Ash Grove Cement Co. v. Nebraska Dept. of Rev.
947 N.W.2d 731
Neb.2020Background
- Ash Grove applied under the Nebraska Advantage Act (NAA) for tier 2 incentives and included nine Lyman-Richey aggregate production sites in the project; the Department of Revenue issued a partial deficiency, excluding those sites as not engaged in a "qualified business."
- Lyman-Richey produces sand and gravel by dredging raw slurry, then cleaning, classifying, dewatering, blending, stockpiling, and sometimes crushing; many aggregates are sold to related concrete plants.
- The Tax Commissioner found (1) aggregate production (absent crushing) was mining, not "manufacturing," but conceded crushing is manufacturing; (2) some locations qualified under other NAA provisions; and (3) Lyman-Richey failed to prove entitlement to a manufacturing machinery/equipment sales-and-use tax exemption for 2011.
- The district court affirmed the commissioner’s denial of the sales/use tax exemption but reversed the commissioner’s exclusion of the nine aggregate sites, holding that aggregate production (without crushing) constitutes "processing" under the NAA.
- The Department and Lyman-Richey appealed; the Nebraska Supreme Court affirmed the district court: aggregate production is not "manufacturing" under the statutory definition but is "processing" for NAA purposes; Lyman-Richey’s exemption claims were denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether aggregate production (absent crushing) is "manufacturing" under § 77-2701.46 | Lyman-Richey: cleaning, sorting, dewatering and blending reduce/transform raw slurry into aggregate (thus manufacturing). | Dept.: aggregate is the relevant property and these activities do not reduce or transform it; they are mining or severing from the ground. | Not manufacturing: record lacks competent evidence of reduction/transformation; crushing only qualifies as manufacturing. |
| Whether Lyman-Richey is entitled to the manufacturing machinery/equipment sales/use tax exemption | Lyman-Richey: its equipment is used in manufacturing (either directly or to deliver raw materials to related concrete plants) so exemption applies. | Dept.: equipment must be used in manufacturing as statutorily defined; much aggregate equipment is mining, handling, or preparation excluded by regulation. | Denied: Lyman-Richey failed to show physical change/reduction required by statute and regulation; broad transport/handling claim lacked evidentiary support. |
| Whether aggregate production is "processing" under the NAA and whether "processing" requires transformation | Ash Grove: processing is broader than manufacturing and includes cleaning/blending that prepares product for market. | Dept.: processing and manufacturing should be read alike (require transformation); agency precedent supports that view. | Processing distinct from manufacturing: "processing" means treatment/preparation to ready goods for market without requiring transformation into a substantially different product; aggregate cleaning/blending qualifies. |
| Whether "processing" should be interpreted so broadly that it subsumes other listed activities in § 77-5715(1)(c) | Ash Grove: statutes list separate activities; processing must have independent meaning and can cover preparation for market. | Dept.: a broad processing definition would swallow manufacturing, assembly, etc., contrary to statutory structure. | Court: must give effect to all terms; read disjunctively. Processing construed to preserve distinct meanings and not to subsume manufacturing. |
Key Cases Cited
- Nucor Steel v. Leuenberger, 233 Neb. 863 (Neb. 1989) (defines "process" as subjecting property to treatment preparing it for market)
- Dolese Bros. v. State ex rel. Tax Com'r, 64 P.3d 1093 (Okla. 2003) (held sand plant operations constituted manufacturing under Oklahoma law)
- Solite Corp. v. County of King George, 220 Va. 661 (Va. 1980) (washing, screening, grading of sand/gravel did not transform product into substantially different character)
- Anheuser-Busch Assn. v. United States, 207 U.S. 556 (U.S. 1908) (manufacturing requires a product emerge with a distinctive name, character, or use)
- East Texas Lines v. Frozen Food Exp., 351 U.S. 49 (U.S. 1956) (processing may render an item marketable without making it a manufactured commodity)
- Metropolitan Utils. Dist. v. Balka, 252 Neb. 172 (Neb. 1997) (court gave weight to agency construction equating manufacturing/processing with transformation in energy-exemption context)
- Com., Dept. of Taxation v. Orange-Madison Coop., 220 Va. 655 (Va. 1980) (mixing grain/additives in feed production is "processing" because it prepares product for market)