President Riverboat Casino v. Missouri Gaming Comm.

• Decision Date: 21 March 2000
• Citation: 13 S.W.3d 635
• Parties: (Mo.banc 2000) . President Riverboat Casino -- Missouri, Inc., and Aztar Missouri Gaming Corporation, Appellants, v. Missouri Gaming Commission, Respondent (SC81616). (consolidated with) Boyd Kansas City, Inc., Appellant, v. Missouri Gaming Commission, Respondent (SC81685). Case Number: SC81616 consolidated with SC81685 Supreme Court of Missouri Handdown Date: 0
• Court: Missouri Supreme Court

13 S.W.3d 635 (Mo.banc 2000)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

President Riverboat Casino -- Missouri, Inc., and Aztar Missouri Gaming Corporation, Appellants, v. Missouri Gaming Commission, Respondent (SC81616).

(consolidated with)

Boyd Kansas City, Inc., Appellant, v. Missouri Gaming Commission, Respondent (SC81685).

Case Number: SC81616 consolidated with SC81685

Supreme Court of Missouri

Handdown Date: 03/21/2000

Appeal From: Circuit Court of Cole County, Hon. Thomas J. Brown III

Counsel for Appellant: SC81616 -- William A. Brasher and Paul E. Littleton; SC81685 -- Daniel Bukovac and N. Chris Walters

Counsel for Respondent: SC81616 -- Michael W. Bradley; SC81685 -- Michael W. Bradley

Opinion Summary:

Three riverboat casinos challenged the admission fees they pay per customer to the gaming commission fund and the reimbursement scheme for highway patrol officers working as gaming agents on the boats. The circuit court ruled for the gaming commission.

AFFIRMED.

Court en banc holds:

(1) The admission fees do not violate the United States Constitution's Commerce Clause. The fees are a tax. The tax applies to an activity with a substantial nexus to Missouri, is fairly apportioned in that the boats are not subject to other states' taxes, does not discriminate between intra- and inter- state commerce, and is fairly related to the services provided by the state.

(2) The reimbursements for the highway patrol officers working as gaming agents do not violate the United States Constitution's Commerce Clause. The reimbursements are a fee. The reimbursements fairly approximate the benefits to the boats and are not excessive (they are exactly) in relation to the state's costs.

(3) The patrol services are within the gaming commission fund's "sole purpose" of covering the administrative costs of the gaming commission, as statute requires.

(4) The fees and reimbursements do not violate the Takings or Due Process Clauses of the state and federal constitutions.

(5) The fees and reimbursements do not violate limits on police powers. The fees come from the taxing power, not police power, of government. The reimbursements do not violate constitutional rights, do serve the legitimate purpose of regulating gaming, and finance the service provided.

(6) The gaming commission has sufficiently established the amount of staff to be reimbursed as required by statute. A commission regulation defines the "amount of staff" as that determined by the highway patrol superintendent and the Commission's executive director. Incorporation of this agreement satisfies the statute.

Opinion Author: Duane Benton, Judge

Opinion Vote: AFFIRMED. All concur.

Opinion:

Three riverboat casinos seek declaratory judgment that: (1) the "admission fees" they pay to the Gaming Commission Fund are unconstitutional, and (2) the scheme of reimbursement for Highway Patrol services -- if not unconstitutional -- violates the governing statutes. The circuit court ruled for the Missouri Gaming Commission. Because of the constitutional challenges, this Court has exclusive jurisdiction. Mo. Const. art. V, sec. 3. Affirmed.

I.

The Commission licensed as excursion gambling boats: President Riverboat Casino-Missouri, Inc.; Aztar Missouri Gaming Corporation; and Boyd Kansas City, Inc. When these Boats applied for a license, they paid "license fees" to cover the cost of investigation. Section 313.807.¹ In addition, the Boats paid an annual license fee. Id. The license fees were deposited in the Gaming Commission Fund. Section 313.835.

The Boats paid "admission fees" of $2 per customer, with $1 allocated to the Gaming Commission Fund, and $1 to the home dock city or county. Section 313.820. The Boats were required to pay the admission fees, whether or not they charged their customers any fee. Id.

The Boats also paid a 20 percent tax on gross receipts from gaming. Section 313.822. The home dock city or county received 10 percent of this tax, with the remainder to the Gaming Proceeds for Education Fund. Id.

Not counting the Gaming Proceeds for Education Fund, the receipts into the (separate) Gaming Commission Fund exceeded the Commission's administrative costs, by at least a three-to-one ratio in fiscal years 1996, 1997, and 1998.

II.

The circuit court held that the admission fees are a tax. The Boats claim that the admission fees regulate interstate commerce, in violation of the Commerce Clause of the United States Constitution, U.S. Const. art. I, sec. 8.

The admission fees are deposited in the Gaming Commission Fund, created by section 313.835. Its history is summarized in the appendix to this opinion. In all of its versions, the Gaming Commission Fund has funded both the Commission, and other public programs. See section 313.835. The 1992 and 1993 versions of section 313.835 deposited all the admission fees in the general revenue fund, to support the entire budget. 1992 Mo. Laws 1236; section 313.835 RSMo Supp. 1993. The next version of section 313.835 was in effect from August 28, 1994, to August 28, 1998. Section 313.835 RSMo 1994, as amended by 1996 Mo. Laws 217. It directed that unencumbered funds -- beyond the costs of the Commission and certain veterans, homeless, and anti-gang programs -- shall be transferred to the general revenue fund, beginning July 1, 2000. Id.

As the Gaming Commission Fund grew, earmarkings grew. Eventually, section 313.835 financed -- in addition to the Gaming Commission itself -- several recipients: deterring gang-related violence, helping the homeless, recognizing and providing for veterans, supporting the national guard, providing college scholarships, and financing early childhood development. Section 313.835 RSMo Supp. 1998. The General Assembly has earmarked the entire Fund, intending that all "net proceeds" will be spent. Section 313.835.1;.1(2);.1(3)(d) RSMo Supp. 1998.

The Boats assert that the legislature intended to impose a fee, not a tax, because (1) the statutes have always used the label admission "fee," sections 313.820.1; 313.835.1, and (2) the first subsection of 313.835 deposits the admission fees into a fund -- the Gaming Commission Fund -- that is separate from the Gaming Proceeds for Education Fund, which receives the gross receipts tax under section 313.822.

Although these two points are accurate, what is labeled a fee may in fact be a tax, based on its "real object, purpose and result." See State ex rel. Wyatt v. Ashbrook, 55 S.W. 627, 628-29 (Mo. 1900). This Court decides such issues by applying the long-established distinction between a tax and a fee:

Taxes are proportional contributions imposed by the state upon individuals for the support of government and for all public needs. . . .Taxes are not payments for a special privilege or a special service rendered. . . .Fees or charges prescribed by law to be paid by certain individuals to public officers for services rendered in connection with a specific purpose ordinarily are not taxes, . . . unless the object of the requirement is to raise revenue to be paid into the general fund of the government to defray customary governmental expenditures . . .rather than compensation of public officers for particular services rendered.

Leggett v. Missouri State Life Ins. Co., 342 S.W.2d 833, 875 (Mo. banc 1960).

The admission fees -- as paid by the Boats to the state -- are not payments for a special privilege, a special service, or a specific purpose. The admission fees do not compensate public officials for particular services. The earmarked recipients of the Gaming Commission Fund are "customary governmental expenditures." Under the definition in Leggett, the admission fees are a tax.

State taxes levied on interstate commerce are not per se invalid. Commonwealth Edison Co. v. Montana, 453 U.S. 609, 615 (1977). The practical effect, rather than the formal language of the statute, is decisive. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977). A four-prong test determines whether a state tax unreasonably burdens interstate commerce. Id. A state tax will not violate the Commerce Clause if it is: (1) applied to an activity with a substantial nexus with the state, (2) fairly apportioned, (3) non-discriminatory against interstate commerce, and (4) fairly related to the services provided by the state. Id.

Substantial Nexus: All activities of the Boats occur in Missouri. Section 313.820.1. There is undoubtedly a substantial nexus with this state.

Fairly Apportioned: By the record in this case, the Boats are not subject to taxation by other states. There is no issue of unfair apportionment.

Non-Discrimination Against Interstate Commerce: The admission fees are measured by Missouri patrons as well as out-of-state patrons (estimated as high as 30 percent). Missouri treats intrastate the same as interstate commerce.

Fairly Related to Services: The measure of the tax is reasonably related to the Boats' contact with Missouri. See Commonwealth Edison, at 626. The tax funds state services that improve the general welfare. Having chosen to operate in Missouri, the Boats -- three Missouri corporations -- enjoy the protection of state laws and the benefits of state services. The admission fees are fairly related to the services provided by the state.

III.

Highway Patrol officers serve as "gaming agents" aboard the Boats, by agreement between the Commission and the Patrol. See State ex rel. Ryan v. Carnahan, 960 S.W.2d 549, 550 (Mo. App. 1998). The Commission has the authority to establish the amount of services and staff necessary to protect the public on any Boat. Sections 313.004.9, 313.824. The Boats must reimburse the Commission for these costs. Id. The reimbursements are deposited in the Gaming Commission Fund, and then transferred to the Patrol as an "administrative expense" of the Commission. Section 313.004.9.

The Highway Patrol reimbursements are a fee. The...