Overland Steel, Inc. v. Director of Revenue, 64218
| Decision Date | 29 March 1983 |
| Docket Number | No. 64218,64218 |
| Citation | 647 S.W.2d 535 |
| Parties | OVERLAND STEEL, INC., Petitioner, v. DIRECTOR OF REVENUE, Respondent. |
| Court | Missouri Supreme Court |
Richard Monaghan, Kansas City, for petitioner.
John Ashcroft, Atty. Gen., Richard L. Wieler, Asst. Atty. Gen., Jefferson City, for respondent.
Overland Steel, Inc. seeks review of a decision which upheld and modified the Director's assessment of sales tax against Overland. Overland contends the Commission erred, asserting imposition of sales tax on personal property sold in Kansas violates the Commerce Clause of the United States Constitution; and the materials sold were purchased by corporations which presented exemption certificates to Overland thereby excusing payment of sales tax pursuant to section 144.030 RSMo 1978. 1 Affirmed.
The Missouri Department of Revenue conducted an audit of Overland's sales from March 1, 1976, through February 28, 1978, and additional sales tax totaling $20,554.31 was assessed as of June 15, 1978. Following an informal hearing, the assessment was reduced to $18,985.17; petitioner filed a petition for reassessment. After the formal hearing, the Department reduced the assessment to $18,824.06; petitioner filed a complaint with the Administrative Hearing Commission. The case was submitted on a joint stipulation of facts which contained the record and exhibits from the Department of Revenue hearing. The Commission held Overland liable for the tax and interest assessed pursuant to various Kansas projects, and denied those exemptions not evidenced by exemption certificates. The Commission modified the Department's decision to allow an exemption which was evidenced by an exemption certificate, concluding the taxpayer had relied on the certificate in good faith and should therefore be relieved of liability pursuant to 12 CSR 10.3.194. Upon this review, the decision of the Administrative Hearing Commission "shall be upheld when authorized by law and supported by competent and substantial evidence upon the whole record...." § 161.338 RSMo 1978.
Overland Steel, Inc. maintains its business office in Kansas City, Missouri, and acts as both a retailer and a contractor. The same steel products the company uses in construction projects are sold at retail. Because the company is unable to determine the ultimate use of each product when purchased from the manufacturer, all of the steel products are purchased under resale exemption certificates which allow Overland to avoid or defer payment of sales tax.
Overland installed some of the steel products at various locations in Kansas while engaged as a contractor. Additional steel products were sold to Missouri customers at retail. Kathryn Pate, Overland's secretary-treasurer, testified that the products used in the Kansas construction projects were transported from Missouri to Kansas after delivery from the manufacturer. She also stated that all of the steel products sold in Missouri were used by the purchasers to support pollution control equipment; the only support offered for this conclusion was her recollection of customer responses to questions she had posed concerning the use of the products. Mrs. Pate was unable to give any details concerning those projects.
Kenneth Middleton conducted the audit of Overland's books for the Department of Revenue. He testified that it was the responsibility of the taxpayer to present evidence which supports pollution control or manufacturing exemptions to the Department auditor. Each item which the taxpayer claims is exempt must be listed on the exemption certificate. Prior to September 28, 1977, the pollution control exemption applied only to machinery and equipment directly used for pollution control. After that date, an amendment to section 144.030 allowed an exemption for materials used in support of pollution control equipment and machinery. Only those supporting materials sold before this date had been included in the Department's assessment. Mr. Middleton went on to testify that the manufacturing exemption applied to anything that was added to an existing plant which became part of the direct manufacturing process.
Only one exemption certificate was presented to Mr. Middleton during his audit of Overland. This certificate claimed the products purchased would be used to treat or control water pollution at the customer's plant. He did not allow this exemption because the material involved was purchased prior to September 28, 1977, and was not, in his judgment, directly involved in pollution control. No other exemption certificates were presented during the audit although certain materials and retail sales had been listed as exempt by Overland.
During the audit it was also discovered that steel products Overland installed for Kansas customers pursuant to construction contracts, had been purchased from the manufacturer under resale exemption certificates thereby allowing Overland to avoid paying sales tax on the purchase. These products were delivered to Overland in Missouri, then subsequently moved to Kansas. Overland claimed the Department was assessing tax on the products they resold to the Kansas customer, a transaction which was exempt from Missouri sales tax because it occurred in interstate commerce.
Mr. Middleton testified that the sale on which the Department had assessed the tax was that between Overland and the vendor of the steel products, a sale which occurred in Missouri. He based this conclusion on the delivery of the products to Overland at Kansas City, Missouri, where they were placed in inventory until moved to Kansas. It was his position that Overland had not resold the materials but had consumed the materials in question while acting as a contractor.
After reviewing the record, the Department of Revenue decided that Overland was a contractor; therefore, the ultimate consumer of the materials used on its Kansas construction projects. Accordingly, the Department held Overland liable for the tax assessed against the materials Overland consumed at the Kansas projects. Additionally, the Department concluded that Overland had failed to meet the burden...
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