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Kansas Court of Appeals Denies Judgment in Integrated Plant Theory Case


Manufacturing

The Kansas State Court of Tax Appeals has denied the Kansas Department of Revenue’s request for summary judgment in response to a cement manufacturer’s appeal of the Department’s final written determination denying the manufacturer’s refund request of sales tax paid on purchases of repair parts for equipment used to transport limestone. The Department argued that the manufacturer engaged in two distinct business operations: 1) limestone evacuation in and around a quarry and 2) cement manufacturing that begins when crushing activities commence at hammermill machines. The Department reasoned that this precluded the repair parts from the manufacturing exemption because they were not used in an integrated production operation by a manufacturing or processing plant or facility, as required by the “integrated plant” statutes.

However, the “integrated plant” statutes specifically state that machinery and equipment are considered an integral part of the integrated production operation when used to receive, transport, convey, handle, treat or store raw materials in preparation of its placement on the production line. The Court failed to find as a matter of law that the equipment in question was not used in an integrated production operation because the Department failed to show that the activities performed did not qualify as the activities enumerated in the statute. Further, the Department failed to prove that the equipment was not used primarily by and at the manufacturer’s single, fixed location, since the quarry and cement manufacturing operations are conducted on adjacent property owned by the manufacturer. The fact that the excavation-related activities are performed on a portion of the manufacturer’s premises where additional processing does not occur is not relevant to the determination of the plant’s boundaries.

(08/27/2009)
(Archived)
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