State ex rel. De Weese v. Morris

• Decision Date: 09 May 1949
• Docket Number: 40938
• Citation: 221 S.W.2d 206,359 Mo. 194
• Parties: State of Missouri, at the Relation of R. O. De Weese, Appellant, v. M. E. Morris, Director of Revenue, Respondent
• Court: Missouri Supreme Court

221 S.W.2d 206

359 Mo. 194

State of Missouri, at the Relation of R. O. De Weese, Appellant, v. M. E. Morris, Director of Revenue, Respondent

No. 40938

Supreme Court of Missouri

May 9, 1949

Opinion Modified on Court's Own Motion and Motion for Rehearing or to Transfer to Banc Overruled June 13, 1949.

Appeal from Scott Circuit Court; Hon. J. C. McDowell Judge.

Reversed and remanded (with directions).

SYLLABUS

An additional sales tax assessment made by the Director of Revenue is set aside because it was based upon incompetent hearsay evidence, speculation and conjecture, and not upon competent and substantial evidence upon the whole record as required by the 1945 Constitution and the Administrative Review Act.

Haw & Haw for relator.

(1) Both the original additional assessment and that made on the basis of the hearing of July 15th, 1947, are void because there is no "competent and substantial evidence to support the finding" of the Commissioner, as required by both the Constitution and the laws of Missouri and the Commissioner erred in making such assessments and the circuit court in failing to hold them void and to quash them. Sec. 22, Art. V, Missouri Constitution of 1945; Laws 1945, p. 1865, Sec. 1, 22 R.S.A., Pkt. Pts., p. 218, Sec. 11445; Laws 1945, p. 1504, Sec. 10, 5 R.S.A., Pkt. Pts., p. 11, Sec. 1140.11; Wood v. Wagner Electric Corp., 197 S.W.2d 647, 355 Mo. 670; Goetz v. J.D. Carson Co., 206 S.W.2d 530; Seabaugh's Dependents v. Garver Lumber Mfg. Co., 200 S.W.2d 55; Novicki v. Department of Finance, 373 Ill. 343, 26 N.E.2d 130. (2) Since relator had made returns and remittances for the whole period covered by the additional assessment, the Director of Revenue had no authority to make the assessment of April 24, 1947, without an investigation and hearing and the taking of testimony and requiring proof for his information, after notice to relator. Laws 1945, Sec. 11422, p. 1873, 22 Mo. R.S.A. 1939, Pkt. Pts., p. 213. (3) It is only when the taxpayer fails to make returns that the Director of Revenue has authority to make an assessment on information, without first giving notice to the taxpayer. Laws 1945, Sec. 11,426, p. 1874, 22 Mo. R.S.A. 1939, Pkt. Pts., p. 213. (4) "Information" as used in the above statute means knowledge communicated by others or obtained by others or obtained by investigation. 43 C.J.S., pp. 383-384. (5) Or, "communication of facts for the purpose of accusation". Webster's Universal Unabridged Dictionary, p. 869, definition 4. (6) The Commissioner erred in overruling relator's objections to the making of any assessment in this proceeding because the original assessment was unwarranted, to the objection to the hearsay evidence of witness Johns, both as to what others told him as to relator's restaurant and as to what the records of relator's predecessor and successor in business showed. The records were the best evidence. The commissioner had the power to have them produced and to cause witness to attend and testify. And the court erred in not quashing the findings and assessment made by respondent. Laws 1945, sec. 11,422, p. 1873; Keissa v. Blackburn, 280 S.W. 1046. (7) The Director of Revenue, respondent, had no authority to make any assessment, under any condition, for sales occurring prior to July 1, 1946, the operative date of the Sales Tax Act of 1945, such assessment being retroactive and contrary both to the provisions of the act itself and to the Constitution of Missouri. Laws 1945, Sec. 11,451, p. 1880, 22 Mo. R.S.A. 1939, Pkt. Pts., p. 219, Sec. 11,451; Missouri Constitution (1945), Art. 1, Sec. 13. (8) Under the express provisions of the Sales Tax Act the amount assessed by the Director of Revenue, tax and penalty, had it been legal, could not have become due from relator until fifteen days after he was notified of the assessment, which was April 28, 1947 as to original assessment. The final assessment by which the penalty was increased was August 12, 1947. Laws 1945, Sec. 11,427, p. 1874, 22 Mo. R.R.A. 1939, Sec. 11,427, Pkts. Pts., p. 214. (9) The first notice of additional assessment received by relator was on April 28, 1947, which was more than two years after the returns for January, February and March, 1945 were filed or required to be filed and such assessment, as to those months, was illegal by express provision of statute, there being no evidence of fraud or failure to make return. Laws 1945, Sec. 11,429, p. 1875, 22 Mo. R.S.A. 1939, Sec. 11,429, Pkt. Pts., p. 214.

J. E. Taylor, Attorney General, Tyre W. Burton and Harry J. Salsbury, Assistant Attorneys General, for respondent.

(1) The assessment was legally made and the trial court did not err in sustaining the said assessment. Sections 11408, 11411, 11413, 11416, 11420, 11421, 11422, 11426, and 11433 of the Sales Tax Act, Laws of Mo. 1945, starting at page 1868, provide for the levying of the tax, manner of assessing and collecting same. Sections 11426 and 11433 supra provide for the giving of a notice of the assessment by the Director of Revenue to the person assessed by registered mail. Wymore v. Markway, 338 Mo. 46, 89 S.W.2d 9; State ex rel. v. State Highway Commission, 349 Mo. 865, 163 S.W.2d 948; State v. Player, 6 N.E.2d 124; State v. Levey, 29 So.2d 129. (2) This assessment was legally made, and the delinquent duty notified. The Director of Revenue acts judicially in making assessments. Sections 11420, 11422, 11426 and 11427, Laws of Missouri 1945, pp. 1872, 1873 and 1874, respectively. State ex rel. Dungan, 265 Mo. 353; J.T. Moss Tie Co. v. Allen, 8 S.W.2d 1038; State ex rel. v. Woolworth Co., 348 Mo. 1180, 159 S.W.2d 297; Uiator v. State Tax Commission, 5 So.2d 478. (3) The Director of Revenue had authority and was empowered to make this assessment, the one complained of, under the provisions of the Sales Tax Act, Laws of Mo. 1943, pp. 1012-1029 inclusive. Sec. 11455A, Laws 1945, p. 1881. (4) In making the assessment the Director of Revenue found that the delinquent had fraudulently and evasively failed to make returns and remit the sales tax in the sum of $ 416 for the period of January 1, 1945 to September 24, 1946. Notice was given on April 24, 1947. The notice was given immediately following the additional assessment, under Sections 11426 and 11433, supra. Laws 1945, p. 1876.

Bohling, C. Westhues and Barrett, CC., concur.

OPINION

BOHLING

R. O. DeWeese instituted certiorari proceedings to review the propriety of an "additional assessment" of $ 729.66 under the Sales Tax act, a State revenue law, by the Director of Revenue of the State of Missouri, and he also attacks the validity of said law. (Statutory references are to the Sales Tax act of 1945, viz.: Laws 1945, pp. 1865-1881, §§ 11407-11455A, and correspondingly numbered sections in Mo. R.S.A.) He appeals from a judgment sustaining said "additional assessment." Appellate jurisdiction is here. Orr v. Hoehn, 353 Mo. 426, 182 S.W. 2d 596[1]; State ex rel. Martin v. Childress, 345 Mo. 495, 134 S.W. 2d 136, 138[2] and authorities cited; Mo. Const. 1945, Art. IV, §§ 12, 22.

Relator was in the restaurant business from January 1, 1945, to September 24, 1946, operating the Farmers Cafe, at Charleston, Missouri, daily, except Sunday.

On April 24, 1947, relator was notified of an additional sales tax assessment of $ 669.76 ($ 416 additional tax, $ 41.60 penalty, and $ 212.16 interest), which was based upon estimated unreported gross receipts at the rate of $ 1,000 a month for the time he was in business.

Relator filed "a petition for reassessment" (§ 11428) and the hearing thereon resulted in an order assessing an additional sales tax of $ 729.66 (the aforesaid $ 416 additional tax, plus a penalty -- we understand -- under § 11433, and three percent monthly interest on the tax, § 11430).

Relator timely filed his petition for a writ of certiorari (§ 11445); and the proceedings certified by the Director of Revenue pursuant thereto, in addition to the matters mentioned hereinabove, show the following:

Norman Johns, Field Representative of the Director of Revenue, notified relator on August 16, 1945, to keep records of his daily gross sales as required by § 11421.

The additional sales tax assessment of April 24, 1947, and the notice to relator thereof is to the effect relator "failed to collect, make proper return and remit" the correct sales tax, that his gross taxable receipts (we understand unreported) aggregated $ 20,800, that is, accrued at the estimated rate of $ 1,000 a month, and that relator "fraudulently and evasively failed to make return and remit sales tax on said sum in the amount of $ 416.00."

Relator testified that he made proper sales tax returns and paid all sales taxes due; that the returns were correct "to the best of my knowledge. They were taken off my daily reports"; that he did not owe the $ 416 additional sales tax; that he kept a record of his daily gross sales after being requested to do so but had lost his record book in Wichita, Kansas, or Kentucky. Relator bought the business from Mr. White and sold it to Mr. E. B. Walker and another person.

Mr Johns, the sole witness for the Director of Revenue, testified that following his notifying relator to keep a daily record of sales, he again contacted relator March 21 and 22, 1947; that relator did not have any records showing the business done; and that witness asked the Director of Revenue to assess an additional tax; that he based his conclusions upon what relator's predecessor and successor did; that he secured figures from Mr. White and copies of his reports and figures from Mr. Walker; that, over the objection this evidence was incompetent, hearsay and guess, the following figures were given for Mr. White's sales: "July, 1943, $ 1,868.52; October, 1943, $ 2,075.20,...