Revenue Cabinet v. Moors Resort, Inc., 82-CA-2110-MR

• Citation: 675 S.W.2d 859
• Decision Date: 24 August 1984
• Docket Number: No. 82-CA-2110-MR,82-CA-2110-MR
• Parties: REVENUE CABINET Commonwealth of Kentucky, Appellant, v. MOORS RESORT, INC., Appellee.
• Court: Court of Appeals of Kentucky

Page 859

675 S.W.2d 859

REVENUE CABINET Commonwealth of Kentucky, Appellant, v. MOORS RESORT, INC., Appellee.

No. 82-CA-2110-MR

Court of Appeals of Kentucky.

Aug. 24, 1984.

Rehearing Denied Sept. 21, 1984.

Arnold C. Jones, Peggy Guier, Revenue Cabinet, Frankfort, for appellant.

Earl T. Osborne, Osborne & Harris, Paducah, for appellee.

Before HOWARD, MILLER and REYNOLDS, JJ.

MILLER, Judge.

This appeal involves a controversy over sales tax assessed by appellant, Revenue Cabinet, Commonwealth of Kentucky (cabinet), against appellee, Moors Resort, Inc. (taxpayer). KRS Chapter 139. Previously, this matter was dismissed by this court as being a premature appeal from the Marshall Circuit Court order. CR 54. The Supreme Court granted discretionary review and reversed, remanding to this court for a decision "on the merits," holding the Marshall Circuit Court order, from which this appeal was taken, to be a final appealable order. CR 54.01. The decision is reported as Revenue Cabinet, Commonwealth of Kentucky v. Moors Resort, Inc., Ky., 662 S.W.2d 219 (1983).

Taxpayer's primary business involves the operation of a boat dock, marina, restaurant and rental cottages on Kentucky Lake in Marshall County, Kentucky. The dispute with the cabinet surrounds taxpayer's failure to collect and remit "sales tax" upon ten transactions involving the sale of houseboat-type crafts during the audit period of 1972-1976. The tax liability alleged by the cabinet, after considerable adjustment for matters not herein relevant, resulted in an August 4, 1978, assessment of over $14,000.00, exclusive of penalty and interest, which is the amount in controversy.

Taxpayer protested the assessment before the Kentucky Board of Tax Appeals (board), (KRS 131.310), maintaining that it was not subject to the sales tax imposed, for reason that its involvement in the ten transactions was not in the capacity of a "retailer," as defined in KRS 139.110. It is, of course, only the gross receipts (KRS 139.050) from a retail sale (KRS 139.100) by a retailer (KRS 139.110) that are subject to sales tax under KRS 139.200. The board upheld the assessment. On taxpayer's appeal to the Marshall Circuit Court, the decision of the board was reversed. The circuit court held that the taxpayer's involvement in the ten transactions concerning the houseboats was not that of a retail seller, but was only that of a "commission agent" and, therefore, not subject to imposition of sales tax under Chapter 139. The cabinet brings this appeal to our court for review of the decisions of the Kentucky Board of Tax Appeals and the Marshall Circuit Court. We affirm the decision of the circuit court.

At the outset, we observe that our sales tax is one upon gross receipts of a retailer. The "incidence" is upon the retailer for the privilege of making a retail sale within this commonwealth (KRS 139.200), although it may be passed on to the consumer (KRS 139.210). For the purpose of collecting and remitting the tax, the retailer is considered to be the taxpayer. See Marcum v. City of Louisville Municipal Housing Commission, Ky., 374 S.W.2d 865 (1963). The statute creates a presumption that all "gross receipts" from retail sales are subject to the tax, and the "burden" of proving that a sale of tangible personal property is not a retail sale is upon the person making the sale. KRS 139.260. Apparently, the only method of shifting this burden is for the seller to obtain, "in good faith," a certificate of intention to resell, as provided in KRS 139.270. See Department of Revenue v. Warren Chemical & Janitor Supply Company, Ky.App., 562 S.W.2d 644 (1977).

With the foregoing being the status of the law, as we see it, and there being no certificate to resell involved, we must conclude that the burden of proving that the gross receipts from the transactions involved in this case were not taxable rested upon taxpayer, Moors Resort, Inc. Taxpayer attempted to fulfill this burden by offering the testimony of interested parties that the transactions as to each of the sales transpired between the manufacturers and the ultimate customers, and that taxpayer at no time held title to the crafts. Further, taxpayer offered evidence that in most, if not all, cases, the manufacturers and purchasers were in other states, and the boats were delivered directly from the manufacturers to the customers, there being no delivery in this jurisdiction. It was shown that each boat was "customized," according to the desire of the particular purchaser. Taxpayer maintained no stock or inventory, no showroom, literature, sales office or dealer's license, and its principal business was that of operating a boat dock, marina, restaurant and cottage rental. Taxpayer contended that its chief officer, Jerry Moore, being the operator of...