E & B GRANITE, INC. v. Director of Revenue
331 S.W.3d 314
| Mo. | 2011Background
- E & B Granite buys raw granite slabs and uses them to manufacture countertops and other granite products.
- Some countertops are sold with installation and some without; installation involves title passing to the owner upon complete installation on real property.
- E & B seeks exemptions under section 144.054.2 for the granite slabs used to manufacture installed countertops; local use tax remains due.
- The Director disallowed the exemptions; E & B challenged via Administrative Hearing Commission (AHC) proceeding.
- AHC granted the refunds; the Director sought judicial review and the Supreme Court affirmed the AHC decision.
- There is no definition of “product” in section 144.054.2; clarified that countertops are “products” and raw granite is a “material.”
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are granite countertops "products" under 144.054.2? | Countertops are output with market value and fall within 144.054.2. | Installed countertops are fixtures on real property, not tangible personal property, thus not products. | Yes, countertops are products under 144.054.2. |
| Are raw granite slabs "materials" under 144.054.2? | Raw granite is a material used or consumed to manufacture countertops. | Materials must be wholly consumed during manufacturing and granite is not. | Yes, raw granite slabs are materials used or consumed. |
| Would the interpretation lead to absurd results? | Taxes apply to local use; exemption is not a special benefit to E & B alone. | Extending exemption creates tax avoidance for materials used in manufacture. | No absurd result; exemptions apply as defined by statute. |
Key Cases Cited
- International Bus. Mach. Corp. v. Dir. of Revenue, 958 S.W.2d 554 (Mo. banc 1998) (definition of product extending to services, influencing statutory scope)
- Blevins v. Dir. of Revenue, 938 S.W.2d 899 (Mo. banc 1997) (title passing to real property; distinctions between section 144.030.2(2) and 144.054.2)
- Southwestern Bell Yellow Pages, Inc. v. Dir. of Revenue, 94 S.W.3d 388 (Mo. banc 2002) (raw paper used to manufacture directories; material use interpretation)
- Ovid Bell Press v. Dir. of Revenue, 45 S.W.3d 880 (Mo. banc 2001) (copy paper as materials in manufacturing process)
- Zip Mail Services, Inc. v. Dir. of Revenue, 16 S.W.3d 588 (Mo. banc 2000) (revenue-law interpretation standard of review)