Full Opinion

ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT: M. PATRICK YINGLING THEODORE E. ROKITA DAVID P. DORNER ATTORNEY GENERAL OF INDIANA REED SMITH LLP SHELBY M. STOUDER Chicago, IL DEPUTY ATTORNEY GENERAL Indianapolis, IN MICHAEL RATO REED SMITH LLP New York, NY IN THE INDIANA TAX COURT INDIANA AMERICAN WATER CO., INC., ) ) Petitioner, ) FILED ) Oct 27 2026, 2:27 pm v. ) Case No. 24T-TA-00011 CLERK ) Indiana Supreme Court Court of Appeals INDIANA DEPARTMENT OF ) and Tax Court STATE REVENUE, ) ) Respondent. ) ORDER ON PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT FOR PUBLICATION October 27, 2026 MCADAM, J. This case presents novel questions about the application of two of Indiana’s sales and use tax exemptions to the production of tap water. Indiana American Water Co., Inc. (“INAW”), transforms raw water into tap water that is both potable (suitable for drinking) and pressurized (suitable to be used) and delivers the water directly to its customers’ water systems through a series of interconnected pipes and pumping stations. It uses an array of equipment (e.g., pipes, seals, fittings, valves, meters, protective wraps, tracer wire, and backfill) to construct, operate, and maintain these public water systems throughout the state. It contends that this equipment is exempt from Indiana’s sales and use tax under two different exemptions: the manufacturing equipment exemption (Indiana Code § 6-2.5-5-3) and the environmental quality exemption (Indiana Code § 6-2.5-5-30). The manufacturing equipment exemption applies to the entire production process and covers tangible personal property that is used in the production of other tangible personal property. On appeal, the parties agree that the manufacturing equipment exemption applies to INAW’s production of water at its water treatment plants but diverge in their assessment of whether it applies to the parts of the public water system positioned after those plants. The parties’ disagreement ultimately turns on the determination of where the production process ends and the most marketable product (tap water) emerges. The uncontroverted facts show that INAW’s production of tap water is incomplete until at least the last time INAW takes active measures to pressurize the water or make it potable. The “first mile” of piping and pipe accessories (those used to convey water to the location where the last action occurs) can thus be exempt even if they are located beyond the water treatment plant. On this record, however, the Court cannot determine the role that the “last mile” of piping and pipe accessories (those that occur after the last change in pressurization or potability) play in the production process as the water continues to the customers’ water systems. The environmental quality exemption covers certain tangible personal property tied to compliance with environmental quality laws. To qualify for exemption, the property must fall into either of two categories: (a) it must be itself a device, facility, or 2 structure predominantly used and acquired for compliance purposes; or, (b) it must be incorporated into or consumed in the operation of a device, facility, or structure predominantly used and acquired for compliance purposes. The parties are at odds about the predominant purpose for the equipment at issue. INAW argues that all of the equipment is purchased and used for compliance purposes but also points to other non- compliance reasons for the purchases without providing a clear indication of which purpose predominates. The Court is unable to resolve the genuine issue of material fact on summary judgment because the evidence does not permit an inference as to the predominant reason for INAW’s purchase and use of the equipment. Ultimately, the Court grants summary judgment in part to INAW with regard to the manufacturing equipment exemption as it relates to the “first mile” but not the “last mile” of equipment and denies summary judgment to INAW and the Department of Revenue in all other respects. I. BACKGROUND FACTS AND PROCEDURAL HISTORY INAW is a water and wastewater utility company regulated by the Indiana Utility Regulatory Commission. (Jt. Stip. Facts Not in Dispute ¶ 3 (hereinafter “Jt. Stip. (Gen.)”).) It owns and operates across the state of Indiana more than thirty public water systems and serves nearly one million residents. 1 (Jt. Stip. (Gen.) ¶¶ 4, 5). As part of its business, it produces tap water that has been treated, disinfected, and pressurized and 1 A “public water system” is defined by Indiana regulations as “a public water supply for the provision to the public of water for human consumption through pipes or other constructed conveyances, if the system has at least fifteen (15) service connections or regularly serves at least twenty-five (25) individuals daily at least sixty (60) days out of the year.” 327 IND. ADMIN. CODE 8-10-1(16) (2018). The term includes “any collection, treatment, storage, and distribution facilities under control of the operator of the system . . . .” Id. 3 delivers that water directly to its customers’ water systems.2 (Jt. Stip. (Gen.) ¶¶ 6, 7.) Only a small fraction of the water that INAW sells is used for drinking water; most of it is used for other household purposes or commercial and industrial purposes. (Britto Aff. ¶ 12.) State and Federal Regulation INAW’s operations are subject to overlapping federal and state laws concerned with public health. (See Stip. ¶¶ 4–5, 8–10 (hereinafter “Jt. Stip. (Env’t)”).) These laws require that INAW protect the public health “by ensuring the continuity of its water purification process all the way to the customer water system.” (Jt. Stip. (Gen.) ¶ 7 (internal quotation marks omitted).) INAW is required to operate its public water systems in a manner that ensures the water is “(1) safe in quality; (2) clean and adequate in quantity; and (3) chemically satisfactory for ordinary domestic consumption.” (Jt. Stip. (Env’t) ¶ 15.) To this end, the laws establish drinking water standards to protect water quality. (See Jt. Stip. (Env’t) ¶ 5.) These standards define maximum levels for various contaminants, require INAW to disinfect the water that it provides to customers, and obligate INAW to monitor contaminant levels throughout the process to ensure that they remain below maximum permissible levels. (Jt. Stip. (Env’t) ¶¶ 5, 9–11.) The law requires INAW to maintain a normal operating pressure of at least twenty (20) pounds per square inch (psi) at all points in its water mains. (Jt. Stip. (Env’t) ¶ 18.) Indiana law also governs how INAW operates, constructs, repairs, maintains, and modifies its public 2 A “customer water system” is defined by Indiana regulations as the “piping, fixtures, and appurtenances . . . used by a customer to convey water on his or her premises.” 327 IND. ADMIN. CODE 8-10-1(12) (2018). 4 water systems and sets the standards for materials INAW is permitted to use in its systems. (Jt. Stip. (Env’t) ¶¶ 15–17.) Water Treatment and Pressurization Process3 The process of creating clean, pressurized, usable water begins when INAW draws and conveys raw water from a surface water source (e.g., lake, river, reservoir) or from a groundwater well to one of its water treatment plants. (Britto Aff. ¶¶ 9, 10; Hobbs Aff. ¶ 4.) The treatment path varies with the source of the raw water, but it generally proceeds in multiple stages. (Britto Aff. ¶ 10.) First, coagulation introduces particles that bind with impurities. (Britto Aff. ¶ 10.) Next, flocculation mixes the resulting particulates so they clump together. (Britto Aff. ¶ 10.) The water then moves to sedimentation tanks, where heavier particles settle out and filtration removes smaller particles and harmful bacteria. (Britto Aff. ¶ 10.) INAW then disinfects the treated and filtered water using chlorine or chloramines, and sometimes ultraviolet light, until it meets drinking water standards. (Britto Aff. ¶ 11.) Corrosion control chemicals are also sometimes added to the water at the treatment plant. (Hobbs Aff. ¶ 4.) Once treated and disinfected, the water is pressurized and travels along the public water system through pipes and pumping stations to the customer’s water system. (Hobbs Aff. ¶ 5.) Both pressure and chlorine levels are affected as the water moves through the public water system. Water loses pressure continuously as it travels along the public water system. (See Hobbs Dep. 20:8–9.) Depending on the system’s size and extent, pressurization may occur at several locations before it reaches customers to ensure that there is 3 Though the parties have not stipulated to these facts, the Court accepts them as true to the extent that the parties do not dispute them and they are not susceptible to conflicting inferences. 5 adequate pressure for the water to be usable. Pressure is created at water treatment plants, booster stations, and elevated storage tanks, though here INAW focuses on only the first two locations. (See Hobbs Aff. ¶¶ 5, 10; Hobbs Dep. 20:19–23.) Pumps at water treatment plants initially pressurize the water, and, in some systems, the water is further pressurized—or de-pressurized, if necessary—elsewhere at downstream pumping stations. (Hobbs Aff. ¶ 5; Miller Aff. ¶ 7.) These downstream stations—composed of a “series of pumps” and “motors to drive the pumps” housed in buildings—are generally referred to as “booster stations.” (Hobbs Dep. 20:16–17, 25:23–24; Miller Aff. ¶ 7.) INAW operates more than seventy (70) such booster and pressure-reducing stations in the state to make sure that water at the appropriate pressure reaches customers. (Hobbs Aff. ¶ 9.) The pumps at these stations are used to modulate the pressure of the water on an as-needed basis. (Hobbs Aff. ¶¶ 9, 10.) Similar to the loss of pressure, residual chlorine concentration levels can also decrease as water travels from the treatment plant to customers’ water systems. (See Hobbs Aff. ¶ 7.) INAW monitors and analyzes the levels of chlorine and chloramines throughout the system to ensure compliance with regulations, “inhibit microbial growth,” and “prevent harmful disinfection byproducts.” (Hobbs Aff. ¶¶ 5, 8, 12; Britto Aff. ¶ 23.) If testing reveals that chlorine levels are below acceptable levels, INAW may add additional chlorine at the booster stations. (Hobbs Aff. ¶ 12; Hobbs Dep. 15:2–5, 30:22– 24.) If a contaminant in the public water system exceeds the maximum level, INAW must notify the Indiana Department of Environmental Management and issue public notice. (Britto Aff. ¶ 24.) 6 Present Dispute In operating its public water systems, INAW purchases pipes, pipe accessories, and other equipment. (Jt. Stip. (Gen.) ¶ 10.) During the three-year period from January 1, 2018, through December 31, 2020, INAW purchased more than $14.5 million worth of these items and supplies for use in its operations. (Jt. Stip. (Gen.) ¶ 9.) The purchases made during the tax periods were installed in INAW’s public water systems and are summarized in the following table: Table 1. (Jt. Stip. (Gen.) ¶¶ 11, 12.) In 2021, INAW sought a refund from the Department for the sales and use tax paid, among other things, on the equipment listed in Table 1.4 (Jt. Stip. (Gen.) ¶ 15.) The Department granted only a portion of the refund request and denied the remainder. (Jt. Stip. (Gen.) ¶¶ 14 n.3, 21.) INAW protested the denial, invoking the two statutory sales and use tax exemptions at issue here, the manufacturing equipment exemption 4 INAW initially sought a refund for numerous other remitted amounts, including taxes paid for water plant expenses, production consumables, capital improvements, and real property. (See Jt. Stip. (Gen.), Ex. 1-J (Claim for Refund) at INAW0015444.) These same requests appeared in INAW’s protest to the Department but were not appealed to this Court. (See Jt. Stip. (Gen.), Ex. 7-J (Statement of the Protest) at INAW0022526–29; Jt. Stip. (Gen.) at 5 n.3.) 7 under Indiana Code § 6-2.5-5-3(b) and the environmental quality exemption under Indiana Code § 6-2.5-5-30. (Jt. Stip. (Gen.) ¶¶ 22–25.) After an administrative hearing, the Department issued a Final Order denying INAW’s protest. (Jt. Stip. (Gen.) ¶ 26; Jt. Stip. (Gen.), Ex. 10-J (DOR Final Order) at INAW0022767.) INAW then requested a rehearing, and the Department affirmed its previous determination that INAW was not entitled to the claimed exemptions. (See Jt. Stip. (Gen.) ¶¶ 27–30.) Once the appeal process at the Department concluded, INAW filed an appeal with this Court. (Jt. Stip. (Gen.) ¶ 31.) The parties’ cross-motions for summary judgment are now before the Court.5 II. STANDARD OF REVIEW The Tax Court reviews final determinations of the Department de novo, IND. CODE § 6-8.1-5-1(i) (2026), and accordingly the Court is not bound by the evidence or the issues raised at the administrative level, see Subaru-Isuzu Auto., Inc. v. Ind. Dep’t of State Revenue, 782 N.E.2d 1071, 1073 (Ind. Tax Ct. 2003). Summary judgment is proper only when the designated evidence demonstrates that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C) (eff. Jan. 1, 2008); see also Merchandise Warehouse Co. v. Indiana Dep’t of State Revenue, 87 N.E.3d 12, 15–16 (Ind. 2017). “Summary judgment is designed to provide speedy resolution to those 5 INAW does not discuss the environmental quality exemption in its motion for partial summary judgment, but it does discuss the exemption at length in its brief and discussed it at oral argument. The Department engaged INAW’s arguments in the briefing and at oral argument and has not asserted any claim of waiver or defect. The Court therefore treats INAW’s arguments regarding the environmental quality exemption as part of its motion. (See generally Pet’r Mot. Partial Summ. J. (not mentioning Indiana Code § 6-2.5-5-30); Pet’r Memo. Supp. Mot. Partial Summ. J. (mentioning Section 30); Resp’t Memo. Opp. Pet’r Mot. Partial Summ. J. (same).) 8 cases—or those parts of cases—that may be determined as a matter of law because there are no factual disputes.” Pinnacle Ent., Inc. v. Ind. Dep’t of State Revenue, 32 N.E.3d 1216, 1218 (Ind. Tax Ct. 2015). However, “[s]ummary judgment shall not be granted as of course because the opposing party fails to offer opposing affidavits or evidence, but the court shall make its determination from the evidentiary matter designated to the court.” Ind. Trial Rule 56(C). “When reviewing a motion for summary judgment, the Court will construe all properly asserted facts and reasonable inferences drawn therefrom in favor of the non-moving party.” Crown Prop. Grp., LLC v. Ind. Dep’t of State Revenue, 135 N.E.3d 671, 675 (Ind. Tax Ct. 2019). “Cross-motions for summary judgment do not alter this standard.” Id. III. THE MANUFACTURING EQUIPMENT EXEMPTION The question before the Court is whether Indiana’s manufacturing equipment exemption applies to the piping and pipe accessories INAW purchased for use throughout its public water systems. INAW contends that this equipment is essential and integral to producing its most marketable product—potable, pressurized water usable at the customer’s tap—and that the exemption therefore covers its public water system all the way up to the point of delivery to the customer’s water system. The Department disagrees. In its view, INAW’s production process concludes at the water treatment plant, and the piping that follows is a distribution system through which an already-finished product merely passes. The Court concludes that INAW has the better argument but that the record does not support the conclusion that the exemption applies all the way to the customer’s water system. INAW’s integrated process produces a distinct marketable good—potable, pressurized water usable at the customer’s tap— 9 and the piping and associated equipment located before the last point in the system that alters the water to its completed form is properly considered part of the production process. The record is insufficient, however, to resolve the status of the piping and associated equipment that lies beyond that point. A. Background Legal Framework: Indiana’s Statutes, Regulations, and “Double Direct” Jurisprudence Indiana imposes a sales tax on retail transactions in Indiana, and a complementary use tax on tangible personal property stored, used, or consumed in the state. See IND. CODE §§ 6-2.5-2-1, 6-2.5-3-2. The legislature has provided a series of exemptions from these complementary taxes. See IND. CODE §§ 6-2.5-5-1 to -58. Like others, these exemptions are strictly construed against the taxpayer, and the taxpayer must demonstrate entitlement to them. Indianapolis Fruit Co. v. Dep’t of State Revenue, 691 N.E.2d 1379, 1383 (Ind. Tax Ct. 1998). One such exemption is the so-called manufacturing equipment exemption. It is one of several exemptions comprising the industrial exemptions, which exempt purchases of equipment and other materials “closely connected with the production of goods” to “promote industrial growth and prevent tax pyramiding” (i.e., the levying of a tax on a tax). Merchandise Warehouse, 87 N.E.3d at 16 (quoting Harlan Sprague Dawley, Inc. v. Ind. Dep’t of State Revenue, 605 N.E.2d 1222, 1228 (Ind. Tax Ct. 1992)). The industrial exemptions “cover a host of different activities and factual situations. There are innumerable ways to produce . . . tangible personal property, and the exemption provisions cannot be expected to give a precise answer to each factual situation that arises.” Rotation Prods. Corp. v. Dep’t of State Revenue, 690 N.E.2d 795, 798 (Ind. Tax Ct. 1998). 10 By statute, the manufacturing equipment exemption generally exempts from sales and use tax tangible personal property used in the production, manufacturing, or processing of other tangible personal property: [T]ransactions involving manufacturing machinery, tools, and equipment . . . are exempt from the state gross retail tax if the person acquiring that property acquires it for direct use in the direct production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing of other tangible personal property. IND. CODE § 6-2.5-5-3(b) (2018). The legislature has explicitly excluded distribution and transmission equipment purchased by public electric utilities from the benefit of the exemption. IND. CODE § 6-2.5-5-3(d). However, the legislature has not included a similar exclusion for other public utilities such as water, gas, or telecommunications providers. There are two important questions that must be addressed in applying the exemption. First, the Court must determine whether there is “direct production” as the exemption is only available for direct production of a distinct marketable good. Second, the Court must determine whether the equipment to be exempted is an essential and integral part of the production process. 1. Direct Production There is “one iron-clad rule: without production there can be no exemption.” Merchandise Warehouse, 87 N.E.3d at 17. The statute plainly “require[s] that the taxpayer engage in [direct] production before qualifying for the exemption.” Id. at 16 (second alteration in original). The exemption may only be sought for production, or the substantial change of tangible personal property into distinct marketable goods. Applying the exemption is not an exercise in parsing the linguistic distinctions between the various activities described by the statute—production, manufacture, fabrication, assembly, extraction, mining, processing, refining, and finishing. The 11 activities “are not mutually exclusive.” Ind. Dep’t of State Revenue v. Cave Stone, Inc., 457 N.E.2d 520, 524 (Ind. 1983) (describing predecessor to Indiana Code § 6-2.5-5-3). The statutory terms “overlap and at times encompass each other” to “provide a comprehensive description of various means of production.” Id. “For example, ‘production’ may include manufacture, fabrication, assembly, processing, refining, and/or finishing.” Id. Instead, the nature of the process at issue must be examined to determine whether there is a transformation of tangible personal property into a distinct marketable good. At its core, “direct production” means “a process during which tangible personal property undergoes substantial change that transforms it into a distinct product.” Merchandise Warehouse, 87 N.E.3d at 17. The relevant statutes do not define the term “direct production,” but the Department’s administrative regulations shed light on its meaning: “Direct production, manufacture, fabrication, assembly, or finishing of tangible personal property” is performance as a business of an integrated series of operations which places tangible personal property in a form, composition, or character different from that in which it was acquired. The change in form, composition, or character must be a substantial change, and it must result in a transformation of property into a different product having a distinctive name, character, and use. Operations such as compounding, fabricating, or assembling are illustrative of the types of operations which may qualify under this definition. 45 IND. ADMIN. CODE 2.2-5-8(k) (2018). Whether a given process constitutes production is a fact-sensitive inquiry that depends on the circumstances of each case. See Aztec Partners, LLC v. Ind. Dep’t of State Revenue, 35 N.E.3d 320, 324 (Ind. Tax Ct. 2015). Courts have looked for the presence of a substantial change in the form, composition, or character of tangible personal property in discerning whether there is the creation of a distinct product. See 12 id.; Indianapolis Fruit, 691 N.E.2d at 1385. When such transformation is present, courts have generally found production to exist. See, e.g., Aztec Partners, 35 N.E.3d at 324; Indianapolis Fruit, 691 N.E.2d at 1385. 2. Essential and Integral If there is direct production, the machinery, tools, and equipment must be directly used in the direct production process to qualify for the exemption. This means the equipment must serve “an essential and integral part” in transforming the property into a distinct product. Merchandise Warehouse, 87 N.E.3d at 17. The exemption applies to machinery, tools, and equipment that have an immediate effect on the article being produced so long as they are “an essential and integral part of an integrated process which produces tangible personal property.” 45 IND. ADMIN. CODE 2.2-5-8(c) (2018). The exemption applies to the whole of the production process and “circumscribes all of the operations or processes by which the finished product is derived.” Cave Stone, 457 N.E.2d at 524. “Production” is considered broadly and includes the whole transformative process employed to create the distinct marketable good. See Merchandise Warehouse, 87 N.E.3d at 17. “[I]t cannot be artificially broken down into its component parts.” Guardian Auto. Trim, Inc. v. Ind. Dep’t of State Revenue, 811 N.E.2d 979, 984 (Ind. Tax Ct. 2004). Determinations about equipment’s “essential and integral” nature are made with respect to all subprocesses that are “inextricably linked” to the ongoing transformation process of the proper marketable good. Id. Arbitrarily cutting up the production process into only those parts that directly transform the property leaves integral pieces on the cutting board. What matters is looking at the “process as a whole.” Id. 13 “Often, this determination is made by identifying the points where production begins and where it ends.” Indianapolis Fruit, 691 N.E.2d at 1384 (citing Gen. Motors v. Ind. Dep’t of State Revenue, 578 N.E.2d 399, 404 (Ind. Tax Ct. 1991), aff’d, 599 N.E.2d 588 (Ind. 1992)). The production process “encompass[es] all steps that alter the tangible personal property into its completed form.” Merchandise Warehouse, 87 N.E.3d at 17. The exemption applies as soon as the production process begins and extends until the most marketable product emerges. Under the Department’s regulations, the production process “begins at the point of the first operation or activity constituting part of the integrated production process” and, importantly for this case, “ends at the point that the production has altered the item to its completed form” including any necessary packaging. 45 IND. ADMIN. CODE 2.2-5-8(d) (2018). The statute does not punish taxpayers for creating incomplete but potentially marketable products on the way to creating their most marketable ones. The production process “does not conclude when it yields a potentially marketable product;” it concludes only when “it yields the most marketable good.” Merchandise Warehouse, 87 N.E.3d at 18 (emphasis added). Accordingly, production is not complete until “the product actually marketed” has emerged. Aztec Partners, 35 N.E.3d at 325 (quoting Gen. Motors, 578 N.E.2d at 404). Equipment used in an integrated production process need only be essential and integral to the process, not directly transformational. See id. at 326 (citing Cave Stone, 457 N.E.2d at 524). “The fact that such equipment may not touch the work-in-process or, by itself, cause a change in the product, is not determinative.” 45 IND. ADMIN. CODE 2.2-5-8(c), Example 2 (2018). That no specific transformation occurs in the period that the exempt equipment is involved in production is “irrelevant.” Cave Stone, 457 N.E.2d 14 at 524. A “continuous flow from one production step to another” is enough to be eligible for exemption. Id. at 525. Of course, some equipment “lack[s]” the “essential and integral relationship with the integrated production system” that is necessary to receive the exemption. 45 IND. ADMIN. CODE 2.2-5-8(c), Example 4 (2018). For example, fire extinguishers, which provide general safety in a plant, or ceiling lights, which provide general illumination, are disconnected from the integrated production system and thus do not receive the exemption. Id. Similarly, a distribution system for post-production transportation, or other equipment “used . . . to move finished products from the last step of production” to the customer, is taxable. Id. B. INAW’s Production Process Taking each element of the manufacturing equipment exemption in turn— (1) whether INAW produces a distinct marketable good and (2) whether the equipment used in that production (the piping and pipe accessories) is essential and integral to the production—the Court concludes that INAW’s process can satisfy both. INAW’s process results in the production of potable, pressurized water usable at customers’ taps, which is a distinct marketable good from the raw water that INAW begins with. It is a different product with a different form, composition, and character. The production of this distinct marketable good can continue at least through the last point in the system (a booster station) where an action is taken to make the water either usable (by modulating the pressurization) or potable (by adding chlorine). The piping and associated equipment that conveys the water to the location where that last action occurs (i.e., the “first mile” of the system) is essential and integral to achieving the water’s production because 15 without it the water would not become usable or potable. As for the piping and other parts of the public water system located after the last pressurization or chlorine injection (i.e., the “last mile” of the system), the record is unclear about how this last mile of piping interacts with the water. The Court cannot make any determination about whether the last mile is part of the production process or essential and integral to production. 1. Is there direct production of a distinct marketable good? At the heart of the direct production inquiry in this case is a question about the nature and purpose of pressurization. The parties agree that INAW engages in production insofar as it produces potable drinking water, but they heavily disagree as to whether INAW’s production process includes pressurization. Without designating any evidence apart from that which was designated by INAW, the Department argues that INAW produces only clean and consumable water. (Resp’t Br. Supp. Mot. Summ. J. at 10.) For the Department, potability is everything and pressure is irrelevant. In contrast, INAW agrees that it produces potable water but also contends that the water contains appropriate pressure to make it usable at the customer’s tap. It contends that pressure is required so that the water can be put to work when it reaches the customers’ water systems. (See Pet’r Memo. Supp. Mot. Partial Summ. J. at 12–13.) This disagreement is fundamental to the direct production analysis and can only be resolved by examining the designated evidence and deciding whether pressurization enacts a substantial change in the form, composition, or character of the water such that it yields a distinct marketable good. On summary judgment, the Court considers only the evidence specifically designated by the parties, see City of Beech Grove v. Beloat, 50 N.E.3d 135, 137 (Ind. 16 2016), remembering that “summary judgment is not a summary trial.” Hughley v. State, 15 N.E.3d 1000, 1003–04 (Ind. 2014) (cleaned up). The Court must view that evidence in the light most favorable to the non-moving party. See Crown Prop. Grp., 135 N.E.3d at 675. The Court is not empowered to resolve factual disputes or to choose among conflicting factual inferences that arise from undisputed facts. See Elmer v. Ind. Dep’t of State Revenue, 42 N.E.3d 185, 197 (Ind. Tax Ct. 2015). Summary judgment is only appropriate where “there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law.” Ind. Trial Rule 56(C). “A fact is ‘material’ if its resolution would affect the outcome of the case, and an issue is ‘genuine’ if a trier of fact is required to resolve the parties' differing accounts of the truth, or if the undisputed material facts support conflicting reasonable inferences.” Hughley, 15 N.E.3d at 1003. a. Production of Potable Water The water treatment process works a substantial change in the water’s composition and character and is undoubtedly direct production. Before it can be sold, raw water undergoes a sequence of chemical and physical processes designed to make it potable. The process removes particles, sediments, and harmful bacteria from raw water using coagulation, flocculation, sedimentation, and filtration and adds chlorine or chloramines to it. Not only does this change the chemical and physical composition of the water, it also fundamentally alters the character of the water. It transforms raw water into drinking water and places it in a state that is safe for human consumption. b. Potable, Pressurized Water Treated water must also be pressurized to make it usable by INAW’s customers. The relevant evidence comes from three INAW employees: (1) INAW’s Vice President 17 of Operations, Kari Britto; (2) INAW’s Engineering Manager, Richard Miller; and, (3) INAW’s Director of Engineering, Matthew Hobbs. Britto states that “[w]ater that meets drinking water standards alone is not sufficient; the water must be sufficiently pressurized to serve its intended purpose.” (Britto Aff. ¶ 15.) “While the water INAW sells must meet drinking water standards, the water must also be capable of being put to work,” since, as she points out, “[o]nly a small fraction of the water sold by INAW is used for drinking; the majority is used for other household, commercial, or industrial purposes.” (Britto Aff. ¶ 12.) Miller and Hobbs concur with Britto. Miller states that the water “INAW sells is not just clean water; it is clean, pressurized, disinfected water that is usable not only for drinking, but for a wide variety of commercial, residential, and industrial uses.” (Miller Aff. ¶ 9.) He continues: “To that end, appropriate pressurization is an essential (and IDEM required) aspect of INAW’s product.” (Miller Aff. ¶ 9.) When asked what INAW considered to be its final product, Hobbs stated, “[i]t’s usable water to the customer’s door basically.” (Hobbs Dep. 19:8.) He later elaborated that, “[w]ithout pressure, [the water] can’t be used. . . . [I]f there is no pressure and [the customer] turn[s] on their faucet, no water will come out.” (Hobbs Dep. 19:21–25.) The inferences that can be drawn from these facts point only in one direction— that INAW produces a distinct marketable product of potable, pressurized water usable at the customer’s tap. The three witnesses converge by identifying the product not just as treated or potable water in the abstract, but as potable, pressurized water that can be put to work at the customer’s location. The only available inference is that potability is necessary but not sufficient to constitute the marketed product; pressurization is also required. 18 This is because pressurization works a substantial change in the character of the water. Before it is pressurized, the water—however clean or potable—cannot perform the functions for which INAW’s customers acquire it. Once appropriately pressurized, the same water can be put to work in the customers’ water systems. That is a significant change in the character of the water: it is the difference between a product that cannot be used and one that can. (See Hobbs Dep. 19:21.) The record confirms that this difference defines the distinct marketable good, because usability is part of what INAW offers to the market. (See Britto Aff. ¶ 12; Miller Aff. ¶ 9.) c. The Alternative of Potable, Unpressurized Water The Department offers no competing testimony of its own, relying instead on selected passages from Hobbs’s deposition that, in its view, show INAW’s distinct marketable product is simply potable water. (See Resp’t Memo. Opp. Pet’r Mot. Partial Summ. J. at 3 (citing Hobbs Dep. 18:13–19:12) [hereinafter “Resp’t Resp.”].) In his deposition, Hobbs is asked if a customer could consume the water as it left the water treatment plant, to which he answers affirmatively. (Hobbs Dep. 18:13–16.) In a follow- up, he is asked, “[a]nd even if the water is not pressurized, . . . can it still be consumed,” to which he again answers affirmatively. (Hobbs Dep. 19:9–12.) Hobbs’s statements, however, do not support the inferences the Department attempts to draw from them. Read in the light most favorable to the Department, this testimony only supports two inferences: that a consumable (potable) form of the water exists at the point it leaves the treatment plant and that potability does not necessarily depend on pressurization. Testimony that the water “could” be consumed at the plant establishes at most that INAW produces water that is potable, but it cannot support the Department’s additional inference that potability is the only characteristic of water 19 actually marketed by INAW. Confirmation that no such inference can be drawn from these statements can be found in additional testimony offered by Hobbs that, without pressure, INAW’s water “can’t be used” and, “if there is no pressure and [the customer] turn[s] on their faucet, no water will come out.” (Hobbs Dep. 19:21–25.) It is unlikely that INAW’s customers pay for potable water that they cannot access or use. The testimony the Department highlights is simply proof that a potentially marketable product exists at the water treatment plant. This is precisely the standard rejected by this Court in General Motors, and later in Aztec Partners. In General Motors, the Court framed the choice as whether an integrated process “ends when a potentially marketable product first emerges (first finished marketable product) or whether it ends when the product is finished for actual sale in the marketplace (most marketable product).” 578 N.E.2d at 402. The Court held that it is the latter—“the product actually marketed.” Id. at 404. Between the statements highlighted by the Department, Hobbs testified that “somebody just can’t come up and fill up at the plant, if you will.” (Hobbs Dep. 18:24–25.) That testimony shows the water is not transacted or made available to customers at the plant. Whatever its potability, water at the plant is not the product sold. Proof that water at the plant is capable of being consumed speaks to the emergence of a potentially marketable product but does not, by itself, identify the product “actually marketed” by INAW. See Gen. Motors, 578 N.E.2d at 404. Viewed in the light most favorable to the Department, the evidence supports only one possible inference: the distinct marketable product INAW markets to its customers is potable, pressurized water usable at the customer’s tap. The testimony uniformly describes the product in those terms, and the Department has designated no evidence