Smith Beverage Co. of Columbia, Inc. v. Reiss

• Decision Date: 15 June 1978
• Docket Number: No. 60002,60002
• Citation: 568 S.W.2d 61
• Parties: SMITH BEVERAGE CO. OF COLUMBIA, INC., et al., Respondents, v. A. Gerald REISS, Director of Revenue of the State of Missouri, Appellant.
• Court: Missouri Supreme Court

Page 61

568 S.W.2d 61

97 A.L.R.3d 1187

SMITH BEVERAGE CO. OF COLUMBIA, INC., et al., Respondents, v. A. Gerald REISS, Director of Revenue of the State of Missouri, Appellant.

No. 60002.

Supreme Court of Missouri,En Banc.

June 15, 1978.

Rehearing Denied July 24, 1978.

John D. Ashcroft, Atty. Gen., S. Joel Wilson, Asst. Atty. Gen., Jefferson City, for appellant.

Cullen Coil, Jefferson City, for respondents.

RENDLEN, Judge.

Declaratory judgment action for construction of the State Use Tax laws. Respondents seek a declaration that the Revenue Department's amended Rule 34 conflicts with the Use Tax exemption provisions of § 144.615(6), RSMo 1969, ¹ and is thus invalid, also for an injunction to stay enforcement of the Rule and a determination that respondents and others of their class qualify for the exemption afforded by the statute.

In the first hearing of the cause, the trial court adjudged the questioned portion of amended Rule 34 invalid as conflicting with § 144.615(6), and enjoined its enforcement as to plaintiffs and others of their class respecting payment of sales or use tax on the purchase of reusable soft drink bottles by plaintiff from outstate suppliers. This Court by its opinion in the first appeal, Smith Beverage Co. of Columbia v. Spradling, 533 S.W.2d 606 (Mo.1976), ² identified the issue as "whether the transfer of bottles by plaintiffs to 'retailers and other institutions' is or is not a sale ; or, to be more specific, whether the bottles when purchased by plaintiffs are held by them (and their class members) 'solely for resale in the regular course of business.' " It was noted the Director had admitted plaintiffs were jobbers of soft drinks, but he contended plaintiffs were not jobbers of the bottles because they did not sell them. This contention is stated in appellant's current brief as follows: "(r)espondents do not purchase and hold these bottles solely for resale, but rather respondents use them over and over again as a convenient and economical way to market their beverage." The Court in the first appeal characterized appellant's position this way: "His theory apparently is that there is merely a loan or bailment." The issue, thus framed, is in the language of the Use Tax, § 144.610.1, which provides: "A tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property . . .," and the qualifying language of the exemption in § 144.615(6), which excludes from the Use Tax, "Tangible personal property held by processors, retailers, importers, manufacturers, wholesalers, or jobbers solely for resale in the regular course of business; . . ." (Emphasis added.)

The cause was reversed upon a finding that "there is no evidence, there are no admissions, and there is no stipulation from which this issue can intelligently be resolved." The opinion points out that on the question of whether these bottles are held "solely for resale in the regular course of business" thus qualifying for the exemption of § 144.615(6), the authorities cited from other jurisdictions are divided. The Court suggested a number of factual questions upon which evidence should be obtained and pursuant to that suggestion the parties on remand stipulated ³ to a variety of facts which we summarize: (1) Respondents as jobbers are engaged in the manufacture and sale of bottled soft drinks for sale to various retailers who in turn sell them to the general public; (2) jobbers (who acquire their bottles from outstate suppliers) require deposits on reusable bottles from the retailers who in turn require a similar deposit from the consumers; (3) there is no formal agreement between bottlers and retailers concerning the return of reusable bottles although trade usage establishes that bottlers accept and pay for bottles which retailers choose to return; (4) this system enables the reuse of bottles an average of seven to twelve times before they are lost or discarded and permits a bottle "charge" or "deposit" below the bottler's actual cost; (5) the cost of a reusable bottle ranges from ten to fifteen cents for a bottle smaller than quart size and from twenty to twenty-five cents for a quart size bottle; (6) deposits are approximately five cents on bottles of sixteen ounces or less and ten cents on bottles in excess of the sixteen ounce size; bottlers keep records concerning inventories, costs and deposit accounts of retailers; (7) however, there is no requirement that the consumer return bottles to the retailer or the retailer to return bottles to the bottler; (8) bottles are permanently marked with the name (trademark) of the soft drink contained in the bottle, but are not specifically identifiable to the original bottler; (9) thus bottles first used by one bottler can be reused by another producing the same soft drink; (10) many bottles contain applied color labels reading "return for deposit" and in efforts to encourage return of reusable bottles, advertisements have asked, "Wouldn't you rather borrow our bottles than buy them?"

In the second proceeding, the trial court again declared the amendment to respondent's Rule 34 invalid insofar as it requires plaintiffs and other members of the class represented, "to pay sales or use tax on reusable bottles to their respective suppliers at the time each member purchases those bottles and insofar as said Rule declares that bottlers who bottle carbonated beverages into a reusable bottle and who are required to charge a refundable deposit on those bottles are consumers of those bottles or will be considered to be consumers of those bottles" and the Court again enjoined enforcement of the Rule. This appeal followed.

The Use Tax, generally complementary to the Sales Tax, is designed to tax transactions on which no Sales Tax can be imposed because the sales do not occur in Missouri. Section 144.610 taxes the privilege of "storing, using or consuming within this state any article of tangible personal property" (emphasis added) and as a taxing statute must be strictly construed in favor of the taxpayer and against the taxing authority. Wiethop Truck Sales, Inc. v. Spradling, 538 S.W.2d 585 (Mo.1976). On the other hand, § 144.615(6) establishes a Use Tax exemption as to tangible personal property held "solely for resale in the regular course of business " (emphasis added) and that exemption is to be construed against the taxpayer, though such construction must be reasonable and not curtail the exemption's intended scope and purpose. City of St. Louis v. State Tax Commission, 524 S.W.2d 839, 843(2) (Mo. banc 1975).

Seeking to enforce the Use Tax, the Director on September 28, 1973, promulgated his amendment to Rule 34 which is in pertinent part as follows "A vendor who packages or bottles tangible personal property (1) into a reusable container and (2) will charge a refundable deposit on those containers is considered to be the consumer of those containers. Thus this vendor (bottler) shall pay sales or use tax to his supplier at the time he purchases those containers." (Emphasis added.)

This amendment to the Rule has been described as the Director's interpretation or the Department's view of the term "consuming " as used in § 144.610. ⁴ As noted above, the statute imposes a Use Tax on the privilege of "consuming within this state," any article of tangible personal property and by the Rule the statute is given special application to bottlers. It is declared they consume such bottles if they bottle their product (1) "into a reusable container" and (2) "charge a refundable deposit on those containers" and in such event, the bottler "shall pay . . . use tax to his supplier at the time he purchases those containers." If such is the intended purpose of the Rule, and it appears so to be, plaintiffs are brought within the ambit of § 144.610 without regard to the exemption provided in § 144.615(6), and the Rule in effect nullifies the exemption section as to them. Alternatively, the amended Rule might be interpreted as not absolutely negating but merely qualifying § 144.615(6), so that any bottler placing his product in a reusable container and charging a refundable deposit would be considered as not holding the same "solely for resale in the regular course of business", and thus ineligible for the exemption. Such interpretation, though couched in language of § 144.615(6), (rather than the language of § 144.610) would work a similar foreclosure of plaintiffs' claim to the exemption. We are neither bound nor persuaded by these inflexible interpretations of the legislative intent. Instead we must examine the language of the statute and determine whether plaintiff qualifies for the intended exemption. This leads to the principal question at bar, i. e., whether, without regard to the considerations of Rule 34, it may be said that plaintiffs, in the course of their business, hold such bottles "solely for resale" within the meaning of § 144.615(6).

The term sale appearing in the Missouri "Compensatory Use Tax Law" (§§ 144.600-144.745) is defined by § 144.605, RSMo Supp.1975, as:

"any transfer, barter or exchange of the title or ownership of tangible personal property, or the right to use, store or consume the same, for a consideration paid or to be paid . . . ."

That definition is applicable to the term resale used in § 144.615(6). The bottles plaintiffs purchase and fill with their products then transfer (sell or bail) to their vendees are exempt from Missouri's Use Tax, if when transferred to the plaintiffs' vendee, such bottles are sold by the plaintiffs rather than merely loaned, bailed or otherwise delivered for some special purpose. To qualify as sales, it must be found that by the transfer, title or ownership of the bottles pass for consideration paid. In State ex rel. Thompson-Stearns-Roger v. Schaffner, 489 S.W.2d 207 (Mo.1973), this Court, discussing provisions of the Missouri sales tax law, stated "The term 'ownership' cannot be...