Kaiser Steel Corporation v. State Board of Equalization

Kaiser Steel Corporation (Kaiser) (plaintiff) manufactured and produced steel, pig iron, and other metals. To fire its furnaces and purify its metal products, Kaiser purchased and used various materials, including limestone, burnt lime, dolomite, and aluminum-magnesium alloy. Once the materials were used in the manufacturing process, some portion of the materials was incorporated into slag, which Kaiser sold to other companies. Under California’s tax laws, retail sales of tangible personal property were generally subject to sales and use taxes. The laws specifically provided that sales and use taxes applied to sales of tangible personal property purchased for use in manufacturing but did not apply to materials that were incorporated into a final manufactured product. A resale exemption from sales and use taxes was available for purchases made with the primary purpose of reselling the property. When Kaiser purchased the materials, it paid sales and use taxes on them. Kaiser applied for a tax refund from the California State Board of Equalization (the board) (defendant) for the sales and use taxes, claiming that the materials were purchased for the purpose of resale. The board denied Kaiser’s application for a tax refund, determining that Kaiser purchased the material to aid in manufacturing its metal products, not to resell the products. The trial court affirmed the board, finding that Kaiser’s primary purpose for purchasing the material was to use the material to aid in manufacturing. Kaiser appealed.