International Travel Advisors, Inc. v. State Tax Commission
| Decision Date | 15 June 1978 |
| Docket Number | No. 60159,60159 |
| Parties | INTERNATIONAL TRAVEL ADVISORS, INC., Petitioner-Appellant, v. STATE TAX COMMISSION of Missouri et al., Respondents-Respondents. |
| Court | Missouri Supreme Court |
Joseph B. Meives, George J. Leontsinis, St. Louis, for petitioner-appellant.
John D. Ashcroft, Atty. General, S. Joel Wilson, Asst. Atty. Gen., Jefferson City, for respondents-respondents.
International Travel Advisors, Inc. (Intrav), in filing its 1970 income tax return pursuant to then 1 § 143.040, RSMo 1969, 2 elected to compute its tax in accordance with the alternative method authorized in § 143.040.2. 3 The Director of Revenue assessed additional tax of $4,806.89 on the basis that Intrav should have included 50% of receipts from transactions allegedly occurring partly in Missouri and partly elsewhere. After the Director of Revenue denied Intrav's petition for abatement, Intrav appealed to the State Tax Commission (Commission) which approved the assessment. Intrav then filed a petition for review in the circuit court. It affirmed, after which Intrav appealed to this court. We have jurisdiction because the appeal involves construction of a revenue law of this state. We affirm.
Intrav is a Missouri corporation engaged in the business of packaging, marketing and conducting back-to-back group charter tours to foreign countries. A chartered plane operates on a continuous shuttle between various cities in the United States and the foreign cities to be visited. The plane brings a tour group from the United States to the first city on the tour. When that group deplanes, the members of the preceding tour are taken on board and flown to the next city. The incoming group occupies the hotel rooms just vacated by the departing group. This process is continued until all scheduled tours are completed. In 1970 those tours were to the Orient and to Africa. These tours were planned in Intrav's home office in St. Louis where all of its employees were located. Intrav had no offices elsewhere.
Before any tours were sold, representatives of Intrav visited the cities to be included in a tour and made arrangements for hotels, restaurants, baggage handling, ground transportation, various sightseeing tours and other details, including arrangements for a staff to set up and operate a hospitality desk in the hotel lobby in each city visited. Various airlines were contacted and following negotiations one airline was chosen to carry all passengers on the tours for one season. Intrav would then prepare printed brochures giving the details of each tour, plus sample form letters and other materials to be used in selling the tours.
After these arrangements had been completed, Intrav's five salesmen then traveled from their office in St. Louis to visit various professional and social organizations throughout the United States in an attempt to persuade them that these tours would be of benefit to their members and that they should sponsor a tour for members. Such organizations were utilized because they provided an established group which would satisfy regulatory provisions applicable to charter flights and because selling the tours in this manner avoided the expense and management headaches of establishing and maintaining branch offices in various parts of the country.
The salesmen had no authority to alter the tours to meet special requests. They were to be sold only as previously packaged. When an organization contacted by a salesman agreed to sponsor a tour for its members, arrangements were made for the organization to mail the previously prepared brochures and an accompanying letter to members. For this purpose, the brochures and other materials were sent from St. Louis to the sponsoring organization. The organization was reimbursed for its actual out-of-pocket expenses, including secretarial work and postage, but it was to receive no other compensation of any kind. No contract between Intrav and the sponsoring organization was signed and the latter incurred no contractual or financial obligation to Intrav by assuming such sponsorship. It assumed no responsibility for the tour. That was the obligation of Intrav. The sponsoring organization was required to sign a charter contract for the airplane with the airline company but the sponsor had no financial obligation therefor. That was taken care of by Intrav.
The brochures gave details of the tour including place and time of departure, places to be visited, the names of the hotels, a listing of what the tour included, weight allowance, the price of the tour and other information. All brochures were identical except for time and place of departure and the name of the sponsoring organization printed on the top of the front page and in the reservation coupon on the back page.
Persons interested in making the tour were instructed to clip a reservation coupon from the back of the brochure and mail it, along with a deposit of $100.00 per person, to the headquarters of the sponsoring organization. The coupon for the Orient tour, which was typical, read: It then was followed by the name and address of the member making the reservation.
Upon receipt at a sponsoring organization's headquarters of a reservation coupon and check, it would be recorded in the manner and on forms specified by Intrav after which the coupon and money were forwarded on to Intrav's St. Louis office. The sponsoring organization would mail to its member a "Welcome Aboard" letter, the form for which had been furnished by Intrav's salesman. The letter provided additional information concerning the tour.
Approximately 90 days before scheduled departure of a particular tour, Intrav, from its St. Louis office, would send to those who had sent in reservation coupons a bill for the balance of the tour price. Payment of the balance due was made directly to Intrav in St. Louis. However, the member still had the right at any time up to 60 days before departure to secure a refund of his initial deposit. If he did that, he had no obligation to pay any part of the subsequent billing. However, if the member cancelled less than 60 days before scheduled departure, he forfeited his original deposit and, if the balance of the tour price had been paid, he also forfeited that portion thereof attributable to the cost of air transportation unless Intrav sold the space to some other member. Upon receipt from a member of payment of the balance due for the tour, Intrav mailed from St. Louis to that member final flight information, including an official "Welcome Aboard" letter, departure details, passport cases, restaurant coupon books, and information concerning optional sightseeing tours offered by Intrav at the various places to be visited.
Tours departed from and returned to an airport near the headquarters of the sponsoring organization. Each tour was accompanied at all times by one of Intrav's regular tour directors from the St. Louis office or occasionally by other personnel from that office who acted as tour director. They processed the group onto planes, trains and buses and through transportation terminals and hotels, also handling any individual problems or special requests. This tour director was with the group from time of departure until the group returned to the city from which it had departed.
In 1970 there were 35 charter trips to the Orient on which there were 5,666 passengers and there were 20 charter trips to Africa on which there were 3,111 passengers. Five of these flights, on which there were 446 passengers, originated from Missouri airports. The other flights originated from airports in other states.
In preparing its 1970 Missouri income tax return, Intrav included in determining the numerator of the elective allocation formula only receipts from passengers whose planes departed from Missouri airports. Receipts from the passengers on all other flights were excluded therefrom but all such income was included in the denominator. This was done on the basis that these were derived from sales made wholly outside of Missouri and that such receipts were to be excluded pursuant to the elective alternative formula provided in § 143.040.2. The Department of Revenue took the position that 50% of receipts from flights...
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