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Great Lakes Chemical Corp. v. Wooten
Citations: 266 Ark. 511; 587 S.W.2d 220; 1979 Ark. LEXIS 1511Docket: 79-89
Court: Supreme Court of Arkansas; September 24, 1979; Arkansas; State Supreme Court
Great Lakes purchased chlorine tax-free in Louisiana and Texas for use in producing bromine at its Union County plant during three tax years starting March 1, 1973. The state assessed a use tax of $94,342.24, plus interest and a 10% penalty, arguing the chlorine was subject to tax. Great Lakes contended the chlorine should be exempt as it becomes “a recognizable, integral part” of the bromine, claiming it fits the sales tax exemption for resale. The court found that the chlorine does not become a part of the bromine. Expert testimony established that Great Lakes extracts brine containing bromide, which is then converted into bromine using chlorine as an oxidizing agent. The chlorine undergoes a chemical change, transforming into chloride, which is discarded as worthless. The court emphasized that while bromine acquires oxidizing properties from the chlorine, the chlorine itself does not remain as tangible property within the bromine. The ruling clarified that tangible personal property must be perceivable by the senses. Since the chlorine is fully converted to chloride, no tangible aspect of the chlorine is retained in the bromine. The court compared this to using natural gas to heat coffee; the gas's heat is measurable, but it is not resold as part of the coffee. Regarding the imposed 10% penalty for tax non-payment, the court noted that the statute prescribes penalties for negligent or fraudulent non-payment, confirming that the 10% penalty was appropriately applied. The chancellor's decision was affirmed, with the court agreeing that Great Lakes' arguments lacked merit.