the purposes set forth in the subdivision. Id. The basic rule of statutory interpretation is to construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. Dunklin v. Ramsay, 328 Ark. 263, 944 S.W.2d 76 (1997). Here, there is no mention of a requirement for a sale, whether profitable or not, to qualify for the exemption. The majority points out that the five essential elements for the statutory exemption are that the item must be: (1) machinery or equipment; (2) used in manufacturing; (3) used directly in some stage of the manufacturing process; (4) used to make an article of commerce; and (5) used at manufacturing or processing plants or facilities in Arkansas. I agree with the majority that there is no doubt that the Rineco machinery and equipment meet the criteria prescribed by (1), (2), (3), and (5). However, I disagree with the majority’s holding that the product manufactured by Rineco is not an article of commerce. Perhaps because there is no mention of a sale in Ark. Code Ann. § 26-53-114(a)(l)(A), the majority turns to Regulation GR-55(F)(6) of the Department of Finance and Administration’s (“DFA”) Rules and Regulations for guidance, and cites that rule to suggest that property must be sold to become an article of commerce. That interpretation is flawed. DFA Regulation GR-55 (F)(6) reads: An article of commerce includes any property to be placed on the market for retail sale to the general public ...[.] Custom items which are produced for specific customers in response to special orders and which are not readily marketable to the general public are not articles of commerce. Id. (emphasis added). The DFA regulation upon which the majority relies merely states that an article of commerce “includes any property to be placed on the market for retail sale to the general public.” Id. The regulation simply does not require that an article of commerce must be sold before it becomes an article of commerce. To the contrary, articles of commerce may include property that is not sold. In Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dept. of Natural Resources, 504 U.S. 353 (1992), the United States Supreme Court cited with approval its holding from Philadelphia v. New Jersey, 437 U.S. 617 (1978), that “[s]olid waste, even if it has no value, is an article of commerce.” This holding that solid waste is an article of commerce, regardless of value, has also been reaffirmed in Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334 (1992). While articles of commerce may include property placed on the market for sale, the DFA Regulation GR-55(F)(6) simply does not require that a sale must occur before an article of commerce can come into existence. Because I believe that machinery and equipment utilized by Rineco at its manufacturing plant is clearly entitled to the tax exemption provided by Ark. Code Ann. § 26-53-114(a)(1)(A), I respectfully dissent. I am authorized to state that Justice CORBIN joins in this dissent. Corbin, J„ joins.