ÿWPC. …# VUNa %¯ 0 (µw@Ý4 1 0 l@ 0D¬ 0Jð 0T: 0^Ž 0hì 0rT 0|Æ 0†B 0È 1uX Í U ,Õ 0À D3Á Bô 0@U,QU>}U 6»B)ñDC AM]U*ª!Ôtõ§i]&|ƒ!ÿ$ áD!v~%%vÓ£& AOv,ÆÅ, 0D‹- D/Ï- Bþ-˜HP LaserJet 4Si/4SiMX PS 600dpiPSCRIPTÀÌÀääÀÀÌ0 (ÈhH  Z ‹6Times New Roman RegularX($¡¡ åDæçEèéDêëìDíÓ€ùypÑ nglish3|xù((3üÝ$¤¤Ý ƒ!ÝÝ  Ýà  àòòÚ  Ú0Ú  Úóó(#Ã$òòÚ  Ú0Ú  Úóó2 ÿÿ0Indent1Ô2ÔÔ3  Ô2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô !"#$% ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)< Œ 9p`(ModernPp ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓÑ\R€€\Ñ++++'ÿÿdxd d("ÿÿ$££Ò  ÒÒ  Ò< Œ 9p`(Monaco< Œ 9p`(&Times New Roman< Œ 9p`(Courier New% Line 7 d66667Border 1dd€-7Cþÿ << Gÿÿ< Œ 9p`(Arial Ý ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÔ€9ÔÔ€9ÔÓ  ÓÔ YYY ÔFILEDÔ€9XÔÌÌò òJuly€18,€1996ÌÌCecil€Crowson,€Jr.ÌÔ€9ôÔAppellate€Court€Clerkó ó jÝ ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€5ÔÔ€5ôÔAs€pertinent€here,€T.C.A.€ðð€67„1„1801€provides€as€follows:ÌÌà àà8 à(a)(1)€In€all€cases€in€which€any€officer,€charged€byÏlaw€with€the€authority€to€assess€taxes€which€areÏcollected€or€administered€by€the€commissioner€ofÏrevenue,€shall€assess€a€tax€alleged€or€claimed€to€beÏdue,€if€the€taxpayer€against€whom€the€assessment€isÏmade€believes€the€assessment€to€be€unjust,€illegal€orÏincorrect,€the€taxpayerððs€remedies€shall€be€asÏfollows:ÌÌà@ à*€€€€*€€€€*ÌÌà àà8 à(B)€The€taxpayer€may€file€suit€against€theÏcommissioner€in€chancery€court€in€the€appropriateÏcounty€in€this€state,€challenging€all€or€any€portionÏof€the€assessment€.€.€.Ì Ý ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€5ÔÔ€5ôÔSome€of€the€code€sections€applicable€to€this€case€have€been€renumberedÏsince€the€audit€period.€€Since€there€have€been€no€changes€in€substance,€weÏhave€used€the€code€sections€in€effect€at€the€present€time.Ì Ý ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€4ôÔÔ€5ÔT.C.A.€ðð€67„6„102(23)(A)€provides,€in€pertinent€part,€as€follows:ÌÌà àà8 àð ðRetail€salesðð€or€ð ðsale€at€retailðð€means€a€taxableÏsale€of€tangible€personal€property€or€specificallyÏtaxable€services€to€a€consumer€or€to€any€person€forÏany€purpose€òòother€than€for€resale.óóÌÌ(Emphasis€added.)Ì SÝ ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€4ôÔÔ€5ÔT.C.A.€ðð€67„6„102(23)(E)(i)€provides,€in€pertinent€part,€as€follows:ÌÌà àà8 àð ðSale€at€retail,ðð€ð ðuse,ðð€ð ðstorage,ðð€and€ð ðconsumptionððÏdo€not€include€the€sale,€use,€storage€or€consumptionÏof:€(i)€industrial€materials...for€future€processing,Ïmanufacture€or€conversion€into€articles€of€tangibleÏpersonal€property€òòfor€resaleóó...ÌÌ(Emphasis€added).Ì rÝ ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€4ôÔÔ€5ÔT.C.A.€ðð€67„6„313(a)€provides,€in€pertinent€part,€as€follows:ÌÌà àà8 àIt€is€not€the€intention€of€this€chapter€to€levy€a€taxÏupon€articles€of€tangible€personal€property...producedÏor€manufactured€in€this€state€òòfor€exportóó.ÌÌ(Emphasis€added).€€This€statute€provides€an€exemption€ð ðfor€personal€propertyÏexported€òòfor€resaleóó.ðð€€ò òòòHearthstoneó óóó,€809€S.W.2d€at€891€(emphasis€addded).Ì Ý ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€4ôÔÔ€5ÔT.C.A.€ðð€67„6„102(12)(A)€provides,€in€pertinent€part,€as€follows:ÌÌà àà8 àð ðIndustrial€machineryðð€means:Ìà àà8 à(A)€Machinery,€apparatus€and€equipment...which€isÏnecessary€to,€and€primarily€for€the€fabrication€orÏprocessing€of€tangible€personal€property€òòfor€resaleóó...ÌÌ(Emphasis€added).Ì Ý ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€5ÔÔ€5ôÔSCC€receives€a€written€authorization€to€solicit€on€behalf€of€theÏschools.Ì ×Ý ƒ!ÝÑ#€d#ÑÔ€(ÔÔ€4ÔÝ  ÝÝ ƒ $Ýà àòòÚ  ÚÚ  ÚóóÝ  ÝÔ€5ÔÔ€5ôÔSusan€Myers€Keebler,€the€Department€of€Revenueððs€audit€manager€for€EastÏTennessee,€conceded€in€her€testimony€that€if€the€schools€themselves€sell€theÏadvertising€and€then€remit€the€contract€price€to€SCC,€a€sale€of€tangibleÏpersonal€property€has€occurred:ÌÌà àà8 àQ.€€Now,€can€the€schools€themselves€like€in€thisÏinstance€„„€we€didnððt€sell€any€advertising€on€thisÏone.€€The€school€just€sent€us€a€check.ÌÌà àà àA.€€Thatððs€correct.ÌÌà àà8 àQ.€€Can€the€schools€go€out€and€sell€advertisingÏthemselves,€get€the€sponsors€themselves,€get€the€moneyÏthemselves€and€then€pay€us€for€this€calendar?ÌÌà àà àA.€€Yes,€sir.ÌÌà àà8 àQ.€€Would€that€be€a€sale€of€tangible€personal€product?ÌÌà àà àA.€€Yes.ÌPtPtStyl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑMonacoÑÑ ÑÒ  BA Op Monaco ÒÒ  BA Op Monaco Ò€-‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€(ÔÓ&€33X„d&ÓÑ#€33Xd#ÑÔ€4ÔÝ  ÝÑ P ÑÔ€5ÔÑ\R AØ'\ÑÑ7€ÕnXXdìdÈ7ÑÑ  Ñ›à@ àIN€THE€COURT€OF€APPEALS€OF€TENNESSEEÌÙ€€ÙœßL€8:7;+'h|½&` Å `€€Lß›ÌÌÌSCHOOL€CALENDAR€œCOMPANY,€INC.,›€€)€C/A€NO.€œ03A01›„9603„CH„00090Ìà àà àà àà àà àà à€€)€œHAMBLEN›€COUNTYÏCHANCERY€COURTÌà àà àPlaintiff„Appellee,à à€€)Ìà àà àà àà àà àà à€€)Ìà àà àà àà àà àà à€€)Ìv.à àà àà àà àà àà à€€)Ìà àà àà àà àà àà à€€)€HONORABLE€WILLIAM€L.€JENKINS,Ìà àà àà àà àà àà à€€)€JUDGE,€Sitting€by€InterchangeÌà àà àà àà àà àà à€€)ÌJOE€œHUDDLESTON›,€in€his€official€)Ìcapacity€as€COMMISSIONER€OFà à€€)ÌREVENUE,€STATE€OF€TENNESSEE,à à€€)Ìà àà àà àà àà àà à€€)€Ìà àà àDefendant„Appellant.€€)€œAFFIRMED€AND€REMANDED›ÌÌÌà àà àà àà àà àà àÌÌMORRISON€PRINTING€COMPANY,€INC.,)€C/A€NO.€œ03A01›„9603„CH„00091Ìà àà àà àà àà àà à€€)€œHAMBLEN›€COUNTY€CHANCERY€COURTÌà àà àPlaintiff„Appellee,à à€€)Ìà àà àà àà àà àà à€€)Ìà àà àà àà àà àà à€€)Ìv.à àà àà àà àà àà à€€)Ìà àà àà àà àà àà à€€)€HONORABLE€WILLIAM€L.€JENKINS,Ìà àà àà àà àà àà à€€)€JUDGE,€Sitting€by€InterchangeÌà àà àà àà àà àà à€€)ÌJOE€œHUDDLESTON›,€in€his€official€)Ìcapacity€as€COMMISSIONER€OFà à€€)ÌREVENUE,€STATE€OF€TENNESSEE,à à€€)Ìà àà àà àà àà àà à€€)€Ìà àà àDefendant„Appellant.€€)€œAFFIRMED€AND€REMANDED›ÌÌÌÌCHARLES€W.€œBURSON›,€Attorney€General€and€Reporter,€and€SEAN€P.ÏœSCALLY›,€Assistant€Attorney€General,€Tax€Division,€Nashville,€forÏœAppellant›ÌÌBARRY€W.€œEUBANKS›€of€NORTON€AND€œLUHN›,€P.C.,€Knoxville,€forÏœAppellees›ÌÌ̛̜Ìà@ àòòO€P€I€N€I€O€NóóÌÌà àà àà àà àà àà àà àà àà àà àà àœSusano›,€J.ÌÓÓà àà àThese€consolidated€cases€involve€sales€and€use€taxÏdeficiencies€assessed€by€the€Commissioner€of€RevenueÏ(Commissioner).€€œThe›€œtaxpayers,›€School€Calendar€Company€(SCC)€andÏMorrison€Printing€Company,€Inc.€œ(Morrison),€filed€separate€actions›Ïagainst€the€Commissioner€pursuant€to€T.C.A.€ðð€œ67„1„1801× ƒ; ××  ×€seeking€aÏdetermination€that€the€assessments€were€improperly€made.€€TheseÏsuits›€were€œheard›€by€the€trial€judge€œat›€a€joint€bench€œtrial€onÏAugust€22€and€23,€1995.›€€He€found€that€the€assessments€were€notÍœlegally€justified›€and€entered€judgment€for€the€taxpayers.€€œTheÏCommissioner€appealed.›€€We€affirm.ÌÌà àà àThe€pivotal€issue€in€this€case€is€whether€SCC€sells€itsÏproducts€or€gives€them€away,€free€of€œcharge.›€€The€CommissionerÏclaims€that€SCC€œsimply€sells›€advertising€œfor€the›€poster„sizeÏœathletic€calendars›€and€pocket„size€schedule€cards€that€it€producesÏfor€œschools€and€colleges€around›€the€œcountry;›€and€that€it€thenÏdistributes€the€calendars€and€schedule€cards€œwithout›€charge.€€HeÏcontends€that€since€SCC€does€not€sell€a€product,€it€is€responsibleÏfor€sales€and€use€tax€on€œpaper,€ink›€and€other€supplies€œthat›€areÏœblended€into€the€calendars›€and€schedule€cards.€€He€also€assessed€aÏtax€on€machinery€purchased€by€SCC.€€He€further€contends€thatÏMorrison,€a€general€commercial€printing€company,€is€obligated€forÏsales€tax€on€press€time€it€sells€to€SCC€for€the€printing€of€theÏlatterððs€products.ÌÌà àà àOn€the€other€hand,€the€taxpayers€argue€that€SCC€doesÏsell€its€products€ð ðfor€a€considerationðð€and€that€the€transactionsÏtaxed€by€the€Commissioner€are€exempt€from€sales€and€use€taxesÏunder€a€number€of€statutory€exemptions.€€œSCC›€contends€that€it€is€aÏð ðspecially€niched€printer.ðð€€It€vigorously€disputes€theÍCommissionerððs€contention€that€it€is€nothing€more€than€a€typicalÏadvertising€agency.ÌÌà àà àð ðOur€review€of€findings€of€fact€in€tax€cases,€as€inÏother€civil€œactions,›€œis›€ððde€novo€upon€the€record€of€the€trialÏcourt,€accompanied€by€a€presumption€of€correctness€of€the€finding,Ïunless€the€preponderance€of€the€evidence€is€otherwise.ðððð€Ïò òòòœHearthstone›,€Inc.€v.€Hardy€œMoyers›óóó ó,€809€S.W.2d€888,€890€(Tenn.Ï1991)€(citing€Rule€13(d),€T.R.A.P.).€€òòSee€alsoóó€òòò òSears€Roebuck€&ÏCo.€v.€Woodsó óóó,€708€S.W.2d€374,€378€(Tenn.€1986).ÌÌà@ àI.€€òòFactsóóÌÌà àà àThe€operative€facts€are€essentially€undisputed;€œhowever,Ïthe€legal€effect€of€those€facts€is€sharply€contested.›ÌÌà àà àSCC€and€Morrison€are€wholly„owned€subsidiaries€ofÏMorrison€Communications,€Inc.,€a€family„owned€corporation.€€AllÏthree€businesses€are€located€in€the€same€facility€in€œMorristown›.€ÏThey€share€a€number€of€employees.ÌÌà àà àMorrison€is€a€general€commercial€printer.€€It€has€aÏprinting€press;€SCC€does€not.€€SCC€contracts€œwith€Morrison€forÏpress€time.€€Morrison€also€provides€printing€services€to€otherÏcompanies.›ÌÌà àà àThe€vast€majority„„over€90%„„of€SCCððs€revenues€œcomesÏfrom€advertisers›€œand›€sponsors€whose€advertisements€or€names€appearÏon€the€calendars€and€schedule€cards€produced€by€the€company.€€TheÏschedule€cards€represent€a€small€part€of€the€companyððs€totalÏbusiness;€the€bulk€of€œits›€business€is€the€production€of€œschoolÏathletic€calendars.›€€During€the€audit€period„„December€31,€1988€toÏDecember€31,€œ1991„„SCC›€distributed€3.8€million€calendars.€€ItÏreceived€$16.5€million€in€revenues€from€calendars€and€œscheduleÏcards›€during€the€audit€period.ÌÌà àà àSCCððs€customers€are€schools€and€colleges.€€97%€of€œtheÏrevenues€associated€with€those€customers›€come€from€out„of„stateÏœeducational€institutions.›ÌÌà àà àSCCððs€representatives€attend€coachesðð€clinics€to€promoteÏœthe€companyððs›€products.€€Most€of€its€leads€come€from€theseÏclinics.€€Coaches€at€the€clinics€who€are€interested€in€SCCððsÍcalendars€and/or€schedule€cards€fill€out€information€cardsÏdirected€to€SCC.€€The€company€then€contacts€the€interested€partiesÏby€phone€or€by€on„site€visits€from€company€representatives.ÌÌà àà àThe€company€maintains€a€price€list€setting€forth€theÏœprices›€for€various€œtypes›€of€calendars.€€The€cost€of€the€calendarsÏis€dependent€upon€œtheir›€size,€œnumber›€of€œcolors,›€œquantity€ordered,›Ïand€other€features.€€Once€a€school€selects€a€calendar€with€theÏdesired€features,€SCC€quotes€a€price€for€œthat›€œproduct€from›€œitsÏpublished€price›€list.€€When€all€of€this€is€agreed€upon,€SCC€andÏthe€school€enter€into€a€contract€for€the€production€and€deliveryÏof€œa€certain€quantity€of›€œcalendars.›ÌÌà àà àœThe€educational€institutions€pay€the€full€contract€priceÏin€only€five€percent€of€the€cases.€€In›€the€other€cases,€funds€mustÏbe€raised€in€the€community€to€pay€for€the€calendars.€€Sometimes,Ïthe€schools€do€their€own€fund€raising;€but€in€most€instances,€theÏschools€avail€themselves€of€SCCððs€offer€to€have€its€fieldÏrepresentatives€contact€potential€advertisers€œand›€sponsors€to€œseekÏadvertisements€or€sponsorships€to€finance›€the€cost€of€theÏœcalendars.›€€Typically,€one€advertiser€or€sponsor€is€selected€toÏfund€the€production€of€the€schedule€cards.ÌÌà àà àThe€testimony€at€trial€œindicates›€that€in€over€œhalf›€ofÏthe€cases,€the€schools€œhave›€to€make€up€the€difference€between€theÏcost€of€the€product€selected€by€the€school€and€the€funds€securedÏfrom€advertisers€œand›€sponsors.ÌÌà àà àThe€calendars€and€schedule€cards€are€not€shipped€to€theÏschools€until€the€full€contract€price€has€been€paid€by€theÏadvertisers,€sponsors,€schools,€or€other€source.ÌÌà àà àSCC€is€œdirectly€involved›€in€all€phases€of€the€printingÏof€the€calendars€and€schedule€cards€except€the€actual€putting€ofÏthe€ink€on€the€paper.€€This€latter€function€is€contracted€out€toÏœMorrison,€but€is€supervised€by€SCC.€€SCC›€maintains€equipment€andÏfacilities€to€do€all€of€the€pre„press€functions€as€well€as€theÏfunctions€that€occur€after€ink€is€put€on€the€paper€by€œMorrison.›€ÏThe€various€functions€of€the€total€printing€process€were€describedÏby€the€President€of€SCC:ÌÌÓÓà àà8 àQ.€€Explain€to€the€Court€the€components€of€theÏprinting€industry€and€where€you€get€this€termÏpre„press€operation.ÌÌà àà8 àA.€€The€printing€industry€has€three€basicÏprocesses.€€The€first€is€the€pre„pressÍoperation,€which€is€where€all€the€of€œ[sic]Ïwork›€is€assembled€to€make€up€the€finalÏproduct.€€The€type€is€set.€€The€picture€isÏeither€scanned€in€or€shot€on€the€camera.€€TheÏdesign€work€is€done.€€The€stripping€is€done,Ïand€the€plate€making€is€done.€€So€it€is€aÏdepartment€thatððs€„„€and€itððs€in€a€lot€ofÏchange€right€now.€€Itððs€going€from€a€manual€toÏan€electronic€system.€€At€any€rate,€thatððs€theÏfirst€part.ÌÌà àà8 àThe€second€part€is€the€plate€part.€€ThatððsÏwhere€the€metal€plate€is€actually€attached€toÏthe€press.€€The€paper€is€loaded€into€the€pressÏand€ink€into€the€press,€and€then€the€productÏis€then€put€through€the€press.ÌÌà àà8 àThe€third€operation€is€the€bindery€andÏfinishing.€€Anything€that€needs€to€be€done€toÏmake€a€final€product€is€done€in€that€area.€€ItÏcould€be€trimmed€on€the€cutter.€€It€could€beÏfolded€on€the€folding€machine.€€It€could€beÏgathered€on€a€saddle€gatherer.€€It€could€haveÏholes€punched€in€it.€€Whatever€needs€to€happenÏhappens€in€that€bindery€and€finishing€area.ÌÌà àà8 àQ.€€Are€all€three€parts€of€those€part€of€theÏprinting€industry?ÌÌà àà8 àA.€€Yes,€they€are.ÌÌÌÌÓÓœSCCððs€part€of€the€printing€process€as€to€a€given€calendar€isÏcompleted€in€three€days;€Morrisonððs€function€takes€only€about€20Ïminutes.Ì›à àà àœÌà àà àAccording›€to€its€President,€SCC€produces€the€plate,Ïtakes€it€along€with€the€œpaper›€and€other€supplies€to€the€part€ofÍœthe›€building€housing€Morrisonððs€press,€and€then€supervises€theÏputting€of€the€ink€on€the€œpaper.›€€Once€the€product€comes€off€theÏpress,€SCC€takes€it€back€to€its€part€of€the€building€for€bindingÏand€other€necessary€completion€work,€after€which€it€is€mailed€toÏthe€schools.€€œGenerally,€the›€advertisers€œand›€sponsors€also€receiveÏsome€œquantity€of›€the€œproducts.ÌÌà àà àTypically,€the€calendars€contain€team€and/or€otherÏpictures,€schedules,€advertisements€or€sponsorsðð€names,€and€aÏcalendar.›ÌÌà àœà àAt€the€time€of€trial,€there€remained€an€unresolvedÏassessment€as€to€SCC€of€$50,696.06€for€materials€purchased€onÏresale€certificates€and€$10,965.02€for€machinery€purchases.€€TheÏunresolved€assessment€as€to€Morrison€amounted€to€$133,901.ÌÌà@ àII.€€òòLawóóÌÌà àà àAs€pertinent€to€this€appeal,€a€sales€or€use€tax€isÏimposed€in€Tennessee€pursuant€to€the€following€statutoryÏauthority:ÌÌÓÓà àà8 àIt€is€declared€to€be€the€legislative€intentÏthat€every€person€is€exercising€a€taxableÏprivilege€who:ÌÌà àà8 à(1)€Engages€in€the€business€of€sellingÏtangible€personal€property€at€retail€in€thisÏstate;Ìà àà8 à(2)€Uses€or€consumes€in€this€state€any€item€orÏarticle€of€tangible€personal€property€asÏdefined€in€this€chapter,€.€.€.ÌÌÌÌÓÓT.C.A.€ðð€67„6„201€(1)€and€(2).€€All€such€covered€transactions€areÏtaxable€unless€they€are€exempt€from€tax€under€one€or€more€of€theÏstatutory€exemptions.›ÌÌà àà àTaxing€legislation€is€strictly€construed€against€theÏtaxing€authority.€€œò òòòHearthstoneó óóó,›€809€S.W.2d€at€890;€ò òòòSears,ÏRoebuck€&€Coó óóó.,€708€S.W.2d€at€378;€however,€exemptions€areÏstrictly€construed€against€the€taxpayer.€€ò òòòœKingsport›€PublishingÏCorporation€v.€Olsenó óóó,€667€S.W.2d€745,€746€(Tenn.€1984);€ò òòòœShearin›Ïv.€Woodsó óóó,€597€S.W.2d€895,€896€(Tenn.€1980).€€ð ðAn€exemption€mustÏnot€be€broadened€beyond€the€command€of€the€provision.ðð€€ò òòòSears,ÏRoebuck€&€Coóóó ó.,€708€S.W.2d€at€378.ÌÌà àà àð ð[œI]n›€a€suit€against€the€state€by€a€taxpayer€claiming€anÏexemption€from€taxation€the€burden€is€on€the€taxpayer€to€establishÏhis€exemption;€every€presumption€is€against€it€and€a€well„foundedÍdoubt€is€fatal€to€the€claim.ðð€€ò òòòWoods€v.€General€Oils,€Inc.óóó ó,€558ÏS.W.2d€433,€435€(Tenn.€1977).€€òòSee€also€ò òœKingsport›€PublishingÏCorporationó óóó,€667€S.W.2d€at€746;€òòò òSears€Roebuck€&€Coó óóó.,€708ÏS.W.2d€at€378.€€ð ðThe€burden€of€proof€is€upon€the€taxpayer€to€proveÏthat€the€assessment€made€is€incorrect€and€to€prove€its€right€toÏrecovery€by€clear€and€convincing€evidence.ðð€€òòò òœEdmondson›€Mgt.ÏService,€Inc.€v.€Woodsó óóó,€603€S.W.2d€716,€717€(Tenn.€1980).ÌÌà@ àIII.€€òòAnalysisóóÌÌà àà àSCC€claims€that€it€òòsells€óócalendars€and€schedule€cards€toÏthe€schools€and€colleges€with€whom€it€contracts.€€It€œclaims€aÏright€to›€the€ð ðsale€for€resaleðð€exemptionœ× ƒ< ××  ×›€found€at€T.C.A.€ðð€œ67„6„102(23)(A);›× ƒ= ××  ×€œthe›€exemption€stated€at€T.C.A.€ðð€œ67„6„102(23)(E)(i);× ƒ> ××  ×›Ïand€the€exemption€at€T.C.A.€ðð€œ67„6„313(a).× ƒ? ××  ×›€€As€to€the€assessmentÏmade€by€the€Commissioner€on€its€machinery€purchases,€it€claims€anÏexemption€under€T.C.A.€ðð€œ67„6„102(12)(A).›× ƒ@ ××  ×€€Morrison€claims€thatÍits€charges€for€press€time€are€likewise€exempt€since€œthe€pressÏtime€is€a€part€of€the€manufacturing€of€products€for€resale.›ÌÌà àà àAs€previously€indicated,€the€Commissioner€takes€aÏcontrary€view.€€He€strenuously€argues€that€œSCCððs€sole€business›€œis›Ïœthe€selling€of›€advertising.€€He€contends€that€SCC€is€not€in€theÏprinting€business,€but€is€rather€nothing€more€or€less€than€anÏadvertising€agency.€€He€œasserts›€that€ð ðthere€is€no€actual€sale€ofÏthe€calendars€œ[and›€œthe›€schedule€œcards]›€to€anyone.ðð€€He€contendsÏthat€SCC€ð ðmakes€a€finished€product€which€is€then€distributed€freeÏof€œcharge.ððÌÌà àà àIt€is€clear€that€the€critical€determination€in€this€caseÏis€whether€SCC€is€selling€a€product.€€If€it€is›€not,€then€theÏpurchases€at€issue€in€this€case€are€for€the€end€use€of€SCC€andÏneither€it€nor€Morrison€is€entitled€to€any€of€the€claimedÏexemptions.€€If€it€is€selling€a€product,€œits›€œpurchases,€under€theÏfacts€of€this€case,›€œare›€œeither€sales›€for€resale€or€materialsÏœpurchased€and€thereafter€blended€into›€a€product€for€œresale;›€œand,Íin€either€event,›€not€subject€to€sales€or€use€tax.€€By€the€sameÏtoken,€if€SCC€is€engaged€in€the€printing€business€and€œspecificallyÏincorporates›€œraw€materials›€into€a€finished€product€that€is€sold€toÏothers,€then€the€machinery€purchased€by€œit,€again€under€the€factsÏof€this€case,›€is€ð ðindustrial€machineryðð€and€those€purchases€areÏlikewise€œexempt.€€Under€SCCððs€theory€of€this€case,€its€purchasesÏof€materials€and€press€time€in€connection€with€out„of„state€salesÏwould€also€be€exempt€as€sales€for€export€under€T.C.A.€ðð€67„6„313(a).›ÌÌà àà àIs€SCC€selling€a€product?€€This€question€causes€us€toÏfocus€on€T.C.A.€ðð€67„6„102(24)(A),€the€sales€and€use€tax€codeÏprovision€defining€a€ð ðsaleðð:ÌÌÓÓà àà8 àð ðSaleðð€means€any€transfer€of€title€orÏpossession,€or€both,...of€tangible€personalÏproperty€for€a€consideration,...ÌÌÌÌÓÓThe€elements€of€a€sale€have€been€addressed€by€the€Supreme€Court:ÌÌÓÓà àà8 àThe€elements€necessary€to€constitute€a€saleÏare€(1)€transfer€of€title€or€possession,€orÏœboth›€of€(2)€tangible€personal€property,€for€aÏ(3)€consideration.ÌÌÌÌÓÓò òòòVolunteer€Val„Pak€v.€œCelauro›óóó ó,€767€S.W.2d€635,€636€(Tenn.Ï1989).€€òòSee€alsoò ò€Hearthstoneó óóó,€809€S.W.2d€at€890.ÌÌà àà àœThe€taxpayersðð€entitlement€to€each€of€the›€claimedÏœexemptions›€œis€contingent›€upon€œSCC€showing,€by€clear€and€convincingÏevidence,€that€it€sells€the€calendars€and€cards.›€€œThe€statutesÏclearly€contain›ÌÌÓÓà àà8 à...a€requirement€that€the€dealer€actuallyÏresell€goods€and€services€or€manufactureÏproducts€for€resale.€€Otherwise€the€dealerððsÏpurchases€are€taxable.€€(citation€omitted)ÌÌÌÌÓÓò òòòœNasco›,€Inc.€v.€Jacksonóóó ó,€748€S.W.2d€193,€196€(Tenn.€1988).€€œòòSeeÏalso€ò òScholl,€Inc.€v.€Jacksonó óóó,€731€S.W.2d€893,€895„96€(Tenn.Ï1987).€€ð ðWhere›€goods€or€services€do€become€component€parts€ofÏððarticles€of€tangible€personal€property€for€resaleðð...theirÏœacquisitions›€from€vendors€are€not€included€in€the€definition€ofÏððretail€sales.ðððð€òòIdóó.€at€195.ÌÌà àà àThe€Commissioner€concedes€the€œexistence€of€the€first›€twoÏelements€of€the€statutory€definition€of€a€ð ðsaleðð;€but€he€arguesÏthat€the€third€element„„ððconsiderationðð„„is€lacking.€€We€disagree.ÌÌà àà àœThe€process€that€ends€with€the€shipment€of€calendarsÏand/or€schedule€cards€to€a€school€begins€with€a€contract€betweenÏSCC€and€the€school.€€We€believe€this€contractual€relationship€is€aÏcritical€factor€that€distinguishes€this€case€from€those€involvingÏadvertising„„financed€ð ðthrowawaysðð€that€are€distributed€free€ofÏcharge.€€òòCf.€ò òShoppers€Guide€Pub.€Co.€Inc.€v.€Woodsó óóó,€547ÏS.W.2d€561€(Tenn.€1977).€€The€contracts€between€SCC€and€theÏschools€are€based€upon€a€set€price€for€a€specified€type€andÏquantity€of€product.€€That€set€price€is€the€total€of€all€theÏseparate€charges€for€the€various€features,€i.e.,€size,€number€ofÏcolors,€etc.,€and€quantity€of€product,€ordered€by€the€school.€€TheÏcalendars€and€schedule€cards€are€not€shipped€to€the€school€òòunlessÏand€untilóó€that€full€price€is€contracted€for€or€paid€from€someÏsource.Ì›Ìà àà àIt€is€true€that€in€a€majority€of€the€cases,€the€contractÏprice€comes€from€advertising€or€sponsorships.€€It€is€likewise€trueÏthat€most€of€those€advertisements€œand›€sponsorships€are€secured€byÏsolicitations€from€SCC€òòacting€on€behalf€of€the€schoolóó.œ× ƒA ××  ×›€€We€do€notÍunderstand€how€the€mode€of€securing€the€œadvertisments€and›Ïsponsorship„„whether€by€the€school€directly€or€by€SCC€acting€onÏœthe€schoolððs€behalf„„affects›€the€issue€of€whether€there€is€a€saleÏof€tangible€personal€property€as€contemplated€by€T.C.A.€ðð€67„6„102(24)(A).œ× ƒB ××  ×€€That€section€does€not€define€ð ðconsiderationðð€in€a€wayÏthat€would€limit€that€concept€in€this€case€to€direct€payments€fromÏthe€schools.€€We€do€not€believe€there€is€any€reason€to€eliminateÏfrom€the€concept€of€ð ðconsideration,ðð€advertising€and€sponsorshipÏdollars,€regardless€of€how€and€by€whom€those€funds€are€secured,€inÏa€case€where€a€school€has€contracted€to€take€a€product€at€aÏspecified€price.›€œ€›ÌÌà àà àœIt€is›€also€œsignificant›€œthat›€over€œhalf›€of€the€schoolsÏœdirectly›€contribute€some€portion€of€the€contract€price.€€This€isÏsome€further€œindication›€that€the€Commissionerððs€characterizationÏof€SCCððs€business€as€œa€typical›€advertising€agency€œwithout€a€paid„for€product€is›€œnot€substantiated€by€the€record€in€these€cases.›ÌÌà àà àWe€recognize€that€the€sample€contract€in€the€recordÏbefore€us€contains€a€provision€that€ð ð[œs]ervices›,€products€andÏmaterial€supplied€by€SCC€will€be€at€no€cost€to€the€school.ðð€€We€doÏnot€understand€this€provision€to€mean€that€a€school€is€without€anyÏobligation€under€the€contract.€€If€the€necessary€funds€to€purchaseÏthe€calendars€or€schedule€cards€are€secured€through€the€efforts€ofÏSCC,€the€school,€or€both,€the€school€is€contractually€obligated€toÏtake€delivery.€€By€the€same€token,€this€provision€does€notÏpreclude€a€school€from€paying€monies€directly€to€SCC,€as€is€doneÏin€œover€half›€of€the€cases,€in€the€event€others€do€not€provide€theÏfunds€to€cover€the€purchase€price€or€the€school€wants€additionalÏcalendars€or€cards€or€other€features€not€earlier€contracted€œfor.€ÏIn€any€event,€product„„tangible€personal€product„„flows€to€theÏschools€and€ð ðconsiderationðð€for€that€product€flows€to€SCC.›ÌÌà àà àWe€find€and€hold€that€the€evidence€does€not€preponderateÏagainst€the€Chancellorððs€judgment€that€SCC€sells€calendars€andÏschedule€cards€ð ðfor€a€consideration.ðð€€œThis€being€the€case,€itÏfollows€that€we›€find€clear€and€convincing€evidence€in€the€recordÏto€support€the€exemptions€claimed€by€SCC€and€Morrison€as€to€theÏtransactions€for€which€the€Commissioner€made€a€deficiencyÏœassessment.ÌÌà àà àIn€view€of€our€finding€that€the€taxpayers€are€entitledÏto€the€claimed€exemptions,€it€is€not€necessary€for€us€to€reach€theÏtaxpayersðð€issue€that€because€no€assessments€were€made€as€a€resultÏof€earlier€audits,€they€are€entitled€to€the€benefit€of€T.C.A.€ððÏ67„1„108,€the€section€of€the€code€that€prohibits€retroactiveÏapplication€by€the€Commissioner€of€a€change€of€policy.€€òòCf.Ïò òMemphis€Shoppers€News,€Inc.€v.€Woodsó óóó,€584€S.W.2d€196,€200Ï(Tenn.€1979).›Ìà àà àÌà àà àThe€judgment€of€the€trial€court€is€affirmed.€€Costs€onÏappeal€are€taxed€to€the€appellant.€€This€case€is€remanded€for€suchÏfurther€proceedings€as€may€be€necessary€consistent€with€thisÏopinion.ÌÌÓÓà àà àà àà àà àà àà à______________________________Ìà àà àà àà àà àà àà àCharles€D.€œSusano›,€Jr.,€J.ÌÌÌCONCUR:ÌÌÌÌ_____________________________ÌHouston€M.€œGoddard›,€œP.J.›ÌÌÌÌ_____________________________ÌDon€T.€œMcMurray›,€J.