Stone, Chairman, State Tax Commission v. Taylor MacHine Works

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This suggestion of error is filed by Taylor Machine Works and challenges the former decision of this court, reported in36 So.2d 137 and not yet reported in our State Reports.

We have before us for construction the last paragraph of Section 10111, Code of 1942, and particularly that part of it using the language "machinery, machine parts, and supplies which are exclusive necessities to processing." The pertinent portion of this statute reads as follows:

"Sales of tangible personal property to manufacturers only, of machinery, machine parts, and supplies which are exclusivenecessities to processing within this state shall be construed to be wholesale sales when the manufacturer to whom the sales are made is taxable under section 2-b (sec. 10107) of this act and the gross proceeds from such sales shall be taxable at the wholesale rate. Provided, however, that such sales may be classed as wholesale sales only if evidenced by proper and adequate invoices and records."

Taylor Machine Works is a Mississippi corporation and manufacturers in this state a machine called "Logger's Dream," a description of which may be found in the former opinion of this Court.

The question for decision is whether the wholesale rate of one-eighth of one percent or whether the retail rate of two percent should have been paid by appellee as sales tax on its sales during the years of 1944, 1945 and 1946 of this machine, called "Logger's Dream." It paid on the wholesale rate.

The question, therefore, is whether the "Logger's Dream" is an "exclusive necessity" to the processing of lumber in this state. Whatever its secondary purposes may be, it is clear that the primary use or purpose of the "Logger's Dream" is to assemble scattered logs into piles or placing them on trucks, tram cars, etc., for transport to sawmills. As a secondary use it may be used for lifting heavy articles, such as mired down, overturned or ditched automobiles or trucks, but such use would be the unusual and not the primary use for which the machine is intended, as indicated by its name "Logger's Dream."

Most every article in daily use can be and is at intervals used for other than its primary purpose for which it was intended to be used. We think of a hat, and there comes to mind its primary use as a shaped covering for the head, but hats are sometimes used for other purposes. Section 970, Code of 1942, in providing the manner in which shares in the partition of lands shall be allotted, provides that the commissioners shall publicly number as many tickets as there are shares to be allotted and put the tickets into a "hat" and allot the shares by drawing. Hats are frequently passed in assemblies for taking up collections or ballots. But still the primary use of the hat is as a covering for the head and the primary use or the "Logger's Dream" is for the collection and loading of logs onto trucks or cars for transport to a sawmill.

The gathering and loading of logs for transport to the sawmill is a necessary and essential step in their processing into lumber. The getting of the logs to the mill is a sine qua non to their processing into lumber. Hence the gathering of the logs, after felling, and the loading of the logs on trucks or cars for transport to the sawmill is a necessary operation for and a part of their manufacture into lumber. It is just as vital to the act of processing as is the power that operates the mill.

It is true that logs may be and generally are gathered and loaded on cars or trucks by instrumentalities other than the "Logger's Dream", but whatever the instrumentality used may be, that instrumentality is a necessity "to processing" within the state for it is performing a necessary step in the process of manufacturing, and when that is the constant and only recurring use made of such instrumentality then its use is exclusively for processing within the state.

It has been the public policy of this state for several years to encourage industry within the state. This is illustrated by the passage of the B.A.W.I. bill and the consequent encouragement to industry to set up factories within the state. It was the purpose of the Legislature, in the enactment of the statute here under review, to stimulate, in the state, the process of manufacture. The term "exclusive," as used in the act, was not intended to modify or limit "necessities," but the Legislature intended that "exclusive" should modify the words "to processing" within the state. The purpose and intent of the Legislature evidently was that a sale of machinery, machine parts and supplies that were "necessities" to processing within the state and whose primary usefulness was "exclusive" to processing "within the state" should "be construed wholesale sales," upon compliance with the other terms of the statute. In this way, industries engaged in processing within the state would be given the benefit of the lower wholesale rate on "necessities" "exclusive" "to processing" within the state. Such industries pay sales taxes on their manufactured products, pay ad valorem taxes on their properties, and their payrolls stimulate commerce and trade in the state.

It is evident therefore that the Legislature intended by the words "machinery, machine parts, and supplies which are exclusive necessities to processing" to classify as taking the wholesale sales tax rate any "machinery, machine parts, and supplies" whose primary use performs a necessary step in the operation of processing in the state, and whose actual use is exclusively in the operation of processing in the state. Any such tangible personal properties are "exclusive necessities to processing" in the state and take the wholesale rate. (Hn 1) The "Logger's Dream" meets these requirements and is an exclusive necessity to processing within the state, and when sold in full compliance with the terms of the aforesaid statute its sale shall be taxed at the wholesale rate.

Three of the members of this Court are of the opinion that the suggestion of error should be sustained, which under our rules of procedure results in the affirmance of the judgment of the trial court.

Suggestion of error sustained and judgment affirmed.