Greenbriar Hills Country Club v. Director of Revenue
| Citation | 935 S.W.2d 36 |
| Decision Date | 17 December 1996 |
| Docket Number | No. 78923,78923 |
| Parties | GREENBRIAR HILLS COUNTRY CLUB, Appellant, v. DIRECTOR OF REVENUE, Respondent. |
| Court | United States State Supreme Court of Missouri |
Harvey M. Tettlebaum, Jefferson City, for Appellant.
Jeremiah W. (Jay) Nixon, Attorney General, Evan J. Buchheim, Assistant Attorney General, Jefferson City, for Respondent.
The issue presented in this case is whether Greenbriar Hills Country Club (Greenbriar) owes sales tax on a flat monthly amount that it charges its members as a service charge, a fixed gratuity for its food and beverage staff. The Administrative Hearing Commission (AHC) concluded that Greenbriar's service charges are subject to sales tax. The decision of the AHC is reversed.
The relevant facts are not in dispute. Greenbriar is a country club located in Kirkwood, Missouri. It provides recreational and dining facilities to its members and their guests. It is organized and operated pursuant to chapter 355, RSMo 1994, as a not-for-profit corporation. Greenbriar is exempt from federal income tax as a club organized for pleasure, recreation, and other non-profitable purposes pursuant to section 501(c)(7) of the Internal Revenue Code of 1986, as amended. It operates for the benefit of its members as a cooperative association.
Greenbriar paid sales tax on its purchases of food and beverages. Greenbriar did not permit tipping of its employees at any time pertinent to the issues in this case. Greenbriar billed its members for a monthly service charge in the amount of $35.00 to cover tipping on food and drink services at its dining facilities. The service charge was used exclusively to provide tips to Greenbriar's food and beverage staff. The amounts collected for the service charge approximated the charge that would have been collected by Greenbriar if a twenty-percent service charge had been imposed on members for general food and drink sales. Greenbriar separately stated the service charge on the monthly bills sent to its members.
On April 1, 1994, the Department of Revenue sent to Greenbriar assessments asserting a sales tax liability, plus additions to tax and interest, against Greenbriar for the periods commencing on September 1, 1990, and ending on August 31, 1993, in the aggregate amount of $48,797.45. The assessments are based on the Director's determination that the service charge to cover tipping is subject to Missouri sales tax. On June 16, 1994, Greenbriar paid the assessments under protest to the Director. On July 11, 1994, Greenbriar filed with the Director a sales/use tax protest payment affidavit. The Director denied the protest. Greenbriar filed a complaint with the AHC contesting the Director's denial of Greenbriar's protest.
The AHC held that sales of meals by private clubs that are places of amusement, entertainment, or recreation are subject to sales tax. The AHC went on to hold that, because its decision unforeseeably overruled a prior regulation, 1 Greenbriar was not liable for the assessments. Greenbriar filed its petition for judicial review with this Court.
Determination of the issue of whether the service charge is subject to sales tax requires construction of parts of section 144.020, RSMo 1994, 2 set out in pertinent part as follows:
1. A tax is hereby levied and imposed upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state. The rate of tax shall be as follows: ...
(2) A tax equivalent to four percent of the amount paid for admission and seating accommodations, or fees paid to, or in any place of amusement, entertainment or recreation, games and athletic events; ...
(6) A tax equivalent to four percent on the amount of sales or charges for all rooms, meals and drinks furnished at any hotel, motel, tavern, inn, restaurant eating house, drugstore, dining car, tourist cabin, tourist camp or other place in which rooms, meals or drinks are regularly served to the public....
The parties rely upon different subdivisions of subsection 1 of section 144.020 in support of their respective positions. The essence of the Director's argument is that Greenbriar's service charge constitutes a fee or charge paid in or to a place of amusement so as to be taxed under subdivision (2) of section 144.020.1. The Director cites L & R Distributing Inc. v. Missouri Department of Revenue for the proposition that a country club is a place of amusement. 529 S.W.2d 375, 378 (Mo.1975). The Director further argues that the service charge is a "fee or charge" within the meaning of 144.020.1(2).
The essence of Greenbriar's argument is that its service charge constitutes part of its charge for meals and drinks; therefore, the taxability of these charges is to be determined by reference to section 144.020.1(6). By negative implication, Greenbriar contends, section 144.020.1(6) excludes from sales tax meal sales by any place that does not regularly serve the public. Because Greenbriar does not serve the public, its service charge is not taxable under 144.020.1(6).
Upon the facts to which the parties stipulated in this case, this Court agrees with Greenbriar. The parties stipulated that Greenbriar serves meals and drinks to its members and guests, but not to the public. The parties also stipulated that the service charge at issue is used exclusively to cover tipping for food and beverage services. It follows that the service charge is part of Greenbriar's charge for meals and drinks. See Oakland Park Inn v. Director of Revenue, 822 S.W.2d 425, 426 (Mo. banc 1992). Section 144.020.1(6) taxes the charge for meals and drinks served by any place that regularly serves the public. Consequently, under the well established rule of construction, meal or drink charges made by any place that does not regularly serve meals or drinks to the public are excluded from the tax. See, e.g., Giloti v. Hamm-Singer Corp., ...
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