The Nebraska Supreme Court found that the activities of a producer of sand and gravel aggregate, Ash Grove Cement Company, did not qualify as “manufacturing” under the Nebraska Advantage Act (NAA), but that the activities did qualify as “processing” activities for purposes of the NAA sales and use tax incentives. The NAA provides tax incentives to taxpayers that are engaged in qualified business and have fulfilled employment and investment obligations in Nebraska.
In Nebraska, “manufacturing” is defined as “an action or series of actions performed upon tangible personal property, either by hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, form, property, or thing.” Ash Grove was unable to prove that they “reduced” or “transformed” their sand and gravel aggregate. Their process of removing mud and water from the aggregate and blending the particles together did not markedly change their appearance or form or convert them into something new. Therefore, their activities did not qualify as “manufacturing” under the NAA.
However, the Supreme Court did find that the production of aggregate by Ash Grove qualifies as “processing” under the NAA. “Processing” means “to subject to a particular method, system, or technique of preparation, handling or other treatment designed to prepare tangible personal property for market, manufacture, or other commercial use which does not result in the transformation of property into a substantially different character.” Ash Grove’s aggregate was subjected to a particular cleaning, sorting, and blending method, thus preparing it for market but not transforming its character substantially.
The Supreme Court stated that the meanings of “manufacturing” and “processing” are closely related but not synonymous, highlighting how definitions can make a major impact in claiming sales tax exemptions. (Ash Grove Cement Company v. Department of Revenue, Nebraska Supreme Court, No. S-19-669, August 28, 2020)