St. Louis Country Club v. Administrative Hearing Com'n of Missouri

Decision Date20 September 1983
Docket NumberNo. 64289,64289
Citation657 S.W.2d 614
CourtMissouri Supreme Court

Juan D. Keller, David T. Karzon, Jr., St. Louis, for appellants.

John Ashcroft, Atty. Gen., Jay Daugherty, Richard L. Wieler, Asst. Attys. Gen., Jefferson City, for respondents.


This action is brought to review the Administrative Hearing Commission's determination that private country clubs, which are not open to the general public, must pay sales tax on fees charged to members when they bring guests to enjoy certain club facilities. Because the case involves construction of the revenue laws, this Court has jurisdiction pursuant to Mo. Const. Art. V, § 3. We conclude that the assessment of sales tax was in accordance with the law.

St. Louis Country Club and Algonquin Country Club are Missouri not-for-profit corporations which provide their members with golf, tennis, swimming, and clubhouse facilities. The clubs are exempt from both federal and state income taxes under § 501(c)(7) of the Internal Revenue Code of 1954 and parallel provisions of state law. St. Louis Country Club's budget regularly shows a deficit, and Algonquin imposes special assessments on members at the end of the year in order to make up any deficit.

In contrast to the public and semi-private clubs, St. Louis and Algonquin Country Clubs, as private clubs, do not derive revenue from fees charged to members of the general public, and severely restrict non-member usage of club facilities. Non-members are allowed to use the facilities only as guests accompanied by members, and members are billed later for their guests' use of the club facilities. Both clubs are prohibited by their bylaws from collecting fees or any other charges from non-members, and do not handle cash. St. Louis Country Club prohibits a member from inviting a particular guest more than two times per year. Other private clubs typically restrict introduction of individual guests to four occasions per year.

The clubs did not report sales taxes on guest fees for the period April 1, 1977, through January 31, 1979. The Department of Revenue issued an assessment of unpaid sales tax against St. Louis Country Club for $2,207.76, for guest fees for golf and tennis, and against Algonquin Country Club for $2,723.29, for guests' golf fees, based on a finding that the guest fees were taxable admission charges under § 144.020.1(2), RSMo 1978.

On appeal to the Administrative Hearing Commission the action by the Department of Revenue was upheld. St. Louis and Algonquin Country Clubs appeal the Administrative Hearing Commission's ruling. We affirm.

1. The Validity of the Assessments

The taxpayers assert that, without respect to the merits, the assessments are procedurally defective. We reject each of the three arguments presented.

It is first claimed that the assessments are invalid because they were not made personally by the Director of Revenue, but rather were signed by Ruth Schneider, an employee of the Department of Revenue. The claim is fully answered by our opinion in Brown Group, Inc. v. Administrative Hearing Commission, 649 S.W.2d 874, 877-78 (Mo. banc 1983), in which we held that the Director of Revenue may delegate authority to subordinates in processing assessments. It would indeed be impossible for the office to function without delegation. The notice of the assessments here involved states, "This assessment is the final decision of the Director of Revenue...." It is entirely in order for the Director to authorize subordinates to authenticate assessments made in accordance with established office procedures. Nor is there any requirement that notice of the delegation to a particular employee be filed or published, or that internal procedures be formalized by rule.

The taxpayers next argue that the Director of Revenue is "estopped" by reason of a letter written in 1974 by the then General Counsel of the Department of Revenue to a partner in a public accounting firm in St. Louis, stating that it was not the policy of the Department to assess sales tax on transactions such as are involved here. We held in Blue Springs Bowl v. Spradling, 551 S.W.2d 596, 600 (Mo. banc 1977), that the incidence of taxes is determined by law, and that the Director of Revenue and his subordinates have no power to vary the force of a statute. All that these employees can do is to state the current policy of the Department. They cannot bind future Directors, or limit the state's right to collect taxes properly owing. See also Bartlett and Company, Grain v. Director of Revenue, 649 S.W.2d 220 (Mo.1983). There might conceivably be a case in which a taxpayer sought a ruling as to the tax incidents of a particular transaction, and relied on the ruling in deciding whether or not to enter into the transaction, but there is absolutely nothing that indicates that these taxpayers would have done anything different if they had not had the 1974 letter. This letter, furthermore, was not a formal ruling as contemplated by 12 CSR 10-3.003 and its predecessor rules, because it was not addressed to the taxpayer. The letter, then, does not foreclose assessment of the sales taxes.

Appellant St. Louis Country Club also argues that a part of the assessment against it is invalid because of the expiration of the two-year period allowed by § 144.220, RSMo 1939, within which the Director may challenge sales tax returns. This taxpayer executed a voluntary waiver of the limitation period, but now argues that this waiver is invalid and of no effect. It cites cases holding that contract provisions extending the statute of limitations for actions on that very contract are invalid. It also observes that the federal statutes provide express authority for the waiver of the limitation period by agreement between Internal Revenue Service and the taxpayer, while state statutes lack similar provisions.

We hold that the waiver executed by this taxpayer is a valid contractual agreement, supported by consideration, and that it is effective in accordance with its terms. The taxpayer might fear a hasty and inaccurate assessment if it declined to enter into a waiver agreement requested by the revenue authorities, or might believe that, by entering into the waiver agreement, it could possibly negotiate a satisfactory resolution of the controversy. The element of reliance by the revenue authorities is apparent. The cases involving contractual waivers in advance of actual controversy do not cover the situations involved here. We conclude that a waiver entered into in order to permit further examination and possibly negotiation is not forbidden by any provision of law, serves a proper purpose, and should be given effect.

2. The Merits of the Assessments

The clubs allege that because they are private, non-profit, social organizations which are not "engaged in business" and the guest fees were not "paid to, or in any place of amusement, entertainment or recreation", their guest fees do not fall within the purview of §§ 144.010.1(8) and 144.020.1(2).

Section 144.010.1(8) defines "sale at retail" as

any transfer made by any person engaged in business, including sales of admission tickets, cash admissions, charges and fees to or in places of amusement, entertainment and recreation, games and athletic events.

Section 144.020.1(2) sets the rate of tax on such sales. Section 144.010.1(5) defines "person" to include "any individual, firm, copartnership, joint adventure, association, corporation, municipal or private, and whether organized for profit or not...." In § 144.010.1(2), "business" is defined as

any activity engaged in by any person, or caused to be engaged in by him, with the object of gain, benefit or advantage, either direct or indirect.

Taxing statutes must be construed strictly, and...

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