                                                                                          06/28/2019
               IN THE COURT OF APPEALS OF TENNESSEE
                           AT NASHVILLE
                                  May 8, 2019 Session

         CHECK PRINTERS, INC. v. DAVID GERREGANO ET AL.

                Appeal from the Chancery Court for Davidson County
                  No. 15-598-IV     Russell T. Perkins, Chancellor
                      ___________________________________

                           No. M2018-01030-COA-R3-CV
                       ___________________________________


This case involves the Commissioner of Revenue for the State of Tennessee’s audit and
subsequent adjustment of sales tax due from Appellant, Check Printers, under the
Tennessee Retailers Sales Tax Act, Tennessee Code Annotated section 67-6-101, et seq.
The trial court granted the Commissioner’s motion for summary judgment finding that,
although Appellant manufactured the disputed products in Tennessee and ultimately
exported the products outside the state, under Appellant’s standard contract language,
title passed to the customer in Tennessee at the time the product was tendered for
shipping. Based on this intervening taxable event, i.e., the “sale,” as that term is defined
in Tennessee Code Annotated section 67-6-102(80)(A), the trial court concluded that the
products were not excluded from taxation under either the manufactured-for-export
exemption, Tennessee Code Annotated section 67-6-313(a), or the sale-for-resale
exemption, Tennessee Code Annotated section 67-6-102(75)(a). Because there is a
dispute of material fact concerning whether Appellant’s sale of blow-in cards to its
customer, AMI, was consummated in Tennessee, we vacate the trial court’s grant of
summary judgment only as to the AMI blow-in cards; the trial court’s order is otherwise
affirmed.

      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                Vacated in Part, Affirmed in Part, and Remanded

KENNY ARMSTRONG, J., delivered the opinion of the court, in which J. STEVEN
STAFFORD, P.J., W.S., and CARMA D. MCGEE, J., joined.

Michael D. Sontag, Stephen J. Jasper, and Michael A. Cottone, Nashville, Tennessee, for
the appellant, Check Printers, Inc.

Herbert H. Slatery, III, Attorney General and Reporter, Andrée Blumstein, Solicitor
General, and R. Mitchell Porcello, Senior Assistant Attorney, for the appellees,
Commissioner of Revenue for the State of Tennessee, and State of Tennessee - Civil.


                                        OPINION

                                      I. Background

       Check Printers, Inc. (“Check Printers,” or “Appellant”) is a commercial printing
company founded in 1960 for the specific purpose of printing checks for banks in the
Middle Tennessee area. Since that time, the company’s operations have expanded to
include the manufacture and sale of a wide range of printed commercial products. In
2004, Check Printers became a wholly-owned indirect subsidiary of R.R. Donnelley and
Sons (“R.R. Donnelley”). R.R. Donnelley has approximately 150 printing facilities in
North America and is one of the largest printers in the world. During all relevant times,
Check Printers had two facilities: one in Antioch, Tennessee and one in North Carolina.
This appeal concerns the tax consequences flowing from the operations at Check
Printers’ Antioch facility during the relevant time period.

        After completing audits of Check Printers for the period of July 1, 2006 through
December 1, 2010 (the “Audit Period”), on April 10, 2015, the Commissioner of the
Tennessee Department of Revenue (“Commissioner,” or “Department,” and together with
the State of Tennessee, “Appellees”) issued a Notice of Adjusted Amounts Due. The
adjusted tax assessment consisted of sales and use tax in the amount of $4,098,468.17,
plus interest (for the period of January 1, 2008 through December 31, 2010), and state
and local business tax in the amount of $323,443.36, plus penalties and interest (for the
period of July 1, 2006 through December 31, 2010). The adjusted tax amount, interest,
and penalties totaled $6,183,675.31. In making the assessment, the Commissioner
determined that Check Printers’ principal business, during the Audit Period, was the sale
of services, rather than manufacturing. However, in its memorandum and final order,
infra, the trial court concluded that Check Printers was, in fact, a manufacturer entitled to
exemption from business tax. Tenn. Code Ann. §§ 67-4-712(b)(2) and 67-6-206. The
parties do not appeal the trial court’s conclusion that Check Printers is a manufacturer or
its amendment of the Commissioner’s adjusted tax amount to reflect Check Printers’
manufacturer exemption. As such, we will neither address nor disturb this portion of the
trial court’s order.

        During the Audit Period, Check Printers printed various items at its Antioch
facility, including checkbooks, catalog components, check starter kits, coupon payment
booklets, mortgage closing packages, monthly billing statements, utility bills, etc. After
Check Printers completed an order, it shipped the order to its customers or to other
customer-designated parties in the chain of production and/or distribution. Check
Printers also printed blow-in cards, which are inserted into magazines to solicit
subscriptions. As is relevant to this appeal, Check Printers manufactured blow-in cards
                                          -2-
for American Media, Inc. (“AMI”) and Martha Stewart-Finishing (“Martha Stewart”).
The blow-in cards were printed at the Antioch facility and then shipped to an out-of-state
R.R. Donnelley facility; the out-of-state facility printed the magazines for AMI and
Martha Stewart, inserted the blow-in cards into the magazines, and then shipped the
magazines to AMI and Martha Stewart or to their subscribers. For its shipping, Check
Printers primarily used the United States Postal Service (“USPS”), which was located at
the Antioch facility, but it shipped some products through common carriers such as
United Parcel Service and Federal Express. When Check Printers shipped materials that
were printed at the Antioch facility (including the blow-in cards) to other states, it did not
charge, collect, or remit sales tax in Tennessee.

        After the Commissioner’s audit, the parties participated in an informal taxpayer
conference concerning the Notice of Adjusted Amounts Due. As part of this process, on
August 24, 2015, Check Printers sent a detailed letter disputing the assessment. In the
letter, Check Printers asserted, inter alia, that: (1) the Department is not permitted to
assess Tennessee tax on sales in interstate commerce; and (2) Check Printers’ sale of
blow-in cards qualifies for either the magazine exemption or, alternatively, for the sale-
for-resale tax exemption. On February 26, 2015, the Department’s Administrative
Hearing Officer issued a determination upholding the assessment. Specifically, the
Hearing Officer rejected Check Printers’ interstate commerce objection on the ground
that title to the printed materials transferred to Check Printers’ customers while the
materials were still in Tennessee, thus creating a taxable event in Tennessee, see further
discussion infra. Concerning the blow-in cards, the Hearing Officer concluded that these
cards were not “components” of the magazines, thus negating application of the
magazine exemption. The Hearing Officer also rejected Check Printers’ argument that
the blow-in cards were sales for resale. Accordingly, the Hearing Officer declined to
adjust the Department’s assessment.

       On May 14, 2018, Check Printers filed this action in the Davidson County
Chancery Court (“trial court”). As is relevant to the instant appeal, in count one of its
complaint Check Printers challenged the Department’s assessment of sales and use tax on
printed products that Check Printers caused to be shipped by common carriers to
destinations outside the State of Tennessee. Concerning these transactions, which we
read to include all materials printed at the Antioch facility including blow-in cards, Check
Printers asserted that they involved products “manufactured for export” and should,
therefore, be exempt from sales and use tax under the plain language of Tennessee Code
Annotated section 67-6-313(a), infra. Concerning the blow-in cards, in count four of the
complaint, Check Printers claimed that the blow-in cards should qualify for the “sale for
resale” exemption under Tennessee Code Annotated section 67-6-102(75)(a), infra.
Specifically, Check Printers argued that the blow-in cards become part of the magazines,
which are then resold by other companies; thus, the blow-in cards (as part of the resold


                                            -3-
magazines) qualify for the “sale for resale” exemption from sales tax.1

        The parties filed cross motions for summary judgment.2 The trial court heard the
motions on July 19, 2017. In its memorandum and final order, filed on May 23, 2018, the
trial court granted the parties’ respective motions in part. The trial court granted Check
Printers’ motion concerning its designation as a manufacturer for business tax purposes
and adjusted the amount of the tax assessment to reflect that designation. As previously
noted, the parties do not appeal this portion of the trial court’s ruling. The trial court
granted the Department’s motion as to the sales tax issues, see discussion infra, finding
that neither the sale-for-resale nor the manufactured-for-export exemptions applied to
Check Printers’ sales of the disputed tangible personal property. Check Printers appeals.


        1
           In count three of the complaint, Check Printers alleged that it is entitled to the magazine
exception for the blow-in cards it produced for AMI and Martha Stewart. Specifically, Check Printers
asserted that “[b]ecause the blow-in cards are components of [AMI and Martha Stewart’s] respective
magazines, the production of the blow-in cards should qualify for the exemption available to magazines.”
The trial court held that the blow-in cards were not magazines and, as such, were not tax exempt under
Tennessee Code Annotated section 67-6-329(a)(16) Check Printers does not appeal this holding;
accordingly, we neither address the magazine exemption nor disturb the trial court’s holding on same.
        2
          As discussed by the Tennessee Supreme Court in CAO Holdings, Inc. v. Trost, 333 S.W.3d 73
(Tenn. 2010):

                 Tenn. R. Civ. P. 56 permits any party to move for summary judgment regardless
        of whether that party is the plaintiff or the defendant. Accordingly, the courts are
        sometimes confronted with cross-motions for summary judgment. Although many cases
        with competing motions for summary judgment can be disposed of based on these
        motions, it does not necessarily follow that a summary judgment must be granted to one
        side or the other simply because both parties have moved for a summary judgment. The
        fact that both parties are arguing simultaneously that there is no genuine issue of material
        fact does not establish that a trial is unnecessary.
                 Cross-motions for summary judgment are no more than claims by each side that
        it alone is entitled to a summary judgment. The court must rule on each party’s motion
        on an individual and separate basis. With regard to each motion, the court must
        determine (1) whether genuine disputes of material fact with regard to that motion exist
        and (2) whether the party seeking the summary judgment has satisfied Tenn. R. Civ. P.
        56’s standards for a judgment as a matter of law. Therefore, in practice, a cross-motion
        for summary judgment operates exactly like a single summary judgment motion.
                 When considering individual competing cross-motions for summary judgment,
        the court must take care to resolve all factual disputes and any competing rational
        inferences in the light most favorable to the party opposing each motion. The denial of
        one motion does not necessarily imply that the other party’s motion should be granted.
        Both summary judgment motions should be denied if the court finds that there is a
        genuine dispute regarding a material issue of fact with regard to both motions, or if the
        parties disagree as to the inferences or conclusions to be drawn from the facts material to
        both motions . . . .

Id. at 82-83 (internal citations omitted).
                                                   -4-
                                         II. Issues

       Check Printers present three issues for review:

       1. Whether [Check Printers’] sales of “blow-in cards” were sales of items
       “intended for subsequent resale by the purchaser” exempt from Tennessee
       sales tax under Tenn. Code Ann. §§ 67-6-102(75)(A), [67-6]-102(76), and
       [67-6]-202(a) when the blow-in cards were inserted into and became
       component parts of magazines sold by [Check Printers’] customers.

       2. Whether [Check Printers’] sales of printed products shipped to other
       states were sales of products “manufactured in this state for export” exempt
       from Tennessee sales tax under Tenn. Code Ann. § 67-6-313(a) when
       [Check Printers] fabricated the products in Tennessee and immediately
       thereafter shipped those products to locations outside Tennessee through
       the United States Postal Service or other common carrier.

       3. Whether [Check Printers’] sales of “blow-in cards” to American Media
       Incorporated were subject to Tennessee sales tax when neither title to nor
       possession of the blow-in cards passed from [Check Printers] to American
       Media Incorporated in Tennessee.

                                 III. Standard of Review

       This case was decided by summary judgment. Summary judgment is appropriate
when “the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.” Tenn. R. Civ.
P. 56.04. We review a trial court’s ruling on a motion for summary judgment de novo,
without a presumption of correctness. Rye v. Women’s Care Center of Memphis,
MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015); Dick Broad. Co., Inc. of Tenn. v. Oak
Ridge FM, Inc., 395 S.W.3d 653, 671 (Tenn. 2013). In doing so, we make a fresh
determination of whether the requirements of Rule 56 of the Tennessee Rules of Civil
Procedure have been satisfied. Rye, 477 S.W.3d at 250 (citing Estate of Brown, 402
S.W.3d 193, 198 (Tenn. 2013); Hughes v. New Life Dev. Corp., 387 S.W.3d 453, 471
(Tenn. 2012)).

       As set out at Tennessee Code Annotated section 20-16-101:

       In motions for summary judgment in any civil action in Tennessee, the
       moving party who does not bear the burden of proof at trial shall prevail on
       its motion for summary judgment if it:

                                           -5-
      (1) Submits affirmative evidence that negates an essential element of the
      nonmoving party’s claim; or
      (2) Demonstrates to the court that the nonmoving party’s evidence is
      insufficient to establish an essential element of the nonmoving party's
      claim.

        However, “a moving party seeking summary judgment by attacking the
nonmoving party’s evidence must do more than make a conclusory assertion that
summary judgment is appropriate on this basis.” Rye, 477 S.W.3d at 264. Rule 56.03
requires the moving party to support its motion with “a separate concise statement of the
material facts as to which the moving party contends there is no genuine issue for trial.”
Tenn. R. Civ. P. 56.03. Each fact is to be set forth in a separate, numbered paragraph and
supported by a specific citation to the record. Id. If the moving party fails to meet its
initial burden of production, the nonmoving party’s burden is not triggered, and the court
should dismiss the motion for summary judgment. Town of Crossville Hous. Auth., 465
S.W.3d 574, 578–79 (Tenn. Ct. App. 2014) (citing Martin v. Norfolk S. Ry. Co., 271
S.W.3d 76, 83 (Tenn. 2008)). As the Tennessee Supreme Court has stated:

      [T]o survive summary judgment, the nonmoving party “may not rest upon
      the mere allegations or denials of [its] pleading, but must respond, and by
      affidavits or one of the other means provided in Tennessee Rule 56, set
      forth specific facts” at the summary judgment stage “showing that there is a
      genuine issue for trial.” Tenn. R. Civ. P. 56.06. The nonmoving party
      “must do more than simply show that there is some metaphysical doubt as
      to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.
      Ct. 1348. The nonmoving party must demonstrate the existence of specific
      facts in the record which could lead a rational trier of fact to find in favor of
      the nonmoving party.

Rye, 477 S.W.3d at 265. If adequate time for discovery has been provided and the
nonmoving party’s evidence at the summary judgment stage is insufficient to establish
the existence of a genuine issue of material fact for trial, then the motion for summary
judgment should be granted. Id. Thus, even where the determinative issue is ordinarily a
question of fact for the jury, summary judgment is still appropriate if the evidence is
uncontroverted and the facts and inferences to be drawn therefrom make it clear that
reasonable persons must agree on the proper outcome or draw only one conclusion.
White v. Lawrence, 975 S.W.2d 525, 529–30 (Tenn. 1998).

      However, if there is any uncertainty concerning a material fact, then summary
judgment is not the appropriate disposition. As stated by the Tennessee Supreme Court
in EVCO Corp. v. Ross, 528 S.W.2d 20 (Tenn. 1975):


                                            -6-
       The summary judgment procedure was designed to provide a quick,
       inexpensive means of concluding cases, in whole or in part, upon issues as
       to which there is no dispute regarding the material facts. Where there does
       exist a dispute as to facts which are deemed material by the trial court,
       however, or where there is uncertainty as to whether there may be such a
       dispute, the duty of the trial court is clear. He [or she] is to overrule any
       motion for summary judgment in such cases, because summary judgment
       proceedings are not in any sense to be viewed as a substitute for a trial of
       disputed factual issues.

Id. at 24-25.

       To the extent that the issues raised in this appeal require us to interpret and apply
statutes, we note that statutory interpretation is a question of law, which we review de
novo, affording no presumption of correctness to the conclusions of the trial court. State
v. Crank, 468 S.W.3d 15, 21 (Tenn. 2015); In re Baby, 447 S.W.3d 807, 817 (Tenn.
2014); Mansell v. Bridgestone Firestone N. Am. Tire, LLC, 417 S.W.3d 393, 399 (Tenn.
2013) (citing Waters v. Farr, 291 S.W.3d 873, 882 (Tenn. 2009)).

        The principles of statutory interpretation are well established. When reading
“statutory language that is clear and unambiguous, we must apply its plain meaning in its
normal and accepted use, without a forced interpretation that would limit or expand the
statute's application.” Eastman Chemical Co. v. Johnson, 151 S.W.3d 503, 507 (Tenn.
2004). “[W]e presume that every word in a statute has meaning and purpose and should
be given full effect if the obvious intention of the General Assembly is not violated by so
doing.” SunTrust Bank v. Burke, 491 S.W.3d 693, 695 (Tenn. Ct. App. 2015), perm.
app. denied (Tenn. June 15, 2015) (quoting Lind v. Beaman Dodge, 356 S.W.3d 889,
895 (Tenn. 2011)). “When a statute is clear, we apply the plain meaning without
complicating the task.” In re Baby, 447 S.W.3d 807, 817 (Tenn. 2014). However, when
a statute is ambiguous, “we may reference the broader statutory scheme, the history of the
legislation, or other sources.” Colonial Pipeline Co. v. Morgan, 263 S.W.3d 827, 836
(Tenn. 2008). Our duty in construing statutes is to ascertain and give effect to the
intention and purpose of the legislature. See Lipscomb v. Doe, 32 S.W.3d 840, 844
(Tenn. 2000). To the extent that these issues involve questions of fact, our review of the
trial court’s ruling is de novo with a presumption of correctness. Tenn. R. App. P. 13.
Accordingly, we may not reverse these findings unless they are contrary to the
preponderance of the evidence. Armbrister v. Armbrister, 414 S.W.3d 685, 692 (Tenn.
2013).

       Furthermore, courts must liberally construe statutes that impose a tax in favor of
the taxpayer and strictly construe them against the taxing authority. Eastman Chemical,
151 S.W.3d at 507. “[W]here there is doubt as to the meaning of a taxing statute, the
doubt must be resolved in favor of the tax payer.” Commercial Standard Ins. Co. v.
                                           -7-
Hixson, 133 S.W.2d 493, 494 (Tenn. 1939). This construction, however, must be fair
and give effect to the language of the statute. See, e.g., International Harvester Co. v.
Carr, 466 S.W.2d 207, 214 (Tenn. 1971); United Inter-Mountain Tel. Co. v. Moyer, 426
S.W.2d 177, 181 (Tenn. 1968).

        Here, Check Printers asserts that it is entitled to certain tax exemptions. While
statutes imposing taxes are to be construed in favor of the tax payer, tax exemption
statutes are strictly construed against tax payers. See, e.g., Steele v. Indus. Dev. Bd. of
Metro. Gov’t of Nashville and Davidson Co., 950 S.W.2d 345, 348 (Tenn. 1997)
(citations omitted). Taxpayers must carry the burden of showing entitlement to tax
exemptions; such exemptions will not be implied. Hutton v. Johnson, 956 S.W.2d 484,
488 (Tenn. 1997) (citing American Cyanamid Co. v. Huddleston, 908 S.W.2d 396, 400
(Tenn. Ct. App. 1995)). In Tennessee, there is a presumption against tax exemption “and
any well-founded doubt defeats a claimed exemption.” Id. In any event, unless the text
of a revenue statute requires otherwise, courts are to give the words in the statute their
natural and ordinary meaning and to enforce revenue statutes as written. Eastman
Chemical, 151 S.W.3d at 507; Stratton v. Jackson, 707 S.W.2d 865, 866 (Tenn. 1986).

                                               IV. Analysis

       At issue in this case is the imposition of sales tax under the Tennessee Retailers
Sales Tax Act, Tennessee Code Annotated section 67-6-101, et seq. (the “Act”). As
discussed by the Tennessee Supreme Court,

        Tennessee’s tax policy . . . seeks to place the ultimate burden for the
        payment of sales and use tax on the end user of the tangible personal
        property. Accordingly, intermediary dealers are relieved of the burden of
        collecting and remitting sales or use tax when they are not an end user.

COA Holdings, Inc. v Trost, 333 S.W.3d 73, 84 (Tenn. 2010). “Thus, persons or entities
falling within the statutory definition of ‘dealer’ are permitted certain exemptions from
the payment of sales or use tax.” Id.3 Here, Check Printers claims two exemptions: (1)
the “sale for resale” exemption regarding the blow-in cards; and (2) the “manufactured
for export” exemption for all products, including the blow-in cards. We will address each
of these exemptions below.

                       A. Sale-for-Resale Exemption for Blow-in Cards

        As defined at Tennessee Code Annotated section 67-6-102(75)(A),

        3
          “Dealer” is defined, in relevant part, as any person or entity that “[m]anufactures or produces
tangible personal property for sale at retail, for use, consumption, distribution, or for storage to be used or
consumed in this state.” Tenn. Code Ann. § 67-6-102(23)(A)
                                                    -8-
       “Resale” means a subsequent, bona fide sale of the property . . . by the
       purchaser. “Sale for resale” means the sale of the property . . . intended for
       subsequent resale by the purchaser. Any sales for resale shall, however, be
       in strict compliance with rules and regulations promulgated by the
       commissioner.

Conversely, a “retail sale” or “sale at retail” is defined as “any sale . . . for any purpose
other than for resale . . . .” Tenn. Code Ann. § 67-6-102(76). “The courts have construed
the phrase ‘for any purpose other than for resale’ as creating an exemption that excludes
sales for resale from taxation.” COA Holdings, 333 S.W.3d at 84 (citing Eusco, Inc. v.
Huddleston, 835 S.W.2d 576, 582 (Tenn. 1992) (citation omitted)).

      As discussed more thoroughly below, a “sale” and, therefore, a “resale,” includes
“any transfer of title or possession, or both . . . in any manner or by any means
whatsoever of tangible personal property for a consideration . . . .” Tenn. Code Ann. §
67-6-102(78)(A). As succinctly stated by the Tennessee Supreme Court,

       [a] sale must satisfy two criteria in order to qualify as a sale for resale.
       First, the sale must have been made for the purpose of resale. Tenn. Code
       Ann. § 67-6-102[(76)]. Second, the sale must be “in strict compliance with
       rules and regulations promulgated by the [C]ommissioner.” Tenn. Code
       Ann. § 67-6-102[(75)](A). . . .

COA Holdings, 333 S.W.3d at 84.

       As set out in Check Printers’ brief, the crux of its argument that the blow-in cards
manufactured at the Antioch facility qualify for the sale-for-resale tax exemption rests on
the proposition that the cards became component parts of the magazines sold by AMI and
Martha Stewart. Specifically, the brief states:

       Under the Department’s regulations, the sale-for-resale exemption includes
       items that become “a component part of the finished product” that is resold.
       Tenn. Comp. R. & Regs. 1320-05-01-.62(1); see also Tenn. Code Ann. §
       67-6-329(a)(12).
               Check Printers’ sales of blow-in cards qualify as exempt sales for
       resale under both the controlling statute and regulation. The blow-in cards
       were shipped to another R.R. Donnelley facility and became part of the
       magazines sold to Check Printers’ customers. After that, Martha Stewart
       and AMI resold the blow-in cards to their own customers as component
       parts of the magazines. Accordingly, the blow-in cards were both
       “intended for subsequent resale by the purchaser” and became “a
       component part of the finished product.” Check Printers’ sales of those
       cards, therefore, were sales for resale exempt from sales tax.
                                             -9-
       As cited in the foregoing portion of Appellant’s brief, Tennessee Code Annotated
section 67-6-329(a)(12) provides a tax exemption for

      [i]ndustrial materials and explosives for future processing, manufacture or
      conversion into articles of tangible personal property for resale where the
      industrial materials and explosives become a component part of the
      finished product or are used directly in fabricating, dislodging, or sizing. . .
      .

(Emphasis added). Appellant also cites Tenn. Comp. R. & Regs. 1320-05-01-.62(1),
which states that

      “Sales for resale” means those whereby a supplier of materials, supplies,
      equipment and services makes such tangible personal property or services
      available to legitimate dealers actually selling such property or services as
      such, or which becomes an industrial material or supply in a
      manufacturing or processing operation.

Id. (Emphases added).

       It is undisputed that the blow-in cards are not sold by AMI or Martha Stewart “as
such.” Id. In other words, Check Printers printed and sold the cards to AMI and Martha
Stewart, but AMI and Martha Stewart did not resell the actual cards to their customers.
Accordingly, the blow-in cards, “as such,” were not “intended for subsequent resale by
the purchaser.” Tenn. Code Ann. § 67-6-102(78)(A). Therefore, the applicability of the
sale-for-resale exemption turns on the question of whether the blow-in cards “bec[a]me a
component part” of the finished magazine or whether they constitute an “industrial
material or supply in the manufacturing . . . operation.” Tenn. Comp. R. & Regs. 1320-
05-01-.62(1). In ruling on this question, the trial court, in its May 23, 2018 order,
adopted the Commissioner’s position. Specifically, the order holds that

      [t]he blow-in reply cards that [Check Printers] sold to AMI and Martha
      Stewart did not “become[] an industrial material or supply in a
      manufacturing or processing operation.” Tenn. Comp. R. & Reg. 1320-05-
      01-.62(1). Likewise, they did not “become a component part of the
      finished product” . . . . Tenn. Code Ann. § 67-6-329(a)(12). The blow-in
      reply cards were inserted into magazines so that consumers could remove
      the cards, fill them out, and return them to sign up for magazine
      subscriptions. The blow-in reply cards were thus purchased by AMI and
      Martha Stewart for their own use, for the purpose of advertising and selling
      magazine subscriptions. Magazine purchasers did not purchase blow-in
      reply cards as part of the purchase of a magazine. The blow-in reply cards
      are in no way similar to paper, glue, ink, and related materials that were
                                          - 10 -
       used to fabricate and become component parts of the finished magazines.

We agree with the trial court. In reviewing the trial court’s determination that the blow-
in cards did not satisfy the requirements for application of the sale for resale tax
exemption, we find guidance in the Tennessee Supreme Court case of Kingsport
Publishing, Corp. v. Olsen. Like the case at bar, Kingsport Publishing involved the
insertion of materials, i.e., advertisements and visual aids, into finished printed products,
i.e., newspapers.

        In Kingsport Publishing, a newspaper publisher brought an action to recover for
use taxes paid on certain items of personal property used in publishing its newspaper.
Kingsport Publishing, Corp. v. Olsen, 667 S.W.2d 745, 745 (Tenn. 1984). The contested
items included “graphs and charts purchased by the plaintiff for use in illustrating news
stories, for example, a chart of the Consumer Price Index used in the newspapers to
illustrate a story concerning the cost of living or inflations.” Id. at 746. Other contested
items included “advertising books.” These “advertising books” contained “pictures of
items that [were] advertised for sale in the plaintiff’s newspapers, such pictures being
incorporated into the newspaper by transferring images, photographically from the
original ‘advertising book’ source onto the printed page of the newspaper.” Id. In
holding that the foregoing items did not constitute “component parts” or “industrial
materials” for tax exemption purposes, the Kingsport Publishing Court reiterated the
requirement that tax exemption statutes are to be construed strictly against the tax payer,
to-wit:

       Thus, strictly construing an exemption from a use tax of materials which
       become a component part of a finished manufactured product, it has been
       held that to make out the exemption it is necessary that the materials have
       actually gone into the finished product as an ingredient or component,
       that such an exemption applies only to such personal property as has been
       chemically or mechanically incorporated into the finished product. See, 68
       Am. Jur. 2d at 298-99 Sales and Use Taxes § 225 and cases there cited
       (1973).

                                            ***

       Giving the exemption the strict construction that we are required to do, we
       hold that these graphs and charts and “advertising books” and any other
       items which are incorporated into the finished product newspaper by means
       of transferring images photographically or by some other similar process do
       not become component parts of the finished product and are not use
       “directly in fabricating . . . converting, or processing” of industrial
       materials within the meaning of the exemption statute.

                                           - 11 -
Id. at 746-47 (emphasis added).

       In this case, the connection between the blow-in cards and the AMI and Martha
Stewart magazines is even more tenuous than the connection among the graphs, charts,
and advertising books and the newspapers at issue in Kingsport Publishing. While we
concede that the blow-in cards were placed “into the finished product” in that they were
inserted within the pages of the AMI and Martha Stewart magazines, the cards were not
put into the magazines as “an ingredient or component” in the sense contemplated by the
sale for resale exemption. Id. In Kingsport Publishing, the graphs, charts, and
advertising were actually transferred photographically (or otherwise) onto the newspaper
pages, Id. at 745, yet the Court held that such integration did not result in the graphs,
charts, and advertising becoming “component parts of [the] finished product within the
meaning of [the] tax exemption statute.” Id. Likewise, the insertion of blow-in cards
(which are meant to be removed, filled out, and returned to AMI and Martha Stewart)
into the finished magazines does not constitute integration as a component part of the
magazines. As such, we affirm the trial court’s conclusion that the sale-for-resale tax
exemption does not apply to Check Printers’ sale of blow-in cards.

                       B. Manufactured-for-Export Exemption

     As discussed by the Tennessee Supreme Court in Hearthstone, Inc. v. Hardy
Moyers:

      For a transaction to be taxable pursuant to Tennessee’s sales tax, certain
      taxable events must occur in Tennessee. Tennessee Code Annotated, § 67-
      6-201(1), provides:

             It is declared to be the legislative intent that every person is
             exercising a taxable privilege who . . . engages in the business
             of selling tangible personal property at retail in this state.

      (Emphasis added). Tennessee Code Annotated, § 67-6-202, provides:

             For the exercise of the privilege of engaging in the business
             of selling tangible personal property at retail in this state, a
             tax is levied at the rate of five and one-half percent of the
             sales price of each item or article of tangible personal
             property when sold at retail in this state; the tax is to be
             computed on gross sales for the purpose of remitting the
             amount of tax due the state and is to include each and every
             retail sale.

      (Emphasis added.)
                                          - 12 -
              “The elements necessary to constitute a sale are (1) transfer of title
       or possession, or both, of (2) tangible personal property, for a (3)
       consideration.” Volunteer Val–Pak v. Celauro, 767 S.W.2d 635, 636
       (Tenn. 1989); Tenn. Code Ann. § 67-6-102([78])(A).

Hearthstone, Inc. v. Hardy Moyers, 809 S.W.2d 888, 890 (Tenn. 1991) (emphases in
original). When a sale occurs in Tennessee, it is a taxable event. See, e.g., Mast Advert.
& Pub., Inc. v. Moyers, 865 S.W.2d 900, 902-903 (Tenn. 1993) (relying on Hearthstone,
809 S.W.2d at 890). However, Tennessee Code Annotated section 67-6-313(a) provides,
in relevant part, that “[i]t is not the intention of this chapter to levy a tax upon articles of
tangible personal property . . . produced or manufactured in this state for export.” Check
Printers argues that all of the products at issue, including the blow-in cards, are exempt
from taxation under Tennessee Code Annotated section 67-6-313(a). As set out in its
appellate brief, Check Printers contends that it “manufactured all of the products at issue
in this appeal ‘for export’ within the plain meaning of the manufactured-for-export
exemption.” Relying on the language of section 67-6-313(a), Check Printers argues that
the manufactured-for-export exemption requires only two conditions: (1) “the tangible
personal property that is sold must be produced or manufactured in this state;” and (2)
“the property must be produced for export by the seller.” Check Printers maintains that
“[i]f these two conditions are met, a sale that would otherwise be subject to Tennessee
sales tax is, nonetheless, exempt.” First, the Department does not dispute that Check
Printers “manufactured” the disputed products in Tennessee. Indeed, the record clearly
and undisputedly establishes this fact. Furthermore, the Department does not dispute that
the products were ultimately exported to other states, and the record undisputedly
establishes this fact. However, the Department counters that, under Check Printers’
standard contract terms, infra, title to the disputed products transferred to the purchasers
at the time the products were tendered to the USPS or a common carrier for shipping.
Because the products were undisputedly tendered to the carriers in Tennessee, the
Department maintains that the taxable event, i.e., the “sale” of these products, occurred in
Tennessee such that Tennessee is entitled to collect taxes on same.

     In denying Check Printers tax exemption under the manufactured-for-export
exemption, the trial court’s order adopted the Department’s argument that,

       [h]ere, delivery to [Check Printers’] customer in the destination state is not
       the taxable event for sales tax purposes. Rather, the contractual transfer of
       title to [Check Printers’] customers in Tennessee is the taxable event . . . .

The trial court went on to hold that

       [w]hen the sale is completed in Tennessee, sales tax is owed in Tennessee.
       The fact that products were shipped outside Tennessee after the sale was
       accomplished does not entitle Check Printers to the manufactured for
                                         - 13 -
       export exemption under the circumstances of this case. The exemption,
       reading the straightforward language of the applicable statute, does not
       provide an exemption for shipping products outside Tennessee in a
       vacuum, without taking into account that the exemption is from the
       obligation to pay sales tax. If the taxable sale occurs in Tennessee, then it
       follows that the product is not manufactured for export tax purposes. See
       Board of Publication of Methodist Church, Inc. v. Woods, 609 S.W.2d
       501, 504-05 (Tenn. 1980). Consequently, although the “manufactured for
       export” exemption appears to apply when a taxpayer manufactures products
       in Tennessee and ships them to another state before a taxable sale occurs in
       Tennessee does not apply here. See Eusco, Inc. v. Huddleston, 835
       S.W.2d 576, 580-83 (Tenn. 1992). . . .

       It is undisputed that R.R. Donnelley’s standard contract terms, which Check
Printers used during the Audit Period, provided:

       Title to and risk of loss for finished and semi-finished work shall pass to
       Customer upon the earlier of RR Donnelley’s delivery to carrier or USPS
       f.o.b. RR Donnelley plant of final manufacture, or delivery into storage,
       regardless of whether the transport medium or storage facilities are owned
       and/or operated by RR Donnelley and regardless of whether RR Donnelley
       charges Customer for storage.

         As set out above, Tennessee Code Annotated section 67-6-102(78)(A), defines a
“Sale,” in pertinent part as “any transfer of title or possession . . . conditional or
otherwise, in any manner or by any means whatsoever of tangible personal property for a
consideration.” In its final order, the trial court found that there was no dispute that a
“sale” for purposes of taxation occurred at the point where title to the finished (or semi-
finished) product transferred. We agree. Pursuant to the contractual language, i.e.,
“[t]itle to . . . finished . . . work shall pass to the Customer upon . . . R.R. Donnelley’s
delivery to carrier or USPS,” a “sale,” as that term is defined to include “any transfer of
title . . . for consideration,” occurred in Tennessee. Nonetheless, Check Printers argues
that the manufactured for export exemption applies to the products at issue because the
requirements set out in section 67-6-313(a) were satisfied, i.e., the products were
manufactured in Tennessee and were exported outside the State. In other words, Check
Printers maintains that the intervening “sale,” at the point of delivery to the carrier, did
not constitute a taxable event in Tennessee so long as Check Printers ultimately exported
the products it manufactured in this State.

       In addressing Check Printers’ arguments, it is helpful to parse some of the cases
addressing the application of the manufactured for export exemption. In Board of
Publication of Methodist Church v. Woods, 609 S.W.2d 501 (Tenn. 1980), a publishing
firm located in Tennessee printed and then delivered catalogs to an agent of the out-of-
                                         - 14 -
state buyer. Id. at 501. The delivery occurred in Tennessee. Following delivery by the
publishing firm, the buyer’s agent affixed mailing labels to the catalogs and delivered
them to the post office, or other carrier, for shipment to out-of-state addresses. Id. at 502.
Under these facts, the Tennessee Supreme Court held that the manufactured for export
exemption (then codified at Tennessee Code Annotated section 67-3003) did not apply.
In so holding, the Court reasoned that,

       [s]ince the transfer of possession of “sale” took place within Tennessee,
       clearly the transaction was intended to be taxed under T.C.A. s 67-3003 and
       was not exempt from taxation under the Commerce Clause . . . even though
       the parties contemplated immediate exportation.

Id. at 504 (citations omitted). In reaching its conclusion, the Court distinguished the
Board of Publication case from the cases of Beecham Laboratories v. Woods, 569 S.W.
2d 456 (Tenn. 1978), and Young Sales Corp. v. Benson, 450 S.W.2d 574 (Tenn. 1970),
“because in neither of those cases was there an allegation that a sale or transfer of
possession to a buyer took place in Tennessee.” Board of Publication, 609 S.W.2d at
504. The Court also distinguished the case of Service Merchandise Co., Inc. v. Tidwell,
529 S.W.2d 215 (Tenn. 1975). In Service Merchandise, “the State was attempting to
levy a tax on materials that were already in interstate commerce before they arrived in
Tennessee and that were still in interstate commerce at the time the State wished to
impose taxation.” Board of Publication, 609 S.W.2d at 504. In distinguishing Service
Merchandise, the Board of Publication Court noted that “in the present case interstate
commerce had not yet begun when the catalogs were delivered to or picked up by” the
buyer’s agent in Tennessee and that “a sale or transfer of possession as defined in T.C.A.
§ 67-3002(b) was completed at this point within the State.” Id. at 505. Under these facts,
the Court held that “. . . a taxable event occurred and no exemption exists under the
Commerce Clause of the United States Constitution or clause one or clause two of T.C.A.
§ 67-3007.” Id.; accord LeTourneau Sales & Service, Inc. v. Olsen, 691 S.W.2d 531
(Tenn. 1985) (distinguishing Beecham Laboratories and Young Sales because “[t]hey
involved the imposition of a use tax on items merely held in the state for export to other
states. No taxable service was performed on the goods while they were held in
Tennessee;” and distinguishing Service Merchandise because, in that case, “[g]oods were
continuously in transit in interstate commerce and never ‘came to rest’ in Tennessee.” In
LeTourneau, the Court held that the goods at issue “came to rest in Tennessee where a
taxable service was performed and taxed as service. The goods here were out of the
stream of commerce.”).

       Check Printers cites the case of Jack Daniel Distillery, Lem Motlow, Prop. v.
Jackson, 740 S.W.2d 413 (Tenn. 1987), in support of its arguments. In Jack Daniel, the
taxpayer instructed its subsidiary to purchase advertising materials from sources located
outside Tennessee. These materials were then delivered to the taxpayer’s Tennessee
warehouse, where they were stored and ultimately shipped to destinations outside
                                           - 15 -
Tennessee. Id. at 415. Although title to the advertising materials passed from the
subsidiary to the taxpayer on delivery of the materials to the Tennessee location, the
taxpayer argued, as does Check Printers, that the “sale” was nonetheless exempt under
the plain language of the Tennessee Code Annotated section 67-6-313(a). Id. at 416.
The Tennessee Supreme Court disagreed and held that the import-for-export exemption
did not apply because title to the goods transferred to the taxpayer in Tennessee, even
though the goods were later exported to destinations outside the State. In so holding, the
Court explained that “[t]he import-for-export exemption from sales tax does not apply
when the transfer of title is from a vendor located in Tennessee to a purchaser also
located in Tennessee even though the purchaser intends to and does export the
merchandise.” Id. The Court distinguished the Jack Daniel case from Beecham
Laboratories and Young Sales explaining that

       in neither of those cases was there an allegation that a sale or transfer of
       possession to a buyer took place in Tennessee. That is not the situation in
       this case. Here, appellant purchased the Jack Daniel P.O.P. advertising
       materials from its subsidiary, “new Jack Daniel,” in accordance with the
       agreement attached to the stipulations. Under the agreement, a sale of the
       merchandise was effected and title passed from “new Jack Daniel” to the
       appellant upon delivery of the merchandise at a location selected by
       appellant. The location selected was in Tennessee, making the sale subject
       to the Tennessee sales tax.

Jack Daniel, 740 S.W.2d at 417.

        In Hearthstone, the taxpayer sold log-home kits that the taxpayer or a
subcontractor built on the customer’s foundation (“erected homes”). Hearthstone, 809
S.W.2d 888. The taxpayer manufactured the log-home kits in Tennessee, but title passed
to the taxpayer’s customers on delivery of the kit to the job site. Id. at 890. Under these
facts, the Tennessee Supreme Court held that kits sold to out-of-state customers were
manufactured in Tennessee for export and were, thus, exempt from taxation under
Tennessee Code Annotated section 67-6-313(a). Id. at 890-91. The Court explained that

       [i]n Nasco, Inc. v. Jackson, 748 S.W.2d 193 (Tenn.1988), we held that this
       statute does not create an exemption from taxation for personal property
       exported for the taxpayer’s use in another state. But we have never held
       that Tenn. Code Ann. § 67-6-313(a) creates no exemption for personal
       property exported for resale, because to do so would render that statute
       meaningless.

Hearthstone, 809 S.W.2d at 890. (Emphasis added). Accordingly, the taxpayer’s sales of
erected homes to out-of-state customers, i.e., kits manufactured in Tennessee for sale in
another state, were not subject to Tennessee sales or use tax. Id. at 891-92.
                                          - 16 -
       Likewise, in the case of Eusco, Inc. v. Huddleston, 835 S.W.2d 576 (Tenn. 1992),
the taxpayer manufactured utility trucks in Tennessee for out-of-state utility companies.
An employee of the taxpayer delivered the utility trucks to the out-of-state purchasers.
The Tennessee Supreme Court held that the manufactured for export exemption applied
under these circumstances, to-wit:

               Since (1) Eusco is a manufacturer of utility trucks, (2) the trucks at
       issue in this case were manufactured under contracts with out-of-state
       utility companies, and (3) title to the trucks passed from Eusco to the
       utility companies outside of Tennessee, we conclude that the nine “drop
       shipment” sales fall within the “manufactured for export” exemption of
       Tenn. Code Ann. § 67-6-313(a). See Jack Daniel Distillery v. Jackson,
       740 S.W.2d 413, 416 (Tenn. 1987).

Eusco, 835 S.W.2d at 582 (emphasis added).

       From the foregoing line of cases, it is clear that where there was an intervening
taxable event in Tennessee (either after the tangible personal property was imported into
the State or before property manufactured in Tennessee was exported from the State),
Tennessee courts have held consistently that section 67-6-313(a) does not prohibit the
Department from taxing the transaction. On the other hand, Tennessee courts have been
consistent in holding that section 67-6-313(a) prohibits the Department from levying tax
where no such intervening taxable event occurred in Tennessee. As the Tennessee
Supreme Court explained in Hearthstone, the manufactured-for-export exemption
applies when tangible personal property is manufactured in Tennessee and “exported for
resale” in another state. 809 S.W.2d at 891 (emphasis added). Conversely, when the
tangible personal property is sold here, i.e., title transfers in Tennessee by operation of
contract or otherwise, such sale constitutes a taxable event in Tennessee.

        Although the cases discussed above clearly indicate that a sale in Tennessee is a
taxable event, Check Printers maintains that the trial court erred in not extending its
analysis to the question of whether “otherwise taxable sales fit within an exemption to
Tennessee’s sales tax.” As discussed above, the crux of Check Printers’ argument is that,
regardless of whether the sale or transfer of title occurred in Tennessee, Tennessee Code
Annotated section 67-6-313(a) creates an exemption where the two statutory criteria are
satisfied, i.e., the disputed product was manufactured in Tennessee and then exported. As
stated in Check Printers’ brief:

              Here, there is no dispute that title to the printed products at issue
       transferred from Check Printers to its customers in Tennessee. As a result,
       Check Printers “sold” the printed products in Tennessee, and the statutes
       presumptively imposing Tennessee sales tax apply to those sales. See
       Tenn. Code Ann. §§ 67-6-102(78)(A), -201(1), -202(a) . . . . But that
                                          - 17 -
       conclusion, alone, does not end the inquiry.

              Under the applicable two-step analysis [(which Check Printers
       derives from Nashville Golf & Athletic Club v. Huddleston, 837 S.W.2d
       49 (Tenn. 1992), discussed infra)], the next inquiry, and the question that
       controls this case, is whether Check Printers’ otherwise taxable sales fit
       within an exemption to the Tennessee’s sales tax. On the undisputed facts
       of this case, it is clear that an exemption did apply to prevent tax from
       being imposed on those sales. Because Check Printers manufactured and
       immediately shipped the products outside Tennessee, the manufactured-for-
       export exemption applied to exempt those otherwise taxable sales. The
       Chancellor’s decision to the contrary was in error and should be reversed.

        Check Printers’ argument that section 67-6-313(a) provides an exemption from
taxation for tangible personal property manufactured in Tennessee for export even when
title to the property transfers in Tennessee is not supported by the case law in this State.
Specifically, Check Printers’ proposition fails to consider the definition of a “sale” in
Tennessee. As set out in context above, Tennessee Code Annotated section 67-6-
102(80)(A), “‘Sale’ means any transfer of title or possession, or both . . . .” Because the
definition of “sale” includes a transfer of title or a transfer of possession, Check Printers’
argument is without merit. The transfer of title constitutes a taxable “sale” in Tennessee.
As in Board of Publication, LeTourneau, and Jack Daniels, after Check Printers
manufactured the disputed products, but before it placed the products into the stream of
commerce for export, i.e., before the products “actually start[ed] in the course of
transportation from one state to another,” Serv. Merch., 529 S.W.2d at 218 (quotation
omitted), under Check Printers’ contract, there was an intervening taxable event in
Tennessee, i.e., a “sale” by transfer of “title” to the customer in Tennessee.

        Nonetheless, Check Printers maintains that the trial court erred in failing to
determine whether an “otherwise taxable sales fit within an exemption to Tennessee’s
sales tax” and that Tennessee Code Annotated section 67-6-313(a) provides such an
exemption. In addition to being contrary to the foregoing line of cases, Check Printers’
argument is also contrary to the legislative intent in enacting Tennessee Code Annotated
section 67-6-313(a). Check Printers’ argument appears to be based largely on the fact
that the legislature placed Tennessee Code Annotated section 67-6-313(a) in Part 3 of the
Act, which part is styled “exemptions.” However, under the rules of statutory
construction, the mere placement of a statute in the Code is not dispositive of legislative
intent. Tenn. Code Ann. § 1-3-109 (“Headings to sections in this code and the references
at the end of such sections giving the source or history of the respective sections shall not
be construed as part of the law.”); State v. Frazier, 558 S.W.3d 145, 154 (Tenn. 2018)
(“We cannot logically view the statute’s location in the Code as more indicative of
legislative intent than the statutory language.”). We further note that the language of
Tennessee Code Annotated section 67-6-313(a) predates the division of the Act into
                                           - 18 -
parts. As correctly noted by the Appellee in its brief,

       The 1947 Public Act establishing the sales and use taxes provided: “It is not
       the intention of this chapter to levy a tax upon articles of tangible personal
       property imported into this State or produced or manufactured in this State
       for export; nor is it the intention of this Act to levy a tax on bona fide
       interstate commerce.” 1947 Tenn. Pub. Acts, ch. 3 §4.

As succinctly stated by the Tennessee Supreme Court in LeTourneau, “the sole purpose
of T.C.A. § 67-6-313 is to confine the sales and use tax to those subjects which the state
is permitted to tax under the commerce clause of the United States Constitution.” 691
S.W.2d at 534 (citations omitted). The legislative intent, dating back to the original
enactment of section 67-6-313, is to impose taxes to the fullest extent allowed by the
Commerce Clause. As such, section 67-6-313(a) excludes from taxation only those
subjects that the Commerce Clause prohibits the state from taxing. Contrary to Check
Printers’ argument, section 67-6-313(a) does not create an exemption for property that is
otherwise taxable.

       Nonetheless, in support of its argument, Check Printers cites the case of Nashville
Golf & Athletic Club v. Huddleston, which involved the imposition of sales tax on
membership dues, under Tennessee Code Annotated section 67-6-212(a)(1), and the
exemption from tax for membership assessments for capital improvements under
Tennessee Code Annotated section 67-6-330(a)(14). 837 S.W.2d at 50. After concluding
that initiation deposits paid by the taxpayer’s members were taxable membership dues,
the Tennessee Supreme Court went on to address whether the initiation deposits were,
nonetheless, exempt assessments for capital improvements under section 67-6-
330(a)(14). Id. at 54. The flaw in Check Printers’ reliance on Nashville Golf is that,
unlike section 67-6-313(a) (which is the statute at issue here), section 67-6-330(a)(14)
(which was at issue in Nashville Golf), is written as an exemption, i.e., “There is exempt
from the sales tax on admission, dues or fees imposed by § 67-6-212 . . . membership
assessments for capital improvements made by recreation club, community service
organization or country club against its members.” Tenn. Code Ann. § 67-6-
330(a)(14)(1989). The legislature uses no such language in section 67-6-313(a).
Accordingly, the two-step analysis Check Printers urges is unnecessary. Based on the
foregoing analysis, there is only one dispositive question concerning whether the disputed
products are taxable in Tennessee, and that is was there a sale in Tennessee before the
products were exported to another state. Here, for the reasons discussed above, the
answer is yes, with the exception of the AMI blow-in cards, see discussion infra.

                                 C. AMI Blow-in Cards

      Based on the foregoing analysis, if title to the AMI blow-in cards transferred to
Check Printers’ customers at the time the cards was tendered for shipping, then there was
                                          - 19 -
a taxable event in Tennessee. It is undisputed that all of the products, with the exception
of the AMI blow-in cards, were sold under R. R. Donnelley’s standard contract, which
transfers title at the time of shipping. However, as to Check Printers’ dealings with AMI,
there is a dispute of fact as to whether Check Printers and AMI used Check Printers’
standard contract language in the sale of the AMI blow-in cards during the Audit Period.

      In its response to Check Printers’ statement of undisputed material facts, the
Department stated, in relevant part:

       69. For blow-in cards AMI purchased from Check Printers, title and risk of
       loss did not pass to AMI until the fully printed and bound magazines were
       shipped from an R.R. Donnelley location outside of Tennessee.
       REPONSE:
               Disputed. The standard contract terms used by RR Donnelley and
       its affiliates, including [Check Printers], provide as follows with respect to
       title and risk of loss:

              Title to and risk of loss for finished and semi-finished work
              shall pass to Customer upon the earlier of RR Donnelley’s
              delivery to carrier or USPS f.o.b. RR Donnelley plant of final
              manufacture, or delivery into storage, regardless of whether
              the transport medium or storage facilities are owned and/or
              operated by RR Donnelley and regardless of whether RR
              Donnelley charges Customer for storage.

        . . . . Because the blow-in cards were fully manufactured at [Check
       Printers’] Antioch facility in Antioch, Tennessee, that facility is the “plant
       of final manufacture” and Tennessee is the state where title passed to AMI
       pursuant to contract.

        In support of its response, the Department relied on the deposition testimony of
Cynthia Wilkerson, the Vice President of Operations for R.R. Donnelley and former
(during the Audit Period) Vice President of Operations for Check Printers at its Antioch
facility. Specifically, the Department cites pages 61-62 of Ms. Wilkerson’s deposition,
which state:

       Q. . . . Check Printers’ shipping and contractual terms vary, but a number
       of contracts include language such as, quote, title and risk of loss will pass
       upon mailing or other delivery for shipment. Was that typical language in
       Check Printers’ contracts?

       A. I would need to look at the individual contracts to reference.

                                           - 20 -
      Q. . . . For contracts that were fulfilled by Check Printers here at the
      Antioch facility, do you know if Check Printers used RR Donnelley’s
      standard [contract] terms?

      A. Yes. I don’t know exactly what month, what date, you know, what
      year, but with the acquisition of RR Donnelley to Check Printers.
             However, contracts can be evergreen contracts [Ms. Wilkerson later
      explained that an “evergreen contract” is one that the parties “can continue
      without a formal contract renegotiation, unless a customer or printer wants
      to opt out.”]. You would just want to go back to the individual contracts. I
      guess is what I’m getting at, to see what language. Where we had new
      contracts where RR Donnelley owned Check Printers, we had specific
      language.

       The Department also cited the report from the Check Printers’ audit, which report
was prepared by Charles Wright, a “Tax Auditor 5” with the Department. Mr. Wright’s
report states, in relevant part:

      Taxpayer provided a contract and various statements of work for these
      customers. During our discussions with the taxpayer, the taxpayer has
      consistently said that title passes at final point of manufacture for all sales.

                                            ***

      Auditors asked for contracts for the sales to these customers. The taxpayer
      has stated that no more contracts/statements of work, other than the ones
      provided [i.e., RR Donnelley’s standard contract, discussed supra] will be
      provided. Since the taxpayer has consistently stated that all sales are FOB
      origin, contracts would be necessary to determine where title passed.
      While discussing where title passed, the auditors were given the following
      email:

      [email from Phillip J. Will, Director of Finance for R. R. Donnelley,
      stating, relevant part, that, under the two R. R. Donnelley contract
      templates, i.e., the “short form contract,” and the “MSA,” “title to and risk
      of loss for finished and semi-finished work shall pass to Customer upon the
      earlier of RR Donnelley’s delivery to carrier or [USPS].” Mr. Will’s email
      continues: “A good majority of the time we use customer agreement
      templates and, as you can imagine, this is not a clause that we typically find
      in a customer provided agreement, so we try to be cognizant of inserting
      some form of this language.”].

      The contract between Check Printers and AMI regarding the sale of blow-in cards
                                       - 21 -
is not in the appellate record. However, in its response to the Department’s statement of
undisputed material facts, Check Printers averred that it did not use the standard contract
language in its dealings with AMI, to-wit:

       13. [Check Printers’] contracts with its customers that were in effect during
       the Audit period generally provided that title and risk of loss to printed
       materials sold by [Check Printers] to its customers were transferred to
       [Check Printers’] customers upon [Check Printers’] delivery of the printed
       materials to an onsite United States Postal Service facility or a common
       carrier for shipment to [Check Printers’] customer’s designated ship-to
       location.

       RESPONSE: Undisputed for purposes of summary judgment. [Check
       Printers] further states, however, that there was an exception to Check
       Printers’ typical business practice regarding transfer of title with regard to
       its sales of “blow-in cards” to American Media Incorporated (“AMI”). For
       the blow-in cards Check Printers sold to AMI, title and risk of loss did not
       pass to AMI until the fully printed and bound magazines into which the
       blow-in cards were inserted and incorporated were shipped from an R.R.
       Donnelley location outside Tennessee.

       In support of its response, Check Printers cited Ms. Wilkerson’s affidavit, wherein
she stated, in relevant part:

       30. . . . For blow-in cards Check Printers sold to AMI, title and risk of loss
       did not pass to AMI until the fully printed and bound magazines were
       shipped from the R.R. Donnelley facilities located outside of the state [of
       Tennessee].

       As discussed above, “to survive summary judgment, the nonmoving party ‘may
not rest upon the mere allegations or denials of [its] pleading,’ but must respond, and by
affidavits or one of the other means provided in Tennessee Rule 56, ‘set forth specific
facts’ at the summary judgment stage ‘showing that there is a genuine issue for trial.”
Rye, 477 S.W.3d at 265 (quoting Tenn. R. Civ. P. 56.06). Submission of the foregoing
evidence by Check Printers satisfied this requirement and demonstrated the “existence of
specific facts in the record which could lead a rational trier of fact to find in favor of the
nonmoving party.” Id. Ms. Wilkerson’s affidavit creates a dispute of fact as to whether
Check Printers used its standard contract language, i.e., that title and risk of loss passed to
the customer at the time the blow-in cards were tendered for shipping in Tennessee (see
discussion supra). Until this dispute of fact is resolved, summary judgment, concerning
the AMI blow-in cards, is premature. Id.; accord EVCO, 528 S.W.2d 24-25.


                                            - 22 -
                                     V. Conclusion

      For the foregoing reasons, we vacate the portion of the trial court’s order allowing
the Department to impose sales tax on the AMI blow-in cards. The trial court’s order is
otherwise affirmed, and the case is remanded for such other proceedings as may be
necessary and are consistent with this opinion. Costs of the appeal are assessed to the
Appellant, Check Printers, Inc., for all of which execution may issue if necessary.




                                                   _________________________________
                                                   KENNY ARMSTRONG, JUDGE




                                          - 23 -
