J. E. Williams Const. Co. v. Spradling, 59922

• Decision Date: 12 September 1977
• Docket Number: No. 59922,59922
• Citation: 555 S.W.2d 16
• Parties: J. E. WILLIAMS CONSTRUCTION COMPANY, a corporation, Appellant, v. James R. SPRADLING, Director, Department of Revenue of Missouri, Respondent.
• Court: Missouri Supreme Court

Page 16

555 S.W.2d 16

J. E. WILLIAMS CONSTRUCTION COMPANY, a corporation, Appellant, v. James R. SPRADLING, Director, Department of Revenue of Missouri, Respondent.

No. 59922.

Supreme Court of Missouri, en banc.

Sept. 12, 1977.

Kenneth H. Suelthaus, St. Louis, for appellant

J. Mike Davis, Asst. Atty. Gen., Jefferson City, for respondent.

PER CURIAM.

This case, transferred to this court by our order after opinion by the Court of Appeals, St. Louis district, involves an assessment by the Department of Revenue of sales/use tax against a general contractor for materials purchased and used in the construction of a building for the city of Troy.

On June 15, 1972, an assessment of sales/use tax was made by the Missouri Department of Revenue (Department) against J. E. Williams Construction Company (Taxpayer or Appellant) in the amount of $75,195.75 (including interest). In due time the Taxpayer filed a petition for reassessment pursuant to § 144.240, RSMo 1969. A hearing was held before a hearing examiner at which the Taxpayer and the Department introduced evidence. Thereafter, in October, 1973, the Director of Revenue (Director) made and entered his final decision approving and upholding the assessment originally made by the Department in 1972. In due time the Taxpayer filed its petition for review in the circuit court of St. Louis county, pursuant to § 144.261, RSMo 1969. As indicated, the circuit court's judgment affirmed the decision of the Director and this appeal followed. We affirm.

In connection with his decision the Director made and filed findings of fact and conclusions of law, as follows:

"FINDINGS OF FACT

"1. That the Assessment dated June 15, 1973, (sic) in the amount of $75,195.75 against Taxpayer is based upon materials used in the construction as described in a Contract (Exhibit F) between Taxpayer and 'Owner' as defined in Taxpayer's Exhibit F.

"2. That no Sales/Use Tax had been paid by Taxpayer on the purchase of said materials.

"3. That 'Owner', defined in said Contract (Taxpayer's Exhibit F), 'refers to Harper & Row, Publishers, Inc., tenants under a lease with the City of Troy, Missouri, except that as specifically indicated and where appropriate it may also include the City of Troy, landlord under said lease.'

"4. That the terms of said Contract required Taxpayer to furnish all indicated materials and labor for the construction of a Distribution Center in The City of Troy, Missouri, for the sum of $3,081,578.00.

"5. That said Contract was signed by Taxpayer's President on behalf of Taxpayer; and by the Secretary of Harper & Row, Publishers, Inc., on behalf of Harper & Row, Publishers, Inc.; and approved by Mayor Briggs on behalf of the City of Troy, Landlord.

"6. That certain subcontracts were entered into between Taxpayer and specified Subcontractors which required said Subcontractors to furnish all necessary labor, materials, etc., to complete said specified work.

"7. That pursuant to said subcontracts Taxpayer made payments for materials to said Subcontractors.

"8. That pursuant to the Contract between Taxpayer and 'Owner,' as defined in Exhibit F, Taxpayer received a separate payment drawn upon an account referred to as Troy, Missouri Construction Fund; and that said Fund was a deposit of monies received from the issuance of certain property bonds.

"9. That the City Treasurer of the City of Troy, Missouri, received a certain letter from the Director of Revenue dated August 13, 1969 (Exhibit J), which described a sales tax exempt purchase by a city.

"10. That no representatives of Taxpayer or the City of Troy, nor anyone on their behalf, were ever informed that the procedure for the payment of materials actually implemented was satisfactory to exempt such purchase of materials from Sales/Use Tax liability by officials of the Department of Revenue.

"CONCLUSIONS OF LAW

"1. That the City of Troy, Missouri, did not take title to or ownership of the materials furnished in the construction as described in Exhibit F. Article III Section 39(10) Mo.Const.1945 & Section 144.030, RSMo 1969.

"2. That the City of Troy was not obligated for the purchase of materials as defined or described in the Subcontracts between Taxpayer and the various Subcontractors.

"3. That the City of Troy by and through the 'Construction Fund' made payments to Taxpayer for materials furnished by Taxpayer in the completion of the construction as defined in the Contract (Exhibit F).

"4. That the Contract (Exhibit F) was not entered into by the City of Troy, Missouri.

"5. That Taxpayer was never appointed agent for the City of Troy, Missouri, for the purpose of purchasing materials for the completion of the work described in the Contract (Exhibit F).

"6. That representation by the officials of the Department of Revenue, if any, may not be used to estop the Department of Revenue to assert its legal position based on the law.

"7. That all material purchases included in the Assessment were subject to the imposition of Sales/Use Tax according to statute and the Taxpayer is liable therefor in the amount shown in the Assessment. Section 144.020, RSMo 1969; and City of St. Louis v. Smith (Mo.Sup.1937) (342 Mo. 317), 114 S.W.2d 1017."

We adopt parts of the Court of Appeals statement of the facts, as follows.

The appellant presented evidence consisting of testimony of Howard Briggs, Mayor of the City of Troy, of J. E. Williams, Jr., president of the appellant corporation, and documentary evidence which shall hereinafter be referred to. The thrust of their testimony was that early in 1968 the Chamber of Commerce of the City of Troy formed an Industrial Development Committee (later known as the Lincoln County Industrial Development Corporation) for the purpose of encouraging industry to locate in the Troy area. To take advantage of the provisions of Chapter 100, RSMo 1969 whereby municipalities might carry out projects for the industrial development thereof, a "community profile" was submitted to the Missouri Industrial Commission. Section 100.050, RSMo 1969. On April 24 or 25, 1968, Gilbert Keith of the Missouri Industrial Commission visited the City accompanied by Bryan Murphy of Harper & Row Publishers, Inc., and Gilbert Ross, of Ross & Company, a New York City engineering and architectural firm. Harper & Row (as the publishing company shall hereinafter be identified) was interested in establishing a midwest distribution center for its publications and this visit was for that purpose.

After numerous telephone calls and several visits to the City by representatives of Harper & Row, it was decided in July or August, 1968, that the publishing company would locate its distribution center in that city. It was agreed that the City would finance the project by issuing industrial revenue bonds pursuant to the authority of § 100.100, RSMo 1969, would own the project, and would lease the facilities to Harper & Row pursuant to the provisions of § 100.180, RSMo 1969. Accordingly, on September 6, 1968, a bond issue election was held pursuant to § 100.110, RSMo 1969 and was passed by a vote of approximately 900 to 6. The City was authorized to issue $4,900,000 industrial revenue bonds.

Subsequently over a period of several months, Mayor Briggs and various other members of the Committee made several trips to New York to iron out the terms of the lease so that the City would be the sole owner and have complete control of the building. At the time Mayor Briggs, acting under authority of the Board of Aldermen of Troy ¹ as the one in charge of the bond issue, represented the City in all negotiations with respect to the lease with Harper & Row. During these negotiations, plans and specifications for the construction of the distribution center were drawn up by Ross & Company (as the engineering and architectural firm shall hereinafter be identified) and were then presented to Harper & Row and Mayor Briggs for approval. After the plans and specifications were approved the lease with Harper & Row was signed and invitations for bids were sent out to several construction companies. The bids submitted were opened in March, 1969, and the successful low bidder was J. E. Williams Construction Company, the appellant. This bid was in the amount of $3,155,000.

Despite the fact appellant's bid was the low bid, it was learned that it was somewhere in the neighborhood of $200,000 in excess of the anticipated amount budgeted for construction of the distribution center. Gilbert Ross, of Ross & Company, Bryan Murphy, of Harper & Row, and Mayor Briggs met and discussed this development and in an effort to reduce this excess, Mayor Briggs suggested that perhaps the materials to be used in the construction of the building might be exempt from sales tax due to the fact the City was to be the owner of the distribution center. It was decided that Mayor Briggs should investigate this possibility so that an effort could be made to renegotiate the original bid by appellant.

Upon his return to the City the Mayor arranged a meeting at Jefferson City in the office of the Department of Revenue to explore the possible sales tax exemption of the materials going into the building of the distribution center building. He met with the Director of Research and counsel, authorized officials of the Department, sometime in April, 1969, and discussed how the project should proceed so that it would enjoy the tax exempt status of the City. According to the Mayor, these officials informed him that for the project to be tax exempt the City would have to make all payments for the material. The Mayor indicated to them that it would be impossible for the City to issue all of the individual checks because the City had only one secretary and Williams Company would thereby lose control of the billing. The Director of Research handed him a form letter on which he had filled in the blank spaces. According to this completed form, in order for the City to be exempt from...