ITT Canteen Corp. v. Spradling

• Citation: 526 S.W.2d 11
• Decision Date: 14 July 1975
• Docket Number: No. 58786,No. 2,58786,2
• Parties: ITT CANTEEN CORPORATION et al., Respondents, v. James SPRADLING et al., Appellants
• Court: United States State Supreme Court of Missouri

Page 11

526 S.W.2d 11

ITT CANTEEN CORPORATION et al., Respondents, v. James SPRADLING et al., Appellants.

No. 58786.

Supreme Court of Missouri, Division No. 2.

July 14, 1975.

Armstrong, Teasdale, Kramer & Vaughan, Thomas E. Wack, St. Louis, for respondents.

John C. Danforth, Atty. Gen., Mark D. Mittleman, Asst. Atty. Gen., Jefferson City, for appellants.

HENRY I. EAGER, Special Commissioner.

This is a declaratory judgment action filed primarily for the purpose of declaring void Amended Rule No. 87 of the Department of Revenue (effective January 31, 1974) which requires the inclusion and payment of sales tax upon the amount received by a retail seller in payment of the Missouri Cigarette Tax (nine cents a package). The plaintiffs sell cigarettes only through vending machines. The petition also sought to extend the remedy sought, in two counts filed as class actions, to all others selling cigarettes and tobacco products in Missouri through vending machines. The case was submitted below and is submitted here upon an agreed statement of facts. The trial court granted plaintiffs the relief sought, declared the amended rule to be void, enjoined its enforcement, and extended the ruling to all other like vending machine operators in Missouri by virtue of a stipulation to the effect that the judgment would be binding upon the stated class 'so long as the Missouri state sales tax remains a gross receipts tax upon the seller and the Missouri cigarette excise tax remains a levy upon the consumer required to be collected by the seller.' We have jurisdiction because the revenue laws are involved.

The history of the matter is substantially as now set forth. From the inception of the Missouri Sales Tax in 1935 until 1971 the Revenue Department had made no claim that the Missouri sales tax (now Ch. 144, Sections 144.010 to 144.745, RSMo 1969, V. A.M.S.) ¹ should be computed and collected upon the amounts paid by purchasers to retail sellers of cigarettes under the Missouri Cigarette Tax Law (which was Ch. 149, Sections 149.010 to 149.110, at the time this suit was filed, but repealed and amended in HB 1612, 2nd Regular Session 1974, Missouri Legislative Service, V.A.M.S. No. 2, p. 220, approved June 18, 1974). Consequently, retailers did not include the amounts of the cigarette tax in their returns. In 1971 the Revenue Department notified ITT Canteen Corporation of a deficiency in its sales tax payments from October 1, 1968-- September 30, 1970, solely by reason of the failure to include the amounts of the cigarette taxes received by it; at that time no rule or regulation had been promulgated. Canteen, as we shall designate it, paid the amount under protest, exhausted its administrative remedies without success and petitioned for a judicial review in the Circuit Court of St. Louis County. That review was held before Judge Orville Richardson who, on October 3, 1972, issued a memorandum and order reversing the decision of the Revenue Department and its Director and ordering the return of the money so paid under protest. In that memo and order the Court found and held: that the cigarette tax was not a part of the price upon which the sales tax was imposed; that the cigarette tax was in fact a levy 'on the consumer or user' and was legally imposed upon him, with the seller (although paying the tax) 'acting merely as agent for the state for the payment and collection of the tax'; that the sales tax was a direct levy upon the seller, imposed upon the purchase price for the privilege of selling; that the incidence of the cigarette tax attached only at the time the sale was made, and did not accrue until the sale was consummated; that it did not become a part of the 'purchase price paid'; that no specific deduction was necessary in the sales tax provisions because the 'controverted item' did not even fall within the general definition of 'gross receipts.' The Court ordered the return of the money paid, and that the amounts of the cigarette taxes be deducted thereafter in computing sales taxes due. The Revenue Department appealed from the judgment, but dismissed its appeal on January 15, 1973. It returned to Canteen the money paid under protest ($15,528.28) and also returned to 28 other vending machine operators the sum of about $150,000. It then promulgated its first Rule on the subject, No. 87, conforming to Judge Richardson's ruling, thus restoring its previous practice. No different position was taken until about the end of 1973, when the Department promulated the now contested Amended Rule 87, effective January 31, 1974, providing: 'Persons selling cigarettes and tobacco products, including vegetable cigarettes and the like, are required to collect and remit sales tax on the total selling price paid or charged, whether sold through vending machines or otherwise, allowing no deductions whatsoever for federal taxes. Vendors selling cigarettes through vending machines may not claim state cigarette tax of nine (9) cents per package as a deduction when filing their returns.' There had then been no new legislation in either the Sales Tax Law or the Cigarette Tax Act. In February, 1974, plaintiffs filed the present suit. It will not be necessary to discuss the pleadings, for the issues pleaded sufficiently cover the points raised in the briefs. We should note at this point, however, that in Count I of the petition plaintiffs allege that the decision of Judge Richardson is 'final and binding upon defendants,' and in Count II they seek to extend this principle to the class of vendors which they allegedly represent. In Count III plaintiffs allege that the Amended Rule and the practice sought to be thus enforced, are void on the merits, and in contravention of the statutes; in Count IV it is sought to evtend the effect of these allegations to the class of vendors represented.

At this point, for clarification, we quote certain parts of the applicable statutes. First, the Sales Tax: Section 144.010(4): "Gross receipts' means the total amount of the sale price of the sales at retail * * * whether received in money or otherwise; * * * For the purposes of sections 144.010 to 144.510 the total amount of the sale price above mentioned shall be deemed to be the amount received.'

Section 144.010(8): "Sale at retail' means any transfer made by any person engaged in business as defined herein of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property, for a valuable consideration; * * *.'

Section 144.020(1): 'Rate of tax.--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.'

Section 144.021: 'Imposition of tax--seller's duties.--The purpose and intent of sections 144.010 to 144.510 is to impose a tax upon the privilege of engaging in the business, in this state, of selling tangible personal property * * * all sellers to report to the director of revenue their 'gross receipts', defined herein to mean the aggregate amount of the sales price of all sales at retail, and remit tax at three percent of their gross receipts.'

Section 144.060: 'Purchaser to pay sales tax--refusal, a misdemeanor--exception.--It shall be the duty of every person making any purchase or receiving any service upon which a tax is imposed by sections 144.010 to 144.510 to pay, to the extent possible under the provisions of section 144.285, the amount of such tax to the person making such sale or rendering such service; any person who shall willfully and intentionally refuse to pay such tax shall be guilty of a misdemeanor; * * *.'

The Cigarette Tax Act, RSMo 1969, Ch. 149, was in part as follows:

Section 149.020. 'Tax levy, stamps to be affixed.--1. A tax shall be paid on the sale of cigarettes made of tobacco, or any substitute for tobacco, of four and one-half mills per cigarette.

'2. This tax shall be paid by affixing stamps in the manner and at the time set forth in this chapter. The stamps shall be affixed to each individual package of cigarettes by the person who first sells the cigarettes within this state. All cigarettes must be stamped before being sold in this state.

'4. Every person required to pay this tax shall add the amount of the tax to the sales price of the cigarettes, it being the purpose and intent of this law that the tax is in fact a levy on the consumer or user with the person first selling the cigarettes acting merely as an agent of the state for the payment and collection of the tax to the state.'

Section 149.040: 'Refund of tax granted, when--rules and regulations.--Whenever any cigarettes upon which stamps have been placed have been sold or shipped into another state for sale or use there or have become unfit for use and consumption or unsalable, or have been destroyed, the wholesaler shall be entitled to a refund of the actual amount of the tax paid with respect to such cigarettes. * * *'

A new Cigarette Tax Act was enacted in 1974; it will be referred to in the body of this opinion. On July 12, 1974, the trial court filed in the present case a memorandum opinion and its decree; therein it held, on agreed facts: that despite procedural differences Judge Richardson's decision and order were binding, the legal issue being identical (thus apparently holding that the judgment was res adjudicata); that, Moreover even if that be not true it would follow the decision on the doctrine of 'stare decisis'; that alternately plaintiffs were entitled to judgment on the merits both under the old and new Cigarette Tax Acts; that the cigarette tax was not a part of the 'sales price,' but was an amount 'added to' the sales price; that the legal incidence and economic burden of the tax was only upon the ultimate buyer; that the seller received no benefit from the collection of the tax, but only fulfilled a...