Westwood Cuntry Club

Citation6 S.W.3d 885
Parties(Mo.banc 1999) . Westwood Country Club, Respondent, v. Director of Revenue, Appellant Case Number: SC81584 Supreme Court of Missouri Handdown Date:
Decision Date07 December 1999
CourtUnited States State Supreme Court of Missouri

Appeal From: Petition For Review of A Decision of The Administrative Hearing Commission, Sharon M. Busch, Commissioner

Counsel for Appellant: Evan J. Buchheim

Counsel for Respondent: Edward F. Downey, John P. Barrie and B. Derek Rose

Opinion Summary:

Westwood Country Club, a private club, offers its members and guests golf and dining, among other activities. The administrative hearing commission found that the club owed no sales tax on its food purchases for members or golf cart rental fees. The director of revenue seeks review.

AFFIRMED IN PART; REVERSED IN PART; REMANDED.

Court en banc holds:

(1) The club must pay sales tax on food and beverages it purchases to serve to its members and guests, as provided by state regulation. The meals and beverages served by the club are not "sales at retail." Thus, they are not excluded from the tax as goods purchased for resale. Neither are the purchases exempt as component parts of new goods. The purpose of the sales tax system is to tax property once, not at various stages in the stream of commerce. The club does not charge sales tax to members. It must pay sales tax on its purchases of food and beverages.

(2) Since the club paid sales tax on its purchases of golf carts, it does not owe sales tax on fees that it charges members to use the carts. The tax statute dealing with the lease or rental of personal property on which sales tax has already been paid applies, as opposed to the less specific tax on places of amusement.

Opinion concurring in Part and Dissenting in Part

The separate opinion author concurs with the majority in that golf cart rental fees are not subject to sales tax.

The separate opinion author dissents in that part of the opinion that holds the club must pay sales tax on food and beverage purchases. This author states that there is no requirement that resales actually be taxable in order for the resale exclusion or component part exemption to apply. The author would hold that because many of the club's food and drink purchases are for resale to members, they are not sales at retail subject to tax, despite that members pay no tax.

Opinion Author: AFFIRMED IN PART; REVERSED IN PART; REMANDED. Michael A. Wolff, Judge

Opinion Vote: Price, C.J., White, Holstein and Benton, JJ., concur; Limbaugh, J., concurs in part and dissents in part in separate opinion filed; Covington, J., concurs in opinion of Limbaugh, J.

Opinion:

This petition to review a decision of the Administrative Hearing Commission raises two issues: First, does Westwood Country Club owe sales tax on its purchases of food for members' meals when such meals are excluded from sales tax since they are not "sales at retail?" Second, are the fees charged by Westwood for the use of golf carts on its premises subject to sales tax? We hold: (1) Since meals and beverages served by Westwood are not "sales at retail," Westwood must pay sales tax on its purchases of food and beverages for such service; and (2) Since Westwood has paid sales tax on its purchases of golf carts, Westwood does not owe sales tax on fees that the club charges to members for use of the carts.

Westwood is a private country club located in St. Louis County, Missouri, offering its members and guests golf, tennis, dining and other activities. It is not open to the public. Westwood purchases food that it prepares and serves to members and guests as meals. Since Westwood does not regularly serve meals and beverages to the public, its services to members and guests are excluded from sales tax. Greenbriar Hills Country Club v. Director of Revenue, 935 S.W.2d 36, 38 (Mo. banc 1996). Westwood charges a fee for the use of golf carts to its members and their guests.

The department of revenue required Westwood to pay sales tax of $2,846.02 on food purchases and cart fees for January of 1998 and assessed a similar tax of $1,411.84 for February of 1998. Westwood appealed to the commission, which found that Westwood owed no sales tax. Now, the director seeks review of the commission's decision.

Taxation of Westwood's Food Purchases

The first issue is whether the food Westwood purchases to prepare and to serve to members and guests is subject to sales tax. Under Greenbriar Hills, no sales tax is charged on these meals since Westwood does not regularly sell meals to the public. 935 S.W.2d at 38. The commission's decision exempted Westwood from paying tax on its food and beverage purchases. We reverse the commission and hold that Westwood is subject to the sales tax on its purchases of food and beverages for consumption by its members and their guests.

By state regulation, sales tax is due on such purchases: "If a club does not regularly serve food and beverages to the public, other than its members and their guests, and the club acts as a cooperative association for the benefit of its members,1 the club has the option of either collecting and remitting sales tax on its sales to members and guests or paying sales tax on the club's purchases of food and beverages (see section 144.020.1(6), RSMo)." 12 CSR 10-3.048(7) (1998)(emphasis added).2 The portion of the regulation giving the club the option to collect the tax on sales to members and their guests is no longer operative. Greenbriar Hills, 935 S.W.2d at 38. However, the regulation does recognize that food purchased by the club for serving its members and guests is subject to tax at some point. Here, Westwood must pay sales tax on its purchases of food and beverages. In Greenbriar Hills, this sales tax on the country club's purchases of food and beverages was properly due and paid. 935 S.W.2d at 37.

Westwood here claims the benefit of two statutory provisions: (1) that its purchases were for resale, and (2) that its purchases were of materials used in processing goods into new personal property to be sold for final use or consumption. The first is an exclusion, and as in Greenbriar Hills, the question is whether, by ordinary principles of statutory construction, the sales tax law excludes from its definitions the transactions involved here. The second point claims the benefit of a specific statutory exemption. Exemptions from taxation are to be strictly construed, State ex rel. Transp. Mfg. & Equip. Co. v. Bates, 224 S.W.2d 996, 1000 (Mo. banc 1949), and, as such, it is the burden of the taxpayer claiming the exemption to show that it fits the statutory language exactly.

(1) Goods Purchased for Resale Westwood argues that the club merely purchased the food and beverages for resale and its purchases were not subject to tax, under McDonnell Douglas Corp. v. Director of Revenue, 945 S.W.2d 437 (Mo. banc 1997), because section 144.010(9)3 excludes from taxation goods to be resold at retail. Dean Machinery Co. v. Director of Revenue, 918 S.W.2d 244, 245-246 (Mo. banc 1996).

Westwood's members are excluded from paying sales tax on food and meals under Greenbriar Hills. 935 S.W.2d at 38. The outcome in Greenbriar Hills was predicated on the maxim of expressio unius est exclusio alterius;4 since the statute imposed a tax on meals and beverages served at eateries open to the public, those that did not regularly serve the public were excluded by negative implication. Section 144.010.1(9) broadly defines "sales at retail" of tangible personal property for use or consumption but excludes such property that is for "resale." However, since Westwood's service of food and beverage is not a sale at retail, Westwood's purchases do not fit the exclusion. Westwood's purchases are thus subject to the sales tax.

The dissent questions why this case is not governed by McDonnell Douglas. McDonnell Douglas addresses exemptions from use tax. 945 S.W.2d at 439-440. The statutory exemption for a sale to the federal government specifically classifies the sale as a "retail sale which the state of Missouri is prohibited from taxing pursuant to the Constitution or laws of the United States." Section 144.030.1. Where aircraft are sold to non-exempt entities, of course, a sales or use tax is to be collected on the sale of the final product. Director of Revenue v. Superior Aircraft Leasing Co., Inc., 734 S.W.2d 504-505, 507-508 (Mo. banc 1987).5 Here, however, there is no sale at retail, as Greenbriar Hills holds. 935 S.W.2d at 38. The exclusion of goods for resale is contained in section 144.010.1(9), which defines "sale at retail." Put simply, there must be a "sale at retail" in order for the "resale" exclusion of that section to apply.

(2) Component or Ingredient Materials Used in Making New GoodsWestwood further argues that its food and drink purchases are exempt under section 144.030.2(2). The statute exempts component or ingredient materials used in the "manufacturing, processing, compounding, mining, producing or fabricating" of goods into "new personal property . . . intended to be sold ultimately for final use or consumption." The commission determined that Westwood was engaged in the process of converting raw foodstuffs into the final product of meals and drinks and applied Al-Tom Inv., Inc. v. Director of Revenue, 774 S.W.2d 131 (Mo. banc 1989). Al-Tom involved an attempt to tax owners of Kentucky Fried Chicken franchises on the portion of oil not consumed in the frying of chicken and other foods. Id. at 131. "[I]f any part of a material is intended to and does remain as an essential or necessary element of the finished product then the entire purchase is exempt." Id. at 134. Since the cooking oil was made an essential part of the fried foods, it was exempt from sales taxation. Id. at 135.

Al-Tom is distinguishable. As restaurants regularly open to the public, the Kentucky Fried Chicken franchises engage in "sales at...

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