Electrical Energy (Rescinded May 30, 2003)

AUTHORITY: section 144.270, RSMo 1994. This rule was previously filed as rule no. 85 Jan. 22, 1973, effective Feb. 1, 1973. S.T. regulation 030-55 was last filed Dec. 31, 1975, effective Jan. 10, 1976. Refiled March 30, 1976. Amended: Filed Aug. 13, 1980, effective Jan. 1, 1981. Amended: Filed March 11, 1983, effective July 11, 1983. Rescinded: Filed Nov. 15, 2002, effective May 30, 2003. Terminal Warehouses of St. Joseph, Inc. v. Department of Revenue, Case No. RV-81-0426 (A.H.C. 8/10/83). The sole issue in this case is whether petitioner was entitled to an electrical energy exemption pursuant to section 144.030.2(12), RSMo for electrical energy used in the secondary processing of a product where the cost of the electrical energy used exceeds ten percent of the total cost of production. Petitioner was in the business of freezing and storing food. The commission found that freezing causes various changes in the chemical and physical properties of food, and that the purpose of freezing was to increase the product’s longevity and preserve its nutritional value. The commission held that the taxpayer need not qualify as a manufacturer before it was entitled to claim an exemption for processing and that the freezing of food constitutes processing. Therefore, the taxpayer is entitled to the exemption. St. Louis County Water Company v. Director of Revenue, Case Nos. RS-84-0307, RS-85-0444 and RS-84-0514 (A.H.C. 6/30/86). The Administrative Hearing Commission found that the petitioner qualified for the manufacturing exemption under 144.030.2(12), RSMo. In Jackson Excavating v. Administrative Hearing Commission, 646 SW2d 48 (Mo. 1983), the supreme court stated the test for manufacturing: a transformation of a raw material into a salable new product which has an intrinsic and merchantable value in a form capable of new uses. The commission noted that pressurization was necessary to maintain purification: both the Missouri Public Service Commission and the Department of Natural Resources require minimum pressure to be maintained to meet consumer needs and to prevent contamination such as backflow and seepage. Further, the commission noted that the petitioner had to produce a product capable of performing work such as activating sprinklers, toilets and showers. The commission found that pressurization was “an integral continuous and indivisible portion of the petitioner’s business” and part of the purification process constituting manufacturing. Monsanto Company v. Director of Revenue, Case No. RS-840332 (A.H.C. 11/29/86). The Administrative Hearing Commission disregarded the integrated plant argument and ruled that the formation of silicon rods was a separate and distinct manufacturing stage entitled to the exemption.