Norwin G. Heimos Greenhouse, Inc. v. Director of Revenue, 68265

• Decision Date: 17 February 1987
• Docket Number: No. 68265,68265
• Citation: 724 S.W.2d 505
• Parties: NORWIN G. HEIMOS GREENHOUSE, INC., Appellant, v. DIRECTOR OF REVENUE, State of Missouri, Respondent.
• Court: Missouri Supreme Court

Page 505

724 S.W.2d 505

NORWIN G. HEIMOS GREENHOUSE, INC., Appellant, v. DIRECTOR OF REVENUE, State of Missouri, Respondent.

No. 68265.

Supreme Court of Missouri En Banc.

Feb. 17, 1987.

Rehearing Denied March 17, 1987.

C. Michael Bakewell, Morris E. Stokes, John C. Hannegan, Tracy L. Mathis, Louis A. Robertson, St. Louis, for appellant.

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

BILLINGS, Judge.

Appellant Norwin G. Heimos Greenhouses, Inc., seeks a refund of the sales tax it paid on purchases of water, electricity, and natural gas used in its business operations. The issues are whether appellant, as a purchaser, has standing to request a refund of sales taxes pursuant to § 144.190, RSMo 1984, and, if so, whether appellant is an agricultural consumer, and, as such, not a domestic, commercial, or industrial consumer subject to sales tax on the purchase of water, electricity, and natural gas, pursuant to § 144.010.1(8)(b), RSMo 1986. The Court determines that appellant has standing to request the refund, that appellant's utility purchases were not subject to sales tax, and that appellant is entitled to a refund.

Appellant is a Missouri corporation headquartered in Sunset Hills, Missouri. It operates four greenhouses, located in St. Louis County, at which it raises vegetable and flower plants for sale to retail establishments in Missouri, Illinois, and Southwest Indiana. In its greenhouses, appellant controls the temperature to the plants by heating units which are fired by natural gas and thermostatically controlled by electricity. Appellant also supplies water to the plants and for the necessities of its employees.

On March 3, 1982, appellant applied to the Respondent Director of Revenue (Director) for a refund of the sales tax it paid from January 1, 1980 to December 31, 1981 on purchases of water, electricity, and natural gas for the greenhouses. Appellant had paid sales tax on these purchases to the State of Missouri, the City of Sunset Hills, and the County of St. Louis. All of these sales taxes were collected by the Director. The parties have stipulated that the amount of sales taxes paid on the purchases of these utilities by appellant during the period for which a refund is requested is $20,604.85. Of this amount, $18,161.35 was paid within the two years immediately prior to the date on which the application for refund was filed and $2,443.50 was paid more than two years before the filing of the application for refund. The Department of Revenue denied any refund to appellant. Appellant sought review of this denial of refund before the Administrative Hearing Commission, and from an adverse ruling there, appeals to this Court.

The initial question is whether appellant has standing to request a refund of sales taxes. Section 144.190 provides the exclusive remedy for recovery of sales tax. Charles v. Spradling, 524 S.W.2d 820, 823 (Mo. banc 1975). Section 144.190.2 provides in relevant part:

If any tax ... has been erroneously ... collected, ... such sum shall be credited on any taxes then due from the person under sections 144.010 to 144.510, and the balance ... shall be refunded to the person, but no such credit or refund shall be allowed unless duplicate copies of a claim for refund are filed within two years ¹ from date of overpayment.

In addition, the Director, pursuant to § 144.270, RSMo 1986, has promulgated a regulation concerning refunds. This regulation, 12 CSR 10-3.520(1) states:

The seller whose sales tax account has been credited the sales tax is the person who is to request a refund or credit. No other person may make a refund request to the Department of Revenue. Persons who make erroneous payment to a seller should seek their monies back directly from the seller.

The statute, by its terms, does not restrict the right to make a request for refund to sellers alone. The Director seeks to justify his regulation so restricting the right to request refunds by citing to § 144.021, RSMo 1986, which provides that "[t]he primary tax burden [of the sales tax] is placed upon the seller." Moreover, in Fabick and Co. v. Schaffner, 492 S.W.2d 737, 743 (Mo.1973), this Court held that the sales tax imposed by Chapter 144 is a gross receipts tax whose burden is imposed upon the seller. Furthermore, the requirement of § 144.060, RSMo 1986, that purchasers pay the amount of the tax to the seller does not alter the legal nature of the tax as a tax upon sellers. Farm and Home Savings Ass'n. v. Spradling, 538 S.W.2d 313, 316 (Mo.1976). In other words, the taxpayer is the seller, not the purchaser. The Director's interpretation of § 144.190, as evidenced by his regulation, appears to be that only the legally burdened taxpayer, hence only the seller, may request a refund.

The Court finds the regulation restricting the right to request refunds to sellers, 12 CSR 10-3.520(1), to be invalid because it is an unreasonably crabbed interpretation of and plainly inconsistent with the terms of § 144.190. See Foremost-McKesson, Inc. v. Davis, 488 S.W.2d 193, 197 (Mo. banc 1972). Under the statute, a "person" may request a refund. Section 144.010.1(5), RSMo 1986, defines person to include "any individual, firm, copartnership, [or] corporation." (Emphasis added.) Had it intended to restrict the right to request refunds to sellers, the legislature could easily have done so by using the word "seller" in § 144.190. "Seller" is used in numerous other places in the sales tax statutes. By inserting the general word "person" into § 144.190, however, rather than the more restrictive word "seller", the legislature evidently intended to allow anyone burdened, either legally or otherwise, by the Director's collection of sales tax to request a refund. Although the legal burden of the sales tax is not on the purchaser, the economic burden is. For example, § 144.080, RSMo 1986, requires the seller to collect the sales tax from the purchaser. Also, § 144.060 requires the purchaser to pay the sales tax to the seller or else suffer criminal sanctions. As an economically burdened entity, the purchaser is a "person" with a right to request a refund pursuant to § 144.190.

Appellant's first argument on the merits is that its purchases of electricity are specifically exempted from sales tax by § 144.030.2(12), RSMo 1986. This statute provides an exemption from sales tax for

Electrical energy used in the actual primary manufacture, processing, compounding, mining or producing of a product, or electrical energy used in the actual secondary processing or fabricating of the product, if the total cost of electrical energy so used exceeds ten percent of the total cost of production, either primary or secondary, exclusive of the cost of electrical energy so used....

Appellant contends that its production of flower and vegetable plants for sale to retailers is primary production within the meaning of this exemption. Even assuming this contention to be correct, however, appellant can obtain no exemption under this provision. The burden of proving entitlement to the sales tax exemption was upon appellant. Section 621.050.2, RSMo 1986. Appellant failed to meet this burden because it presented no evidence that its total cost of electricity exceeded ten percent of its total cost of primary production. Appellant's assertion that this ten percent requirement applies only to the exemption for electrical energy used in secondary production and not to the exemption for electrical energy used in primary production is incorrect given the clause "either primary or secondary" immediately following the statement of the ten percent requirement.

Appellant's second argument on the merits is that it is an agricultural consumer and that no sales taxes on the sale of water, electricity, and natural gas to agricultural consumers have been authorized by the legislature. Taxes may be imposed by Missouri or its political subdivisions only when the taxes are authorized by the legislature. Mo. Const. art. X, § 1.

Section 144.020, RSMo 1986, imposes a sales tax upon sales at retail. Section 144.010.1(8)(b), RSMo 1986, defines "sales at retail" to include:

Sales of electricity, electrical current, water and gas, natural or artificial, to domestic, commercial or industrial consumers....

Section 144.020.1(3), RSMo 1978, the statute in effect during the period for which appellant is seeking a refund, specifically imposed

A tax equivalent to three percent of the basic rate paid or charged on all sales of electricity or electrical current, water and gas, natural or artificial, to domestic, commercial or industrial consumers.... ²

Missouri cities and counties have also been authorized to impose sales taxes, but only upon sales that are subject to the state sales tax. See §§ 66.600.2, 67.505.3, 94.510.2, 94.605.2, 94.705.3, RSMo 1986. Additionally, Missouri imposes a sales tax for conservation purposes upon sales at retail as defined in § 144.010.1(8). See Mo. Const. art. IV, § 43(a).

Given the wording of §§ 144.010.1(8)(b) and 144.020.1(3), the legislature has authorized sales taxes upon the sale of utilities only if the purchaser is a domestic, commercial, or industrial consumer. The parties agree that appellant is neither a domestic nor an industrial consumer. Thus the dispute hinges upon whether or not appellant is a commercial consumer. Appellant contends that it is an agricultural consumer and, as such, is in a class separate and independent from the class of commercial consumers. Since no sales tax is authorized upon the sales of utilities to members of the independent class of agricultural consumers, appellant concludes, no such sales tax can be or should have been collected by the Director.

The Director's counterargument is that even if appellant is considered an agricultural consumer, such consumers are a subclass of commercial consumers and therefore subject to sales taxes on their purchases of...