Associated Industries of Missouri v. Director of Revenue

• Decision Date: 26 March 1996
• Docket Number: No. 77885,77885
• Parties: ASSOCIATED INDUSTRIES OF MISSOURI and Alumax Foils, Inc., Appellants, v. DIRECTOR OF REVENUE, et al., Respondents.
• Court: Missouri Supreme Court

Page 780

918 S.W.2d 780

ASSOCIATED INDUSTRIES OF MISSOURI and Alumax Foils, Inc., Appellants, v. DIRECTOR OF REVENUE, et al., Respondents.

No. 77885.

Supreme Court of Missouri,

En Banc.

March 26, 1996.

As Modified on Denial of Rehearing

April 23, 1996.

Appeal from the Circuit Court of Cole County; Honorable James F. McHenry, Judge.

Thomas C. Walsh, Juan D. Keller, St. Louis, for Appellants.

Jeremiah W. (Jay) Nixon, Attorney General, Don Downing, Deputy Attorney General, Jefferson City, Alex Bartlett, Jefferson City, for Respondents.

Joann Leykam, County Counselor, Stephanie K. Gastman, Harold A. Ellis, Asst. County Counselors, for Amicus Curiae St. Charles County.

LIMBAUGH, Judge.

The United States Supreme Court determined in Associated Industries of Missouri v. Lohman, 511 U.S. 641, 114 S.Ct. 1815, 128 L.Ed.2d 639 (1994), that § 144.748, RSMo Supp.1992, which imposes a statewide 1.5% use tax as a counterpart to local sales taxes, is invalid as applied in those taxing districts where the local sales tax is less than 1.5%. In those districts, the Court explained, the use tax impermissibly discriminates against interstate commerce in violation of the Commerce Clause. In view of the Supreme Court's ruling, we must now decide on remand whether, as a matter of Missouri state law, § 144.748 is completely invalid and incapable of being enforced. Because this case involves the construction of revenue laws and the validity of a statute, we have jurisdiction under Article V, § 3, of the Missouri Constitution. We now strike down the statute in toto.

I.

Section 144.748 imposes an additional 1.5% use tax on tangible personal property sold outside of Missouri but stored, used, or consumed within the state. When added to the 4.225% general use tax imposed by § 144.610, RSMo 1994, the result is an aggregate use tax on all interstate transactions of 5.725%. Sales transacted within Missouri are subject to a statewide sales tax of 4.225%, and local sales taxes are imposed at varying rates that may increase the aggregate sales taxes from 4.225% to over 7%, depending on the local taxing district. ¹

Under this taxing scheme, intrastate transactions in certain taxing districts are taxed at a lower rate than similar interstate transactions. In light of this discrepancy, Associated Industries of Missouri ("AIM") ² brought suit to challenge the validity of § 144.748, claiming that the statute violated the Commerce Clause of the United States Constitution and the uniformity clause of the Missouri Constitution. ³ The circuit court ruled that the additional use tax was constitutional in all respects and refused to enjoin the Director of Revenue (Director) from collecting the tax. This Court affirmed that judgment on appeal. Associated Industries of Missouri v. Director of Revenue, 857 S.W.2d 182 (Mo. banc 1993), rev'd 511 U.S. 641, 114 S.Ct. 1815, 128 L.Ed.2d 639 (1994). Acting upon AIM's petition, the United States Supreme Court granted certiorari and reversed the judgment of this Court, finding that the additional use tax discriminated against interstate commerce and was unconstitutional as applied in those localities where the aggregate use tax exceeded the aggregate sales tax. Associated Industries of Missouri v. Lohman, 511 U.S. 641, 114 S.Ct. 1815, 128 L.Ed.2d 639 (1994). The Supreme Court did not address any questions of state law but remanded the case to this Court. We, in turn, withdrew our prior mandate and remanded the case to the Circuit Court of Cole County for further proceedings consistent with the United States Supreme Court opinion.

On remand, AIM again sought a declaration that § 144.748 was invalid in its entirety and an injunction prohibiting the Director from enforcing § 144.748 anywhere in Missouri. In support thereof, AIM maintained that the Supreme Court's partial invalidation of § 144.748 rendered the statute incapable of rational understanding or administration, inconsistent with legislative intent, and violative of the uniformity clause of the Missouri Constitution. The Director contended that these points were beyond this Court's mandate and therefore not eligible for consideration on remand. ⁴ The circuit court denied injunctive relief and held that the Director may enforce § 144.748 in those taxing districts where the local sales tax rate is equal to or greater than 1.5%. AIM now appeals this final judgment.

II.

Initially, we must address the procedural question of whether the issue raised by AIM on remand--the continued validity of § 144.748 as a matter of state law--was properly before the trial court and, consequently, is now properly before this Court on appeal. In this regard, all parties agree that proceedings on remand should be in accordance with the mandate and the result contemplated in the appellate court's opinion. Frost v. Liberty Mut. Ins. Co., 813 S.W.2d 302, 304 (Mo. banc 1991). The circuit court interpreted the mandate to preclude consideration of any issue other than the propriety of the remedy of tax refunds. Because AIM had not claimed any refund, the trial court deemed all issues disposed of and denied all other relief sought.

The actual mandate of the United States Supreme Court called "for further proceedings not inconsistent with this opinion." Associated Industries, 511 U.S. at ----, 114 S.Ct. at 1826. This Court has held that substantially the same language--"remanded for further proceedings in accordance with this opinion"--is merely a simple reversal and remand, as opposed to a remand "import[ing] a direction of specified things." Murphy v. Barron, 228 S.W. 492, 494 (Mo.1920). We conclude, therefore, that the mandate of the Supreme Court was a general mandate and was not explicitly limited to a determination of available remedies.

The Director, however, contends that while the Supreme Court's mandate, itself, contains no limiting language, the mandate, when read in the context of the Supreme Court's entire opinion, is, in fact, limited to a consideration of the remedy of tax refunds. We agree that the mandate cannot be read in isolation, but should be interpreted in light of the entire opinion. Frost, 813 S.W.2d at 305. In so doing, however, we still cannot fathom how the circuit court's jurisdiction was limited to the extent the Director suggests.

On this issue, the Supreme Court stated that the appropriate remedy in the case was a question of state law and best left for consideration on remand. Associated Industries, 511 U.S. at ----, 114 S.Ct. at 1825. More specifically, the Court said that its holding "does not in itself dictate the relief that the State must provide." Id. Furthermore, the Court noted that the parties had "not addressed the procedures that were available in Missouri to contest the tax." Id. To sum up, the Court declared that "[t]he methods best adapted to achieving equal treatment in this case, whether partial or complete refunds or other measures are similarly matters properly left for determination on remand." Id.

Despite the express reference to tax refunds, the use of the open-ended term "other measures" makes it clear that the Supreme Court contemplated a review of any other procedures that might be available in Missouri to contest the tax. To be sure, no one disputes, and, indeed, the Director acknowledges, that a declaratory judgment action coupled with a request for an injunction is an appropriate procedure for contesting a tax in Missouri.

Nevertheless, the Director, in her brief, devotes considerable effort to an analysis of McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, 496 U.S. 18, 39-40, 110 S.Ct. 2238, 2251-52, 110 L.Ed.2d 17 (1990), where the Supreme Court approved partial refunds as a remedy for a tax that violated the Commerce Clause. Apparently, the Director would like to interpolate the remedy in McKesson into the Supreme Court's mandate in Associated Industries. Without addressing the question of whether such interpolation is ever proper, we note that the present case is factually distinguishable from McKesson, where an injunction had already been granted prior to the appeal. Thus, there was no need for the McKesson Court to address the propriety of an injunction in its mandate.

On a different theory, the Director contends that injunctive or declaratory relief was implicitly foreclosed by the Supreme Court by the fact that it refused to strike down § 144.748 in its entirety. As the Director explains, for the circuit court to strike down the statute when the Supreme Court refused to do so would contravene the mandate. In our view, however, the Director disregards the fact that the Supreme Court was only faced with the validity of § 144.748 under federal law. It is clear from the record that no questions of state law were even presented to the Supreme Court, let alone answered or otherwise disposed of, and so the validity of § 144.748 as a matter of state law simply was not within the compass of the Supreme Court's mandate. A mandate is controlling only as to matters within its compass; a lower court is free to act as to other issues. Sprague v. Ticonic Nat. Bank, 307 U.S. 161, 168, 59 S.Ct. 777, 780-81, 83 L.Ed. 1184 (1939).

Finally, the Director submits that the points AIM raises on remand are not supported by the pleadings and are new to the case, having never been raised before. The Director, however, mischaracterizes the record. In the initial petition, AIM raised both state and federal constitutional challenges. Moreover, the question of whether the statute could survive if found only partially invalid was raised, first by the intervenors in their answer and later by all parties in post-trial briefs at the request of the trial court. The state law questions and the partial invalidity issue were also briefed to this Court on appeal from the initial trial court proceeding. Of course, when both the trial court and this Court upheld the statute, neither had to address the viability of § 144.748 upon...