                SUPREME COURT OF MISSOURI
                                            en banc
BEN HUR STEEL WORX, LLC,                                )
                                                        )
                        Appellant,                      )
          v.                                            )            No. SC94209
                                                        )
DIRECTOR OF REVENUE,                                    )
                                                        )
                        Respondent.                     )

                     PETITION FOR REVIEW OF A DECISION OF THE
                       ADMINISTRATIVE HEARING COMMISSION
                   The Honorable Sreenivasa Rao Dandamudi, Commissioner

                                Opinion issued January 13, 2015

          Ben Hur Steel Worx, LLC ("Ben Hur") is a subcontractor that purchases steel

beams and other steel components that are used to fulfill its contracts to construct steel

frames for large-scale commercial buildings and structures. Ben Hur petitioned the

Director of Revenue for sales and use tax refunds under § 144.054.2. 1 The Director

denied the request, and Ben Hur appealed to the Administrative Hearing Commission

("AHC"). The AHC decided that Ben Hur did not meet the requirements for a tax

exemption under § 144.054.2 and affirmed the Director's denial of Ben Hur’s request for

sales and use tax refunds. Ben Hur then petitioned this Court for review of the AHC’s

decision. The decision of the AHC is affirmed.




1
    All statutory citations are to RSMo Supp. 2013, unless otherwise specified.
                            Factual and Procedural Background

      Ben Hur's refund applications were for various months in 2008, 2009, and 2010

and sought nearly $200,000. The AHC found the following facts:

      1. Ben Hur is a Missouri limited liability corporation, which was 50%
      owned by Ben Hur Construction Company at all times relevant to this case.

      2. One of Ben Hur's business endeavors is subcontracting with commercial
      construction companies for the provision of labor, materials, and equipment
      necessary to furnish and install structural steel beams, plates, angles, and
      other components in the process of construction of large scale commercial
      buildings and structures. During the relevant time, Ben Hur would often
      partner with Ben Hur Construction Company to accomplish installation for
      these jobs.

      3. In order to fulfill its contractual obligations, Ben Hur buys steel beams
      and steel plates directly from steel mills, at times when the mills are
      producing the size and shape Ben Hur needs for a particular project, or
      from steel supply houses that keep inventories of such materials when they
      are not available from the mills.

      4. Ben Hur does not pay sales or use tax on its purchase of steel beams and
      plates.

      5. Once it purchases the steel, Ben Hur may modify the steel beams
      according to project drawings and specifications by performing various
      tasks such as cutting them to length, drilling holes and slots in them,
      beveling the edges, cambering or curving the steel, coping or cutting the
      steel at an angle, grinding, painting, and attaching other steel pieces, such
      as angles, clips, or steel plate [sic] by bolting or welding.

      6. If the steel components it purchases are for a taxable construction
      project, Ben Hur pays tax on the components. If the project is for a tax-
      exempt entity, such as a qualified educational institution or healthcare
      organization, Ben Hur does not pay sales tax on the purchased materials.

      7. Ben Hur maintains a facility in Lemay, Missouri, where it uses
      machinery and equipment to modify raw steel components by shaping and
      finishing them. At that facility, large pieces of steel are processed using
      large saws, drills, grinders, and welding equipment while being moved and
      transferred by cranes and hydraulic lifts.
      8. Typically, Ben Hur buys and prepares steel components for incorporation
      into large scale commercial buildings.

      9. In some instances, Ben Hur prepares such components for other
      contractors and collects sales tax from those contractors when the
      components are sold. Those transactions are not the subject of this appeal.

      10. At all times relevant to this appeal, when Ben Hur was a party to the
      construction contract, it employed all of the labor, materials, and equipment
      necessary to deliver and install fabricated structural components in
      buildings.

                                        Analysis

      This case involves the construction of a revenue law, providing this Court with

exclusive appellate jurisdiction. Mo. Const. art. V, § 3; see also § 621.189. This Court

reviews the AHC's interpretation of a revenue statute de novo. AAA Laundry & Linen

Supply Co. v. Dir. of Revenue, 425 S.W.3d 126, 128 (Mo. banc 2014). The AHC's

decision will be upheld if authorized by law and supported by substantial and competent

evidence on the record as a whole, if no mandatory procedural safeguard is violated, and

if the affirmation of the AHC's decision does not create a result clearly contrary to the

General Assembly's reasonable expectations. Section 621.193, RSMo 2000.

      Tax exemptions are strictly construed against the taxpayer. AAA Laundry, 425

S.W.3d at 128. A taxpayer must show by "clear and unequivocal proof" that it qualifies

for an exemption, and all doubts are resolved against the taxpayer. Id. Section 144.054.2

exempts the following from sales tax:

      [E]lectrical energy and gas, whether natural, artificial, or propane, water,
      coal, and energy sources, chemicals, machinery, equipment, and materials
      used or consumed in the manufacturing, processing, compounding,
      mining, or producing of any product, or used or consumed in the
      processing of recovered materials, or used in research and development

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       related to manufacturing, processing, compounding, mining, or producing
       any product . . . .

(Emphasis added.)

       The primary rule of statutory interpretation is to give effect to the General

Assembly's intent as reflected in the plain language of the statute at issue. Parktown

Imports, Inc. v. Audi of Am., Inc., 278 S.W.3d 670, 672 (Mo. banc 2009). This Court

looks to canons of statutory interpretation only when the meaning of a statute "is

ambiguous or would lead to an illogical result that defeats the purpose of the legislation."

Ivie v. Smith, 439 S.W.3d 189, 202 (Mo. banc 2014). This Court interprets statutes in a

way that is not hyper-technical, but instead, is reasonable and logical and gives meaning

to the statute. Id. at 203.

       In the context of this case, Ben Hur must prove three criteria to qualify under

§ 144.054.2 for the sales and use tax exemption: (1) that it consumed or used materials

(2) during the manufacturing, processing, compounding, or producing (3) of a product.

Fred Weber, Inc. v. Director of Revenue, ___ S.W.3d ___, No. SC94109 (Mo. banc

2015). The taxpayer has the burden of proof. Aquila Foreign Qualifications Corp. v.

Dir. of Revenue, 362 S.W.3d 1, 3 (Mo. banc 2012). If the taxpayer fails to meet any of

these three criteria, the taxpayer does not qualify for exemption under § 144.054.2. See

Aquila, 362 S.W.3d 1; Union Elec. Co. v. Dir. of Revenue, 425 S.W.3d 118 (Mo. banc

2014); AAA Laundry, 425 S.W.3d 126; Fenix Constr. Co. v. Dir. of Revenue, ___ S.W.3d

___, No. SC93915, 2014 WL 6679523 (Mo. banc 2014); Fred Weber, Inc. v. Director of




                                             4
Revenue, ___ S.W.3d ___, No. SC94109 (Mo. banc 2015).              The second prong is

dispositive in this case.

       In Union Elec. Co., this Court held that the General Assembly intended the plain

and ordinary language of § 144.054.2 to apply only to "what can best be described as

large-scale industrial activities." 425 S.W.3d at 124. Ben Hur, however, is not engaged

in this type of large-scale industrial activity. It is engaged in construction. See Fred

Weber, Inc. v. Director of Revenue, ___ S.W.3d ___, No. SC94109 (Mo. banc 2015).

The word "construction" does not appear in § 144.054, nor do any words that would be

associated with construction activities. The General Assembly knows how to delineate

between construction activities and the large-scale industrial activities it intended to

exempt in § 144.054.2. This is best demonstrated by another tax exemption statute

within chapter 144.

       Section 144.062 provides a tax exemption for materials purchased for the "purpose

of constructing, repairing or remodeling" for certain tax-exempt entities. It describes

various types of exempt entities, and among them are various types of healthcare

organizations and "[a]ny institution of higher education supported by public funds or any

private not-for-profit institution of higher education." Section 144.062.1(2) and (3). The

AHC's factual findings make it clear that not only was Ben Hur aware of the tax

exemption for construction materials in § 144.062.1, it used that exemption. The AHC

found that Ben Hur paid tax on the steel components it purchased for a construction

project with a non-exempt entity. However, Ben Hur did not pay tax if the project was

for a tax-exempt entity, such as a qualified educational institution or healthcare

                                            5
organization. These factual findings dovetail with the language of § 144.062. This is

evidence that not only was Ben Hur engaged in construction, but it also was taking

advantage of construction-oriented tax exemptions.

       Ben Hur is now trying to use § 144.054.2 as a way to seek tax reimbursement for

materials purchased to fulfill construction contracts it has with non-exempt entities. This

is contrary to the language and interpretation this Court has given § 144.054.2. Had the

General Assembly meant for "construction" activities to be included in § 144.054.2, it

would have used terminology associated with construction activities. It also could have

achieved the same result by expanding § 144.062 to allow an exemption for materials

purchased for use in construction for non-exempt entities. This is not what the General

Assembly chose to do.

       Further, as expressed by the AHC in its decision, if Ben Hur were allowed a tax

exemption for its construction activities, it would cut against one of this Court's well-

settled principles stated in Blevins Asphalt Construction Company v. Director of

Revenue, 938 S.W.2d 899 (Mo. banc 1997). 2 The taxpayer in Blevins argued that it was

not required to pay tax on the materials it purchased from its suppliers because the

asphalt it manufactured was tangible personal property, sold for the purpose of final use

or consumption. Id. at 901. This Court upheld the AHC's denial of the exemption,

reasoning that "it is a settled proposition that contractors and subcontractors are the

consumers of materials purchased and used in the fulfillment of a construction contract


2
 While Blevins interprets § 144.030.2(2), RSMo 1994, the principles stated within it are equally
applicable in interpreting § 144.054.2 in this case.
                                               6
and are therefore liable for sales and use taxes." Id. (citations and internal quotation

marks omitted). The Court also held "[m]aterials purchased by a contractor for use in

meeting contractual obligations for the improvement of real property are used or

consumed by the contractor; they are not resold." Id. (citations and internal quotation

marks omitted). These principles apply here.

      Ben Hur is a subcontractor using steel beams, plates, angles, and other

components to fulfill its contractual obligations to construct steel frames for commercial

buildings. Because Ben Hur is using these construction materials in fulfillment of its

construction contracts, an activity not exempt under the plain and ordinary language of

§ 144.054.2, it has failed to meet all three statutory criteria and does not qualify for a

sales and use tax exemption. The decision of the AHC is affirmed.


                                                       __________________________
                                                       Zel M. Fischer, Judge

All concur.




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