Court Opinion

ID: 9659572
Source: CourtListenerOpinion
Date Created: 2023-08-23 21:49:38.123161+00
Date Added: 2024-06-11T18:14:09.472047
License: Public Domain

JAMES R. DOWD, Special Judge,
concurring in result.
I agree with the majority’s decision that IBM and DST are not entitled to the sales tax exemption contained in section 144.030.2(5). I respectfully disagree with the majority’s expansion of the definition of the term “product” as used in section 144.030.2(5). I further disagree with the implication that passage of title is determinative of whether or not a sale of the optical and tape storage devices at issue here has occurred.
I.
Today this Court exempts manufacturers of machinery and equipment from the sales tax statute if the purchaser uses the machinery or equipment to render services. This interpretation is contrary to the tax policy formulated by the legislature as “[i]t is firmly engrained that taxation is the rule and exemption therefrom the exception and such claims are not favored in the law.” Missouri Church of Scientology v. State Tax Comm’n, 560 S.W.2d 837, 844 (Mo. banc 1977) (internal citation omitted). The majority correctly acknowledges its role in the interpretation of the sales tax statute: “[S]ales tax is purely a matter of statute and within the power of the legislature, subject to constitutional limits. This Court has no authority to amend the sales tax laws in order to update them.” Sec. V, supra (internal citations omitted). Section II of the principal opinion, however, contravenes this well-recognized principle by broadening the definition of the term “product” to include services within the scope of the sales tax exemption.
I disagree with the majority because the General Assembly has never expressed an intent to classify services as products even though it has exposed some specific services to sales tax. In GTE Automatic Electric v. Director of Revenue, this Court concluded that services were not products. 780 S.W.2d 49, 51 (Mo. banc 1989). Since GTE was decided in 1989, the General Assembly has amended section 144.030 on several occasions without altering the language of section 144.030.2(5).1 I believe the legislature’s decision to reenact section 144.030.2(5) unchanged indicates its acceptance of GTE’s interpretation that services are not products. As stated by this Court long ago, “where the Legislature, after a statute has received a settled judicial construction, reenacts or carries forward without change, or reincorporates the exact language theretofore construed, it is to be presumed that it knew of and adopted the judicial construction previ*560ously given to the statute.”- Roy F. Stamm Electric Co. v. Hamilton-Brown Shoe Co., 350 Mo. 1178, 171 S.W.2d 580, 583 (1943).
The majority cites Mid-America Dairymen, Inc. v. Director of Revenue, 924 S.W.2d 280 (Mo. banc 1996), and McKinley Iron, Inc. v. Director of Revenue, 888 S.W.2d 705 (Mo. banc 1994), as providing the foundation for its decision to broaden the definition of the term “product.” Significantly, neither of the holdings of these eases required an interpretation of section 144.030.2(5), and the taxpayers in these cases were not seeking sales tax exemptions for services. In fact, a fair reading of Mid-America Dairy indicates that the Court equated tangible goods with products: “It is sufficient if the product, although marketable, is used instead by the same manufacturer or processor as an ingredient or base for yet another product.” Mid-America Dairymen, 924 S.W.2d at 283 (emphasis added). In my view, these cases do not justify such a departure from existing law.
More importantly, the plain language of the statute precludes such a sweeping interpretation. The statute exempts from sales tax
[mjachinery and equipment, and the materials and supplies solely required for the installation or construction of such 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.
Sec. 144.030.2(5), RSMo 1994 (emphasis added). According to the statute, a product is the result of “manufacturing, mining or fabricating.” It is clear that a service is not the product of mining or fabricating as the principal opinion omits that language and focuses solely on manufacturing. The question that remains, therefore, is whether or not a service can be manufactured. Manufacturing is defined as “to make into a product suitable for use” or “to make from raw materials by hand or by machinery.” Webster’s Third International Dictionary 1378 (1976). Clearly a service does not reasonably fit within any of these definitions.
In addition, the majority’s expanded definition of the terra “product” conflicts with the purpose of the sales tax statute. The General Assembly exempted certain equipment from the sales tax statute because this equipment ultimately would trigger a sale at retail when it was used to manufacture products “sold ultimately for final use or consumption.” Missouri sales tax focuses on the retail level. See Dean Machinery Co. v. Director of Revenue, 918 S.W.2d 244, 245-46 (Mo. banc 1996). The majority claims that the purpose of section 144.030.2(5) is to “encouraged the development of enterprises that produce products that are within the scope of the sales tax law,” sec. Ill, supra (emphasis added), however, creating an exemption for ser rices as the majority desires will not fulfill this goal. To the contrary, as a result of this opinion, the sale of machinery and equipment will no longer be subject to sales tax even though the machinery and equipment may not generate a taxable product.
To interpret this language as intending services to constitute products misinterprets the statute’s plain meaning and directly contravenes the clear intent of the General Assembly. I believe that we should adhere to the limited role in construing statutes expressed by this Court in Conagra Poultry Co. v. Director of Revenue: “This Court should not construe a legislative intent to allow a sales tax exemption ... without clear statutory language to that effect.” 862 S.W.2d 915, 917 (Mo. banc 1993).
II.
I agree with the majority’s assessment that IBM is not entitled to the sales tax exemption by virtue of DST’s computer printouts and computer output on microfiche or microfilm. However, the majority seems to carve out an exception to section 144.030.2(5) for DST’s transmissions on various storage devices. The majority implies that had DST simply transferred title to these devices to its customers, a “sale” would have occurred that would exempt from sales tax the machinery and equipment used to *561encrypt the information on these devices and transmit it to the customer. I do not agree with this analysis. Section 144.010.1(8)(ii) RSMo 1994 states that:
[T]he selling of computer printouts, computer output or microfilm or microfiche and computer assisted photo compositions to a purchaser to enable the purchaser to obtain for his own use the desired information contained in such computer printouts, computer output on microfilm or microfiche and computer assisted photo compositions shall be considered as the sale of a service and not as the sale of tangible personal property.
I do not understand how the majority can distinguish computer output on microfiche or microfilm from computer output stored on optical or tape media. Storage on optical or tape media is simply the modern equivalent of microfilm or microfiche. Optical and tape media is the successor to the type of information storage and transmission originally envisioned by the General Assembly. According to the existing interpretation of section 144.030.2(5), DST’s transmission of information on optical or tape media would not entitle IBM to an exemption from the sales tax statute whether title passes or not. This is so because section 144.010.1(8)(ii) specifically classifies such a transmission as the sale of a service, and under present law a service is not a product. However, now that the majority classifies transmissions of this type as products, IBM may claim the exemption simply upon “passage of title.”

. See Laws 1991, p. 509; Laws 1994, p. 466; Laws 1995, p. 411; Laws 1996, p. 304.