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Noranda Aluminum, Inc. v. Missouri Dept. of Revenue, 599 S.W.2d 1

Facts

Noranda Aluminum, Inc. was assessed $115,456.85 in sales and use tax by the Missouri Department of Revenue for the period from January 1, 1974, to October 1, 1975. The assessment was based on the Department's determination that Noranda had not filed correct tax returns. After an administrative hearing, the Director of Revenue granted Noranda's protest for some items but denied it for others. Noranda operates a large aluminum production facility and claimed exemptions for machinery and equipment used directly in the manufacturing process, including new laboratory equipment and cranes.

1 The Department of Revenue of the State of Missouri assessed Noranda Aluminum, Inc. (hereafter referred to as 'Noranda') $115,456.85 tax and interest, which was paid under protest, for failure to file what the Department considered to be correct sales/use tax returns and pay the tax for the period beginning January 1, 1974 through October 1, 1975.

Issue

Whether the contested items purchased by Noranda Aluminum, Inc. are exempt from sales and use tax under Missouri law as machinery and equipment used directly in manufacturing.

The only issue upon which (that) decision (was) rendered was whether any or all of the contested items are exempt by reason of s 144.030.3(4).

Rule

Section 144.030.3 RSMo 1969 provides an exemption from sales and use tax for machinery and equipment used directly in manufacturing, mining, or fabricating a product intended for final use or consumption.

Section 144.030.3 RSMo 1969 provided a specific exemption from the provisions imposing a sales or use tax, among other things, of the following: 'Machinery and equipment purchased and used to establish new or to expand existing manufacturing, mining or fabricating plants in the state if such machinery is used directly in manufacturing, mining or fabricating a product which is intended to be sold ultimately for final use or consumption; * * *.'

Analysis

The court applied the exemption provision by determining that the items in question were integral to Noranda's manufacturing process. It referenced the 'integrated plant' theory, which supports the idea that all machinery and equipment essential to the manufacturing process should be exempt from taxation, not just those that directly change raw materials into finished products. The court found that the laboratory equipment and other contested items were necessary for the production and quality control of aluminum.

When we apply the construction of the exemption provision which was approved and adopted in the Floyd Charcoal case, it is clear that the items designated and set forth above as (a), (b), (e), and (g) are used in steps or operations that are essential to and comprise an integral part of Noranda's manufacturing process, and are 'used directly for manufacturing or fabricating a product' as that term was used in s 144.030 RSMo 1969.

Conclusion

The court affirmed the trial court's decision that certain items were exempt from sales and use tax and that Noranda was entitled to a refund of the sales tax paid under protest, limited to the amount of interest earned on the funds held in special deposit.

The judgment of the trial court that the Director of Revenue refund to Noranda the amount of sales and use tax paid under protest 'plus interest at the statutory rate from the date of Noranda's payment of such amount under protest, less any sum which may have previously been refunded * * *.'

Who won?

Noranda Aluminum, Inc. prevailed in the case because the court found that the contested items were used directly in the manufacturing process, qualifying them for tax exemption.

Noranda operates a large complex in New Madrid, Missouri for the production of aluminum metal and aluminum products.

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