Court Opinion

ID: 9714964
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:50:21.17159+00
Date Added: 2024-06-11T18:23:30.023236
License: Public Domain

BUCHANAN, Chief Judge,
concurring in part and dissenting in part.
I dissent as to Issue One and Two because I believe the majority has too narrowly construed the terms of Ind. Code 6-2-1-39(b)(6), which reads in part:
(b) Nor shall the state gross retail tax apply to any of the following transactions:
(6) Sales of manufacturing machinery, tools and equipment to be directly used by the purchaser in the direct production, manufacture, fabrication, assembly, extraction, mining, processing, refining or finishing of tangible personal property; sales of agricultural machinery, tools and equipment to be directly used by the purchaser in the direct production, extraction, harvesting or processing of agricultural commodities; and sales of tangible personal property to be directly used by the purchaser in the direct production or manufacture of any such manufacturing or agricultural machinery, tools and . equipment.
(Emphasis added).
The majority concludes that trucks and other transportation equipment are not “directly” used in the “direct” processing of the stone. Although I would rationalize that transportation equipment is directly used in the direct “processing” of the stone, perhaps an even stronger argument can be made that this equipment is directly used in the direct “production” of marketable stone.
The trucks used in hauling the stone seem to me to be directly used in the direct production of the stone. In considering the plain meaning of the language used, State ex rel. Bynum v. LaPorte Superior Court (1973), 259 Ind. 647, 291 N.E.2d 355, the word “production” as used in the context of this statute has been variously defined as:
In an economic sense, production includes all activity directed to increasing the number of scarce economic goods. It is not simply the manual, physical labor involved in changing the form or utility of a tangible article.
Borden Co. v. Borella (1945), 325 U.S. 679, 683, 65 S.Ct. 1223, 1225, 89 L.Ed. 1865, 1869.
Production: something that is produced naturally or as a result of labor and effort; the act or process of producing, bringing forth or making; the creation of utility, the making of goods available for human wants.
Webster’s Third Law International Dictionary 1810 (unabridged ed. 1971).
The majority sets forth a test which the equipment must meet in order to be exempt. I believe that the transportation equipment under consideration here satisfies their test, which requires that before the equipment may be tax exempt it must be “an integral part of a process which is on-going during the transportation.” It appears to me that while the stone is being transported the transportation equipment is being directly used in the direct production of the marketable stone. The majority does admit the transportation equipment is “an essential and integral part of the procedures by which the unquarried stone is transformed into a marketable product.”
So I would conclude that because the transportation equipment is essential and integral to the production of the stone, it should be tax exempt. Any other view lets the genie out of the bottle-it will be virtually impossible for taxpayers and taxing authorities to determine what is “directly” used in “direct” processing, manufacturing, or production.
*699Because the transportation equipment is an essential and integral part of the production of the marketable stone, it can be distinguished from the air-conditioning equipment in Indiana Department of Revenue v. RCA Corp. (1974), 160 Ind.App. 55, 310 N.E.2d 96. The role of air conditioning in effecting air quality control for the production of television tubes is certainly more remote and indirect.
Another test which the Indiana Court of Appeals has used to decide if equipment is tax exempt is stated in Indiana Department of Revenue v. Harrison Steel Castings Co. (1980), Ind.App., 402 N.E.2d 1276. This case requires that the questioned purchase must have a “positive effect and active and causal relationship to the production of the product.” Ind.App., 402 N.E.2d at 1278. The court in Harrison held that the safety helmets worn by the employees in its steel casting business did not satisfy this test. But the trucks purchased here can be distinguished from the safety helmets because the use of the trucks directly affect in a positive and causal fashion the production of marketable stone.
My view finds succor in Indiana Department of Revenue v. American Dairy of Evansville, Inc. (1975), 167 Ind.App. 367, 338 N.E.2d 698, which held that milk cans that were used by the manufacturer to hold, measure and convey the raw materials were directly used in the direct production of milk. See also Indiana Department of Revenue v. Mumma Brothers Drilling Co. (1977), Ind.App., 364 N.E.2d 167. In American Dairy our court said:
[E]ven the most narrow reading of the foregoing subsections of IC 1971, 6-2-1-39, supra, fails to support a conclusion that the exemptions provided therein are limited to items and substances contributing to the physical composition of the final product, and no authority has been advanced to support such a construction.
167 Ind.App. at 374, 338 N.E.2d at 702. The rationale of American Dairy is more persuasive, and realistic to me than the majority view here. Lines do have to be drawn in the law. As Justice Frankfurter observed in his dissent in Pearce v. Commissioner:
In law, as in life, lines have to be drawn. But the fact that a line has to be drawn somewhere does not justify its being drawn anywhere. The line must follow some direction of policy, whether rooted in logic or experience.
315 U.S. 543, 558, 62 S.Ct. 754, 761, 86 L.Ed. 1016, 1025. I find the line to be drawn in this case should be rooted in the logic and experience of the market place. The conveyance of the stone from place to place integrally and essentially is a part of its production or processing. To otherwise draw the line requires the mills of justice to grind too fine.
Thus, I dissent as to Issues One and Two, concur as to Issue Three, and would affirm the entire decision of the trial court.