Court Opinion

ID: 9652309
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:22:08.309189+00
Date Added: 2024-06-11T18:12:49.293906
License: Public Domain

*328ROBERTS, Justice,
dissenting.
The issue presented is whether the bulk storage systems1 which appellant Air Products & Chemicals, Inc. (Air Products) uses to deliver purified gas serve primarily a storage or a manufacturing function. The majority concludes that the principal function of this equipment is manufacturing, and thus this equipment is not subject to Pennsylvania Use Tax.2 The evidence demonstrates, however, that these units are primarily for storage rather than manufacture, and hence are taxable. I therefore dissent.
There is a large industrial demand for purified gases such as oxygen, nitrogen and argon. Air Products produces these gases by separating the constituent elements of air and purifying them to the levels required by industry. There *329are some large industrial customers, such as steel manufacturers, who use so much of these gases that Air Products finds it practical to install on-site plants to carry out this entire production process. The Commonwealth concedes that these plants are equipment engaged in the manufacture of industrial gases. For small customers, Air Products provides bottled gas kept under high pressure in relatively small storage containers, which is released by the customer as needed.
The equipment involved in this case, however, is of a third type, used to supply Air Products’ middle-sized customers. These customers use more gas than can safely and economically be delivered in compressed gaseous form but not enough to be able to use full on-site plants economically. Air Products solves this problem by providing these customers with gas, for example oxygen, purified in Air Products’ own plants. This oxygen is provided in a liquid state in large storage tanks. Air Products also supplies equipment for warming the liquefied oxygen in order to return it to the gaseous state at a temperature and pressure at which it is useable by the customer.
These bulk storage systems — the tanks holding liquefied oxygen plus the equipment for evaporating the liquid — were developed to store quantities of oxygen too large for storage in ordinary gas bottles. The customers who use these systems find it uneconomical to manufacture purified oxygen from the air on site; therefore they must store purified oxygen at their plants until ready to use it. Assuming that conversion of oxygen from the liquid to the gaseous state is one step of a manufacturing process, it is clear that Air Products and its customers choose to carry out this step at the customer’s plant rather than at Air Products’ own facilities because this arrangement allows the customer to store more oxygen at its plant than it could economically store if required to obtain gaseous oxygen from Air Products. Thus the equipment is designed primarily to store for use that which has already been produced at Air Products’ facilities. The tanks and evaporating equipment to convert liquid *330oxygen to gaseous oxygen are provided only because on-site storage of oxygen in its final, gaseous form is impractical. Thus the primary function of this equipment is storage, not manufacturing.
The majority suggests that holding that the primary function of these units is storage
“would mean that every piece of a manufacturer’s equipment not actually involved in acting upon the raw material would be subject to [use] tax, a result we think the legislature did not intend.” 475 Pa. at 326, 380 A.2d at 744 (footnote omitted).
The majority’s fears are unfounded. Where a manufacturing process involves several steps, a manufacturer must often hold intermediate products pending completion of the process. The equipment used to hold the intermediate products will have a storage function, but it will have this function only as part of the manufacturing process in which it is primarily involved. It is there to assist the manufacturer in the process of manufacturing. It is not meant to store inventory for direct use by the customer, as Air Products uses the equipment in this case. If taxation of equipment is analyzed not in vacuo but in view of the relevant business and industrial environment, the absurd results the majority fears will be avoided.
It must therefore be concluded that the equipment used by Air Products in its bulk storage systems on customer sites is used primarily for storage and not for manufacturing. I would reverse the judgment of the Commonwealth Court.3
EAGEN, C. J., joins in this dissenting opinion.

. “Bulk storage system” is the term which Air Products applies to these units in its customer agreements.

. The applicable statutory provision is Act of May 24, 1956, P.L. (1955) 1707, § 3, as amended, 72 P.S. § 3403-2(n)(4)(c)(¶4) (1964), now amended and codified in the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 16, § 201, as amended, 72 P.S. § 7201(o)(5) (Supp.1977).

. This case is not controlled by any previous Pennsylvania decision. The result I reach is in accord with decisions from two other jurisdictions with similar but not identical statutes. Suburban Propane Gas Corp. v. Tawes, 205 Md. 38, 106 A.2d 119 (1954); Bay Bottled Gas Co. v. Michigan Dep’t of Revenue, 344 Mich. 326, 74 N.W.2d 37 (1955).