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Concord Pub. House, Inc. v. Director of Revenue, State of Mo., 916 S.W.2d 186, 24 Media L. Rep. 1949

Facts

Concord Publishing Company and Cape Mississippi Development, Inc. were under common ownership and operated a printing press used to print the Southeast Missourian newspaper. Before implementing a new pagination system, the companies used a manual tiling process for newspaper layout. They purchased computer equipment to upgrade their production system, which was not intended to replace old equipment but to facilitate the new pagination process and expand their production from six to seven days a week. The Director assessed sales and use tax on this equipment, which the companies paid under protest.

Cape and Concord have been under common ownership since 1986. Before 1992, Concord's primary business was commercial printing.

Issue

Whether the computer equipment purchased by Concord and Cape for the pagination system was exempt from sales and use tax under Missouri statutes.

Whether the computer equipment purchased by Concord and Cape for the pagination system was exempt from sales and use tax under Missouri statutes.

Rule

Under Missouri law, machinery and equipment used directly in manufacturing a product intended for final use or consumption may be exempt from sales and use tax if purchased to replace existing equipment due to design or product changes or to expand manufacturing.

Neither sales nor use tax is due on machinery and equipment (1) used directly (2) in manufacturing (3) a product which is intended to be sold ultimately for final use or consumption (4) if the machinery or equipment was purchased (a) to replace existing equipment by reason of design or product changes or (b) to expand existing manufacturing.

Analysis

The court analyzed whether the computer equipment was used directly in the manufacturing of the newspaper. It concluded that the pagination process, which involved assembling newspaper pages electronically, constituted manufacturing. The court found that the computers were integral to the publication process and that the changes implemented through pagination represented both a design and product change, qualifying the purchases for tax exemption.

We hold that the computers in the present case were used in 'manufacturing' a newspaper.

Conclusion

The court affirmed the AHC's decision to exempt the majority of the computer equipment from sales and use tax, concluding that the equipment was purchased for and used in an exempt manner. However, it reversed the exemption for specific items that did not meet the criteria.

We affirm the decision of the Administrative Hearing Commission except as to the Power Flex computer and the Apple DTB Mouse discussed in footnote three.

Who won?

Concord Publishing Company and Cape Mississippi Development, Inc. prevailed because the court found that their purchases of computer equipment were exempt from sales and use tax under the applicable statutes.

The court found that the equipment purchased was used to implement both a design and a product change because of the permanent changes in the format of the paper.

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