St. Charles County v. Director of Revenue

• Decision Date: 27 January 1998
• Docket Number: No. 79616,79616
• Parties: ST. CHARLES COUNTY, et al., Appellants, v. DIRECTOR OF REVENUE, et al., Respondents. BERNADETTE BUSINESS FORMS, INC., et al., Respondents, v. DEPARTMENT OF REVENUE and Director of Revenue, Appellants.
• Court: Missouri Supreme Court

Page 44

961 S.W.2d 44

ST. CHARLES COUNTY, et al., Appellants, v. DIRECTOR OF REVENUE, et al., Respondents.

BERNADETTE BUSINESS FORMS, INC., et al., Respondents, v. DEPARTMENT OF REVENUE and Director of Revenue, Appellants.

No. 79616.

Supreme Court of Missouri En Banc.

Jan. 27, 1998.

Edward J. Hanlon, Deputy City Counselor, Mark Lawson, Asst. City Counselor, Patricia Hageman, St. Louis, Jeremiah W. (Jay) Nixon, Atty. Gen., Edward F. Downey, Asst. Atty. Gen., Evan Buchheim, Asst. Atty. Gen., Jefferson City, James H. White, Deputy Co. Counselor, Cynthia L. Hoemann, Asst. Co. Counsler, Clayton, Joann Leykam, County Counselor, St. Charles, Patrick Cronan, Gary Markenson, Columbia, Walter J. O'Toole, Kansas City, Rollin J. Moerschel, V. Scott Williams, St. Charles, for Appellants.

Thomas C. Walsh, Juan D. Keller, Elizabeth C. Carver, St. Louis, James C. Owen, Katherine S. Walsh, Chesterfield, for Respondents.

LIMBAUGH, Judge.

This is an appeal from three cases consolidated before the Cole County Circuit Court involving refunds of local use taxes. The cases were filed in the wake of Associated Industries of Missouri v. Director of Revenue, 918 S.W.2d 780 (Mo. banc 1996), in which this Court held that the local use tax statute, section 144.748, ¹ was unconstitutional in its entirety.

The saga of litigation began in 1991 when the Missouri General Assembly enacted section 144.748, which imposed a statewide local use tax. Before the local use tax was first implemented, Associated Industries of Missouri ("AIM") challenged its constitutionality, claiming that it violated the Commerce Clause of the United States Constitution. The circuit court found that section 144.748 was constitutional, and this Court affirmed that decision in Associated Industries of Missouri v. Director of Revenue, 857 S.W.2d 182 (Mo. banc 1993) ("AIM I "). Specifically, this Court held that the fact that the local use tax imposed a greater burden than the local sales tax in certain localities did not violate the Commerce Clause if the statewide burden of the use tax was less than the statewide burden of local sales taxes. Id. at 186. However, the United States Supreme Court granted certiorari and reversed the judgment of this Court in Associated Industries of Missouri v. Lohman, 511 U.S. 641, 114 S.Ct. 1815, 128 L.Ed.2d 639 (1994) ("AIM II "). The Supreme Court rejected this Court's statewide-burden approach to Commerce Clause analysis and held that the local use tax scheme was unconstitutional in those localities where the local use tax exceeded the local sales tax. Id. at 654, 114 S.Ct. at 1824. The Supreme Court did not consider a specific remedy but, instead, remanded to this Court for further proceedings consistent with its opinion. Id. at 656-57, 114 S.Ct. at 1825-26. This Court then vacated its prior mandate and, in turn, remanded the case to the Cole County Circuit Court to determine the effect of the Supreme Court's decision under Missouri law. By way of declaratory judgment, the circuit court held that the local use tax was not unconstitutional in its entirety and that the tax could be enforced in those districts where the local sales tax was equal to or greater than the amount of the local use tax. On appeal, this Court reversed, holding that section 144.748 could not be constitutionally applied as written and was, thus, unconstitutional in its entirety. Associated Industries of Missouri v. Director of Revenue, 918 S.W.2d 780 (Mo. banc 1996) ("AIM III "). ²

Following the initial attack on the constitutionality of section 144.748, the Director of Revenue refused to distribute proceeds from the local use tax to political subdivisions unless they executed an agreement promising to reimburse the Director in the event that the local use tax was found unconstitutional and refunds were required. Despite the Director's instructions, a number of political subdivisions refused or otherwise failed to execute the required agreements, and as a result, they received none of the use tax proceeds. In response to this situation, and to ensure a funding mechanism in the event refunds were required, the General Assembly enacted section 144.749, which states in pertinent part:

In the event section 144.748 is ultimately found to be unconstitutional, the director of revenue may withhold from future distributions due political subdivisions an amount equal to such political subdivision's share, including interest, of the distribution from the local use tax fund since its inception.

Once section 144.749 became effective, the Director began distributing funds to those political subdivisions that had failed to execute reimbursement agreements.

After the decision in AIM III in 1996, the Department of Revenue ("DOR") began honoring applications for refunds filed by taxpayers who had paid local use taxes within the previous three years. Relying on section 144.749, the DOR also indicated its intention to withhold amounts otherwise due to political subdivisions in order to pay for these refunds. Before the DOR could initiate this plan, several lawsuits were filed seeking to clarify the consequences of this Court's decision that 144.748 was unconstitutional in its entirety. One lawsuit, Bernadette Business Forms, Inc. v. Department of Revenue, filed by several businesses, sought to compel the Director of Revenue to issue refunds of amounts they had paid under section 144.748. Two other lawsuits, St. Charles County v. Lohman and City of St. Peters v. Lohman, filed by political subdivisions, sought to enjoin the Director from refunding local use taxes that were paid prior to the decision in AIM III. These three cases were consolidated for trial before the Cole County Circuit Court. Additional parties were granted leave to intervene, including other political subdivisions and an individual taxpayer. Four issues were presented to the circuit court: (1) whether the decision in AIM III was an "unexpected decision" under section 143.903 and, thus, would foreclose the possibility of taxpayer refunds; (2) whether section 144.749 violated the provisions of the Hancock Amendment stated in article X, sections 21 and 22 of the Missouri Constitution; (3) whether section 144.749 violated article X, section 1, of the Missouri Constitution pertaining to state taxing authority; and (4) whether refunds were available under section 144.190 following the 1996 repeal of section 144.748. The circuit court granted judgment in favor of the businesses in the first suit and granted judgment in favor of the Director of Revenue in the second two suits. This appeal followed. Jurisdiction in this Court is based on the necessity to construe several sections of the state revenue laws. Mo. Const. art. V, sec. 3.

In essence, the current dispute consists of a three-way conflict between various businesses that seek a tax refund ("Taxpayers"), the Director of Revenue who seeks to avoid payment of a tax refund ("Director"), and various political subdivisions that seek to avoid footing the bill for any tax refund that is required ("Local Taxing Authorities").

I. UNEXPECTED DECISION

The Director and the Local Taxing Authorities claim that no refunds are due on local use taxes paid prior to the decision in AIM III because AIM III was an "unexpected decision" under section 143.903, which states in pertinent part:

1. Any provision of law to the contrary notwithstanding, an unexpected decision by or order of a court of competent jurisdiction or the administrative hearing commission shall only apply after the most recently ended tax period of the particular class of persons subject to such tax imposed by chapters 143 and 144, RSMo, and any credit, refund or additional assessment shall be only for periods after the most recently ended tax period of such persons.

If AIM III was an "unexpected decision" under this statute, then refunds for all tax years prior to 1996, the year AIM III was decided, would not be authorized. However, for the reasons that follow, this Court holds that section 143.903 is not applicable.

Section 144.749, the General Assembly's response to the original 1991 local use tax litigation, acts as an exception to section 143.903, the "unexpected decision" statute, so that section 143.903 does not apply at all in this case. There is an inherent conflict between the two statutes. Under section 143.903, if a tax decision is deemed to be unexpected, then any refund "shall be only for periods after the most recently ended tax period." Sec. 143.903.1 (emphasis added). In contrast, section 144.749 provides that in the event section 144.748 is found unconstitutional, the director of revenue may withhold an amount (implicitly for refunds to taxpayers) equal to "the distribution from the local use tax fund since its inception." Sec. 144.749 (emphasis added). Thus, section 143.903 limits refunds to periods after the determination of unexpectedness, while section 144.749 implicitly allows refunds dating back to the inception of the tax regardless of a subsequent determination of unexpectedness. Assuming arguendo that the decision in AIM III was unexpected, these sections could not be applied simultaneously because they reach contradictory results. Section 144.749 implicitly allows refunds for periods prior to the decision in AIM III while section 143.903 expressly forbids such refunds.

This Court has consistently held that when two statutory provisions are repugnant, "the later act ... operates to the extent of the repugnancy to repeal the first." Morrow v. City of Kansas City, 788 S.W.2d 278, 281 (Mo. banc 1990); see also County of Jefferson v. Quiktrip Corporation, 912 S.W.2d 487, 490 (Mo. banc 1995). However, repeal by implication is disfavored, and if two statutes can be reconciled then both should be given effect. Matter of Nocita, 914 S.W.2d 358, 359 (Mo. banc 1996). The crucial notion in applying the doctrine of repeal by implication is "the extent of the repugnancy" of the...