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Midwestern Press, Inc. v. Commissioner of Taxation, 295 Minn. 59, 203 N.W.2d 344

Facts

Midwestern Press, Inc., a Minnesota corporation engaged in commercial printing, utilized metal lithographic plates in its offset lithography process. The plates were custom-made for specific jobs and were typically worthless after their use, except in rare cases where they could be reused for reruns. The company did not pay sales tax on these plates, claiming an exemption, which the Commissioner of Taxation initially rejected. The Tax Court later ruled in favor of Midwestern, stating that the plates were exempt from sales tax.

Midwestern Press, Inc. (hereinafter referred to as Midwestern) is a Minnesota corporation engaged in the business of commercial printing, a major portion of which is done by the ‘offset’ method of lithography, which utilizes in its printing process metal lithographic plates.

Issue

Whether lithographic plates used by Midwestern Press, Inc. are exempt from sales tax under Minn.St. 297A.25, subd. 1(h) as materials 'used or consumed' in industrial production.

Whether lithographic plates used by Midwestern Press, Inc. are exempt from sales tax under Minn.St. 297A.25, subd. 1(h) as materials 'used or consumed' in industrial production.

Rule

Lithographic plates that are manufactured and used only for the job for which they are prepared and are worthless after the job is completed are considered 'used or consumed' in production, qualifying for sales tax exemption. Additionally, such plates are not classified as 'machinery' under the relevant statute.

Lithographic plates which are manufactured and used only for the job for which they are prepared and are worthless after the job is completed, except in rare cases where there is a rerun, are ‘used or consumed’ in production within the sales-and use-tax exemption of Minn.St. 297A.25, subd. 1(h).

Analysis

The Court analyzed the nature of the lithographic plates, noting that they were specifically made for particular jobs and had limited usability. The Tax Court's finding that the plates were economically consumed in the printing process was upheld, as they had no significant value after their use. The Court distinguished these plates from machinery, emphasizing their limited lifespan and lack of reuse.

The Tax Court held that ‘(l)ithographic printing plates are specifically made for particular jobs and except in isolated cases are not reuseable. In any event they are not useable beyond certain capacities because of wear and abrasion on the plate.’

Conclusion

The Supreme Court affirmed the Tax Court's decision, concluding that the lithographic plates were exempt from sales tax as they were used or consumed in the printing process and did not qualify as machinery.

We are convinced that the Tax Court was right and its decision should be and is affirmed.

Who won?

Midwestern Press, Inc. prevailed in the case because the Court agreed with the Tax Court's reasoning that the lithographic plates were 'used or consumed' in the printing process and did not constitute machinery.

The Tax Court further held: ‘It is the opinion of this Court that the lithographic plates in question here are used And consumed in the printing process. This Court sees no distinction between the plates and the ink used in the printing process.’

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