Cascio v. Beam

• Decision Date: 11 March 1980
• Docket Number: No. 61038,61038
• Citation: 594 S.W.2d 942
• Parties: Ben CASCIO, d/b/a Cascio's Food Market, Respondent, v. Ronald BEAM et al., Appellants.
• Court: Missouri Supreme Court

Page 942

594 S.W.2d 942

Ben CASCIO, d/b/a Cascio's Food Market, Respondent, v. Ronald BEAM et al., Appellants.

No. 61038.

Supreme Court of Missouri, En Banc.

March 11, 1980.

Lester W. Duggan, Jr., St. Charles, for appellants.

John Ashcroft, Atty. Gen., Steven Steinhilber, Asst. Atty. Gen., Jefferson City, for respondent.

WELLIVER, Judge.

This is an appeal from a judgment which permanently enjoined appellants, the Director of Revenue for the State of Missouri and two of his special agents, from enforcing a summons which commanded respondent to appear before an agent of the department of revenue with specified business records relating to respondent's tax liability. We have jurisdiction because the case involves construction of the revenue laws of this state. Mo.Const. art. V, § 3. We affirm.

Respondent conducts a retail sales business known as Cascio's Food Market and Cascio's Delicatessen. On January 20, 1977, the director of revenue issued a summons to respondent which called for production of various books and records pertaining to the business for the period from January 1, 1970, through December 31, 1973. The records demanded by the summons included general ledgers, all journals, retained copies of Missouri State Sales Tax returns, retained copies of Federal and State Income Tax returns, retained copies of Federal and State withholding tax reports, monthly and yearly profit and loss statements, all payroll ledgers, any records of daily sales (i. e., cash register tapes or daily summaries), and all bank statements and cancelled checks. The summons was allegedly issued pursuant to § 144.330, RSMo 1969, which authorizes examination of records for the purpose of ascertaining the correctness of any tax return or for the purpose of determining the amount of tax due. ¹ The printed form summons did not recite a specific purpose other than disclosing that it concerned the tax liability of respondent and that respondent was summoned and required to appear before appellant Ronald G. Beam to give testimony relating to respondent's tax liability or the collection thereof.

On March 15, 1977, respondent filed in the Circuit Court of Jackson County a petition for an injunction against enforcement of the summons. On March 24, 1977, the circuit court entered a temporary restraining order and after a hearing held on May 27, 1977, the circuit court entered a temporary injunction against enforcing the summons. The parties filed a joint stipulation of facts on March 1, 1978, and on August 28, 1978, the court made the injunction permanent.

The court held that § 144.320, RSMo 1969, ² read in conjunction with § 144.330, RSMo 1969, gives the director the right to examine books and records which the taxpayer is required to keep, namely those that are not more than two years old. The court observed that the "records requested at the time of the service of the 'summons' . . . (were) all in excess of an age of two years." ³ Consequently, the court stated that "(t)he records requested by the Director of Revenue are irrelevant to any proposed investigation that they have the statutory right to make." From the judgment permanently enjoining enforcement of the summons, appellants perfected this appeal.

This case was submitted on the pleadings and on stipulated facts and was decided by the trial court as a matter of law. In oral argument before this Court it was further agreed by the parties that the tax investigation of the respondent and the summons issued herein pursuant to such investigation related solely to the collection and payment of sales taxes and not to any other type of tax investigation. Consequently, only construction of the statutes relating to the keeping of sales tax records and the right of the department of revenue to examine such records for the purpose of ascertaining sales tax liability is involved on this appeal.

The central issue presented is whether the provisions of Chapter 144, RSMo 1969, permit inspection of a taxpayer's business records after passage of the two year period during which § 144.320, RSMo 1969, requires them to be kept.

Respondent contends that statutes such as this one providing for inspection of business records are to be construed strictly against the state and liberally in favor of the taxpayer. Respondent argues that construing the statutes so as to limit the right of inspection is in keeping with public policy interests which are furthered by statutes of limitation and the doctrine of repose. He contends that when §§ 144.320 and 144.330, RSMo 1969, are read together and construed in this fashion, the director's power to examine a taxpayer's books and records is limited to that period during which preservation of the records is mandated. Respondent argues that since the keeping of the records is required for only two years, it is reasonable to infer that the legislature intended to limit the director's right to investigate such records to two years. We agree.

The statutes in question are part of the Sales Tax Act, and are unquestionably taxing statutes. Statutes relating to taxation are to be narrowly construed in favor of the taxpayer and against the taxing authority. Wiethop Truck Sales, Inc. v. Spradling, 538 S.W.2d 585, 586-87 (Mo.1976); O'Dell v. Division of Employment Security, 376 S.W.2d 137, 141-42 (Mo.1964); State ex rel. Benson v. Union Electric Co., 359 Mo. 35, 220 S.W.2d 1, 3 (banc 1949); A. J. Meyer & Co. v. Unemployment Compensation Commission, 348 Mo. 147, 152 S.W.2d 184, 191 (1941).

In Wiethop Truck Sales, Inc. v. Spradling, 538 S.W.2d 585 (Mo.1976), this Court refused to require sellers of trailers to bear the burden of collecting a city sales tax. Although § 99.560, RSMo 1969, did not expressly place the burden of collection on the director of revenue except in the case of "motor vehicles," the Court declined to apply the maxim "expressio unius est exclusio alterius" to place the burden of collection on the taxpayer. The Court stated: "(t)he statutes in question here are taxing statutes and it is well established that such statutes must be strictly construed in favor of the taxpayer and against the taxing authority." Id. at 586-87.

In State ex rel. Benson v. Union Electric Co., 359 Mo. 35, 220 S.W.2d 1 (banc 1949), although the Court upheld the application of property tax to the appellant, the Court agreed with appellant "that tax statutes are to be strictly construed and that the court may not, under the guise of construction, supply authority which the General Assembly has not provided." Id. at 3.

This rule of construction has been applied even to statutes that are only partially revenue statutes, such as the Unemployment Compensation Act. In A. J. Meyer & Co. v. Unemployment Compensation Commission, 348 Mo. 147, 152 S.W.2d 184 (1941), the Court stated:

As we see it, there is no escape from the conclusion that the unemployment compensation act includes a taxing statute, and "it is well established that the right of the taxing authority to levy a particular tax must be clearly authorized by the statute, and that all such laws are to be construed strictly against such taxing authority." State ex rel. Ford Motor Co. v. Gehner et al., 325 Mo. 24, 27 S.W.2d 1, loc. cit. 3, and cases there cited. See also State v. Hallenberg-Wagner Motor Co., 341 Mo. 771, 108 S.W.2d 398, loc. cit. 400; State ex rel. Western Union Telegraph Co. v. Markway, 341 Mo. 976, 110 S.W.2d 1118, loc. cit. 1119; Artophone Corp. v. Coale et al., 345 Mo. 344, 133 S.W.2d 343, loc. cit. 347; State v. Shell Pipe Line Corp., 345 Mo. 1222, 139 S.W.2d 510, loc. cit. 519.

152 S.W.2d at 191. See also O'Dell v. Division of Employment Security, 376 S.W.2d 137, 141-42 (Mo.1964).

This Court stated the appropriate rules to be applied in construing the Sales and Use Tax provisions of Chapter 144, RSMo, in Hern v. Carpenter, 312 S.W.2d 823, 826-27 (Mo.1958). The proper construction:

should not force a conclusion that the legislative intent was other than a reasonable construction of language used in the circumstances shows it to be. American Bridge Co. v. Smith, 352 Mo. 616, 179 S.W.2d 12, 16, (6, 7), 157 A.L.R. 798. The parties agree that the basic construction rule is to discover the lawmakers' intention, and, if possible, effectuate that intention, Laclede Gas Co. v. City of St. Louis, 363 Mo. 842, 253 S.W.2d 832, 835, (2-4), and thereby attain the object and purpose of the statute, Kansas City v. Travelers Ins. Co., Mo.App., 284 S.W.2d 874, 878 (5-7).

312 S.W.2d at 826-27. Another consideration dictating a narrow construction of § 144.330, RSMo 1969, is the principle that a court should avoid a construction which would bring a statute into conflict with constitutional limitations. ⁴

Not only are we bound to the principle that these statutes must be strictly construed in favor of the taxpayer and against the taxing authority, we are also bound to read these statutes in context. 82 C.J.S. Statutes § 348, pp. 723-30. This is particularly true where the two statutes to be construed were passed simultaneously by the legislature and appeared one immediately following the other in the legislative bill under consideration.

The rules of construction set out above must be applied to §§ 144.320 and 144.330, RSMo 1969, in order to determine whether the summons involved in the instant case is valid. The two sections involved were passed by the legislature in the same act. ⁵ Section 144.320 specifies the kind of records to be kept and the length of time that businesses must keep them. Section 144.330 grants to the director of revenue for specified limited purposes the right to "hold investigations and hearings" and to "examine any books, papers, records or memoranda bearing upon such sales." Reading these two consecutive sections together, we do not believe that the General Assembly intended to require businesses to keep sales tax records for only two years and at the same time to grant the director of...