Concord Publishing House, Inc. v. Director of Revenue

Concord Publishing House (Concord) and Cape Mississippi Development, Inc. (Cape) (plaintiffs) published newspapers. Cape owned and published the Southeast Missourian, and Concord, whose primary business was commercial printing, operated the printing press that printed the Southeast Missourian. In 1986 Cape and Concord went under common ownership, and in 1992 Cape merged into Concord. Prior to 1993, the Southeast Missourian was printed using a tiling process. The text for the newspaper was entered into computers by Cape employees, printed off on laser printers, and manually arranged onto a board. Photos were taken of the boards, and the photos were sent to Concord’s press to print the newspapers. In 1993 Concord began using a pagination process to print the Southeast Missourian. Through that process, the newspaper was assembled electronically on computers. Between 1989 and 1993, Cape and Concord purchased the equipment that was needed for the pagination process. Cape and Concord did not pay sales or use taxes on the equipment. In 1993 the director of revenue (the director) (defendant) audited Concord for the period between 1989 and 1992. The director assessed sales- and use-tax deficiencies against Cape and Concord for their equipment purchases. Cape and Concord paid the taxes and filed a lawsuit for a refund. Cape and Concord argued that the equipment purchases were exempt from sales and use taxes under Missouri’s machinery-and-equipment exemption. Under that exemption, purchases of machinery and equipment used directly in manufacturing a product intended for final sale were exempt from sales and use taxes if the machinery and equipment were bought to replace old equipment or expand manufacturing. The Administrative Hearing Commission (the commission) held that Cape and Concord’s equipment purchases were exempt from sales and use taxes. The director appealed, arguing that the equipment that Cape and Concord bought was not used directly in manufacturing.