State ex rel. Union Electric Co. v. Goldberg

WELLIVER, Judge.

This mandamus suit was brought in the Cole County Circuit Court pursuant to § 536.1501 to review the Director of Revenue’s denial of appellants’ claim for a sales tax refund. The question presented in this case is whether appellant Union Electric Company’s sale of electricity to appellant Meramec Mining Company is covered by § 144.030.3(11), RSMo 1969, which exempts from Missouri sales tax:

“(11) Electrical energy used in the actual primary manufacture, processing, compounding, mining or producing of a product, or electrical energy used in the actual secondary processing or fabricating of the product, if the total cost of electrical energy so used exceeds ten percent of the total cost of production, either primary or secondary, exclusive of the cost of electrical energy so used;”

The circuit court held that this sale of electrical energy was not exempt, and this appeal followed. We have appellate jurisdiction because construction of a revenue law is involved. Mo.Const. art. V, § 3. We reverse.

The facts are stipulated. From June 1, 1976 to June 30, 1977 Meramec engaged in mining iron ore in Washington County, Missouri. Ore (rock bearing iron) and waste rock (necessary to get to the ore) were drilled and blasted at depths underground varying from 1400 feet to 2400 feet. The ore and rock were then crushed to approximately six inches in size to facilitate handling and removal. This mixture was carried to the shaft by conveyor belt, loaded into skips, and hoisted to the surface where it was placed in bins.

*923Above ground the ore was removed from the bins and subjected to a process called beneficiation. Iron minerals were separated from the ore by grinding and magnetic separation. These were further processed by thickening, filtering, mixing with ben-tonite and shaping into balls of ⅝ inch or less diameter which were fired and hardened in a pellet furnace. The fired pellets were stocked for shipment to steel mills. Non-magnetic minerals were processed by flotation and gravity concentration to produce pyrite, apatite and hematite.

The total cost of electrical energy used in the combined operations of mining and processing did not exceed ten percent of the total cost of production, exclusive of the cost of electrical energy, but the cost of electrical energy used in the beneficiation process did exceed ten percent of the total cost of that process, exclusive of the cost of electrical energy. Union Electric’s bill to Meramec included sales tax on the entire amount of energy sold, which was paid over to the Department of Revenue. Appellants now seek to compel refund of $51,909 which was paid as sales tax on electrical energy used in the beneficiation process. They claim that § 144.030.3(11) provides separate exemptions for electricity used in separate parts of Meramec’s operations. Respondent contends that the statute allows an exemption only when the cost of electricity used in various stages of producing a product exceeds ten percent of the total cost of production, and that it does not allow appellants to split a production process into stages and seek an exemption for one stage alone.

Section 144.030.3(11) has not been previously construed on this issue. Respondent reminds us that this is a statute providing a tax exemption, and it therefore should be construed strictly against the party claiming the exemption. While this is an accepted canon of statutory interpretation, it should not be applied to force a conclusion that the legislature intended something other than v/hat is expressed in the plain language of the statute. American Bridge Co. v. Smith, 352 Mo. 616, 179 S.W.2d 12, 16 (1944). In construing a statute “[t]he primary rule is to ascertain the intent of the legislature from the language used, to give effect to that intent if possible, and to take the words used in the statute in their plain and ordinary meaning.” State ex rel. Dravo Corp. v. Spradling, 515 S.W.2d 512, 517 (Mo.1974). The language of the statute must be examined with this principle in mind.

We think the legislature’s use of the terms “primary” and “secondary” is significant. The use of various other words to refer to these terms complicates construction of the statute, but its meaning is clarified when a neutral term is substituted. The statute may be paraphrased as follows:

Electrical energy used in the actual primary [stage] or electrical energy used in the actual secondary [stage], if the total cost of electrical energy so used exceeds ten percent of the total cost of production, either primary or secondary, exclusive of the cost of electrical energy so used; (emphasis supplied)

This language clearly shows an intention to exempt electrical energy used in either a primary or a secondary stage of production. Respondent argues that the cost of electricity must exceed ten percent of the total cost of production in all stages of production added together. This construction ignores the phrase “either primary or secondary” which follows immediately after the reference to total cost of production, and would render meaningless the legislature’s division of production into primary and secondary stages. We should not assume the legislature intended these words to have no meaning. State ex rel. Smith v. Atterbury, 364 Mo. 963, 270 S.W.2d 399 (banc 1954).

This court has had occasion to define “mining” as used in another subsection providing an exemption under § 144.030.3.2 In *924West Lake Quarry & Material Co., Inc. v. Schaffner, 451 S.W.2d 140 (Mo.1970) the issue was whether certain machinery and equipment was used in “manufacturing, mining or fabricating a product” so as to qualify for a sales tax exemption. West Lake blasted rock from the ground, reduced it in size and hauled it to a hopper. The rock was then put through a screening process, after which it was crushed into several sizes and then sorted by size. The court concluded that the operation of removing the rock from the ground, breaking it up and hauling it to the crusher was mining. The blasting, crushing and hauling activities are virtually the same as those of Mera-mec in this case. We hold that in drilling and blasting rock, and crushing and hauling it to bins, Meramec was engaged in mining.

Processing has been defined elsewhere as “a mode of treatment of certain materials to produce a given result. It is an act, or a series of acts, performed upon the subject matter to be transformed and reduced to a different state or thing.” Miller v. Electro Bleaching Gas Co., 276 F. 379, 381 (8th Cir. 1921), quoting from Cochrane v. Deener, 94 U.S. 780, 788, 24 L.Ed. 139 (1876). This is similar to the definition in Webster’s Third New International Dictionary, 1808 (1976), which gives illustrations as follows: processing cattle by slaughtering them; processing milk by pasteurizing it; processing grain by milling; processing cotton by spinning. We hold that the flotation and gravity concentration used to produce the non-magnetic metals, and the thickening, filtering, mixing, shaping and firing of the iron ore can be labeled as processes within the meaning of § 144.030.3(11).3

We are aware that the statute may be more difficult to apply to other factual situations because of the legislature’s inartful choice of overlapping terms, i. e., the use of the words “manufacturing, processing, compounding, and fabricating,” the meaning of the latter three ordinarily being included within the meaning of the more general and inclusive term “manufacturing,” and the use of the word “processing” with reference to both primary and secondary stages of production. We do not attempt to address such problems at this time. In the case before us we have a company which clearly is engaged in the primary mining and secondary processing of a product. We hold that Meramec is entitled to an exemption from sales tax for the electricity used in the secondary beneficiation process. In ruling that an exemption is not available unless the cost of electricity exceeds ten percent of the total cost of all stages of production, the trial court erroneously applied the law.

We reverse and remand to the circuit court with instructions that it issue its writ of mandamus to the respondent Director of Revenue directing him to refund to relators the sum of $51,090.

MORGAN, C. J., and DONNELLY, RENDLEN and SIMEONE, JJ., concur. BARDGETT, J., dissents in separate dissenting opinion filed. SEILER, J., dissents and concurs in separate dissenting opinion of BARDGETT, J.

. Section 536.150 RSMo Supp.1975 provides for review by injunction or original writ of administrative decisions not otherwise subject to judicial review.

. Section 144.030.3(4) exempts from sales tax “[m]achinery 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 *924fabricating 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;”

. We realize that in West Lake activities performed after mining were classified as manufacturing rather than processing. However, the exemption being construed applied only to manufacturing, mining and fabricating; processing was not under consideration. We do not feel these terms are mutually exclusive. In states with similar tax exemption statutes processing and manufacturing are sometimes treated as equivalents and are sometimes distinguished. See Annot., 17 A.L.R.3d 7, § 4 (1968). In West Lake we defined manufacturing as “a process [which] takes something practically unsuitable for any common use and changes it so as to adapt it to such common use . . . .” 451 S.W.2d at 143. This term is an extremely broad one, which could encompass most of the terms used by the legislature in § 144.030.3(11), such as processing, compounding or fabricating. See, e. g., Wilson & Co., Inc. v. Department of Revenue, 531 S.W.2d 752 (Mo.1976) (manufacturing includes the processing of hogs into meat and other products).