Lora v. Director of Revenue, 62921

• Decision Date: 14 July 1981
• Docket Number: No. 1,No. 62921,62921,1
• Citation: 618 S.W.2d 630
• Parties: Elsie V. LORA, d/b/a Putt-Putt Fun Center, Appellant, v. DIRECTOR OF REVENUE, State of Missouri, Respondent
• Court: Missouri Supreme Court

Page 630

618 S.W.2d 630

Elsie V. LORA, d/b/a Putt-Putt Fun Center, Appellant, v. DIRECTOR OF REVENUE, State of Missouri, Respondent.

No. 62921.

Supreme Court of Missouri, Division No. 1.

July 14, 1981.

Sawyer Marglous and Warren Grauel, Clayton, for appellant.

Richard L. Wieler, Asst. Atty. Gen., Jefferson City, for respondent.

FINCH, Senior Judge.

Appellant filed in the Missouri Court of Appeals, Eastern District, a petition for judicial review from a final decision of the Administrative Hearing Commission which affirmed an assessment by the Director of Revenue for unpaid sales tax, interest and a late filing penalty. The Court of Appeals ordered the case transferred to this court for lack of jurisdiction in the Court of Appeals. We have jurisdiction because construction of the revenue laws of the state is involved. Mo.Const. Art. V, § 3. We reverse and remand with directions.

This case is an outgrowth of the decision of this Court in Blue Springs Bowl v. Spradling, 551 S.W.2d 596 (Mo.banc 1977). In that case this court upheld a revised Revenue Rule 49, effective April 30, 1974, which, in a reinterpretation of § 144.020.1(2) RSMo, stated that a sales tax was due on gross receipts derived from fees or charges paid for participation in bowling in any place of amusement, entertainment or recreation. For many years prior to that date the Department of Revenue had interpreted § 144.020.1(2) as not imposing a tax on bowling receipts. ¹

Subsequent to the decision in Blue Springs Bowl the Department of Revenue conducted an audit of Elsie Lora, d/b/a Putt-Putt Fun Center, for the period from May 1, 1974 to September 30, 1978. Based on that audit the Director of Revenue, on Pursuant to § 161.337, RSMo 1978, appellant filed a petition for reassessment before the Administrative Hearing Commission, contending:

January 11, 1979, assessed appellant Lora the sum of $62,570 on receipts from the miniature golf course for the period in question. The sum assessed consisted of $46,705.13 for tax, $11,195.00 for interest, and $4,670.54 for a ten percent penalty under § 144.250.1, RSMo 1978.

1. that she was not liable for any tax because for many years the state had taken the position in its Revenue Rules that sales tax was not due on a business engaged in operating a miniature golf course and related activities, and that, after changing its position in 1974 without any statutory change, it failed to notify appellant of its reinterpretation of the statute and she was not aware of any obligation to pay sales tax and had not collected any sales tax;

2. that the portion of the assessment which is for a period in excess of two years from the date of assessment is barred by the Statute of Limitations, § 144.220, RSMo 1978; and

3. that no penalty should be assessed under § 144.250, RSMo 1978.

The Petition for Reassessment was submitted to the Administrative Hearing Commission on the following agreed statement of facts:

"1. The taxpayer, a housewife unschooled and inexperienced, took over the operation of her husband's business upon his demise August 23, 1973, and has operated the business to current date.

2. The business activity is in the amusement field consisting of miniature golf and allied games of entertainment in which a fee is charged to the public to play and participate.

3. At all times herein the taxpayer did not collect sales tax from patrons and customers on the reasonable knowledge and belief that the business activity was excluded from the purview of the Act. That during all of said period the taxpayer exercised reasonable prudence and good faith without intention to evade, conceal, deceive, or otherwise mislead taxing authorities.

4. In Blue Springs Bowl v. Spradling, 551 S.W.2d 596 (1977), the Supreme Court held that § 144.020.1(2) taxes receipts received from bowling in a commercial establishment. No measures were taken by the Department of Revenue to notify the taxpayer or others similarly situated following the opinion in the Blue Springs Bowl case, supra, in 1977 other than to publish its rulings that it was now holding such taxpayer's business subject to and included in the provisions of the statute.

5. That at all times herein there was in full force and effect § 144.220, RSMo 1969 commonly known as a Statute of Limitations of two years.

6. It is stipulated that the figures contained in the audit accurately reflect the sales or purchaser of the taxpayer and that in the event the Department of Revenue's determination to tax these transactions is upheld, the amount of the sales/use tax and local taxes assessed is correct."

The Administrative Hearing Commission upheld the assessment of the Director of Revenue, holding that by issuing Revised Rule 49 and filing a certified copy thereof with the Secretary of State, the Department of Revenue gave all the notice that was required. Personal notice to the taxpayer was not required. Next, the Commission held that none of the assessment was barred by the Statute of Limitations and that a penalty was properly assessed under § 144.250.

On appeal to this Court appellant has abandoned her contention that she was not subject to tax because she did not receive notice of Revised Revenue Rule 49 from the Director of Revenue. She has conceded that tax is due for the last two years of the

period covered by the assessment. The only issues raised on this appeal are that the earlier portion of the assessment is barred by § 144.220, the two year Statute of Limitations, and that no penalty can be assessed under the terms of § 144.250.

STATUTE OF LIMITATIONS ISSUE

The Sales Tax Act provides its own statute of limitations. Section 144.220 RSMo 1978 thereof provides:

"Additional Assessment made within two years Except in the case of a fraudulent return, or neglect or refusal to make a return, every notice of additional amount proposed to be assessed hereunder shall be mailed to the person within two years after the return was filed or was required to be filed."

Under that section the assessment of additional tax is limited by the two year period specified except where a fraudulent tax return is filed or the taxpayer neglects or refuses to make a return. In this case neither a fraudulent return nor a refusal to make a return is involved. Therefore, the legal issue for decision is whether, under the stipulated facts in the case, taxpayer "neglected" to make a return.

It is the contention of taxpayer that when § 144.220 speaks of "neglect" to make a return, it means that the taxpayer negligently failed to file a return. She points out that under the stipulated facts she was not negligent because she "did not collect sales tax from patrons and customers on the reasonable knowledge and belief that the business activity was excluded from the purview of the Act" and because she "exercise reasonable prudence and good faith without intention to evade, conceal, deceive, or otherwise mislead taxing authorities."

On the other hand, it is the position of the Director that "neglect" to file a return, as used in § 144.220, equates with mere "failure" to file a return. In other words, it simply "connotes a failure to act." Since taxpayer failed to file a return for the years in question, the Director argues that the two year limitation does not apply.

These conflicting interpretations require that we determine the meaning of the term "neglect" as used in § 144.220.

We note at the outset, as stated in an earlier opinion of the St. Louis Court of Appeals, that "(M)any words have various shades of meaning in legal usage, and the same is true in the case of the verb 'neglect'. In some instances it may imply a mere failure or omission to do something...