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Keywords

statuteappealburden of proofbeyond a reasonable doubt
appealtrialbeyond a reasonable doubtappellant

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Western Paper Co. v. Qualls, 272 Ark. 466, 615 S.W.2d 369

Facts

Western Paper Co. appealed a decision from the Pulaski County Chancery Court that denied its claimed exemption from gross receipts tax on machinery sold to commercial printers. The company argued that the machinery was used directly in manufacturing, which is exempt under Arkansas law. However, the court needed to determine whether commercial printers could be classified as manufacturers under the statute, which had not been previously addressed in Arkansas.

Appellant, Western Paper Co., appeals from a decree of the Pulaski County Chancery Court denying its claimed exemption from gross receipts (sales) tax on its sales to commercial printers. Under Ark.Stat.Ann. s 84-1904(r)(2) the sale of machinery or equipment used directly in manufacturing is exempt from taxation.

Issue

Whether the commercial printers to whom Western Paper Co. sells machinery are 'manufacturers' within the meaning of Ark.Stat.Ann. s 84-1904(r)(2).

The sole question presented on this appeal is whether the commercial printers to whom appellant sells machinery are 'manufacturers' within the meaning of Ark.Stat.Ann. s 84-1904(r)(2).

Rule

The party claiming the exemption has the burden of proving it beyond a reasonable doubt; any exemption provision must be strictly construed against the exemption.

As stated in 370 S. H. & J. Drilling Corp. v. Qualls, 268 Ark. 71, 593 S.W.2d 178 (1980), the party claiming the exemption has the burden of proving it beyond a reasonable doubt; also, any exemption provision must be strictly construed against the exemption, and to doubt is to deny the exemption.

Analysis

The court analyzed the operations of commercial printers and concluded that they do not fit the definition of manufacturers as intended by the statute. The court referenced previous cases that distinguished between manufacturing and mere printing services, emphasizing that the final product of commercial printing does not have a commercial market value beyond the individual client. The court found that the operations of commercial printers, while involving machinery, do not transform raw materials into new and useful products in the way that manufacturing does.

The party claiming the exemption has the burden of proving it beyond a reasonable doubt. The chancellor was not convinced, neither are we. In any event we are unable to say that the ruling of the trial court was clearly against the preponderance of the evidence.

Conclusion

The court affirmed the Chancery Court's decision, concluding that Western Paper Co. did not meet the burden of proof required to establish that commercial printers are manufacturers under the statute.

Affirmed.

Who won?

The Chancery Court's ruling was upheld, with the court finding that Western Paper Co. failed to prove that commercial printers are manufacturers, thus denying the tax exemption.

Affirmed.

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