Mo Reply to Worlds of Fun Resp

8/4/2019 Mo Reply to Worlds of Fun Resp

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BEFORE THEADMINISTRATIVE HEARING COMMISSION

STATE OF MISSOURIWORLDS OF FUN/OCEANS OF FUN, ))Petitioner, )

)v. ))DIRECTOR OF REVENUE, )

)Respondent. )

Case No. 08-1935 RS

FILEDJUN I 0 2011

AOMIN/STRATlVeHEARCOMMISSION

RESPONDENT'S REPLY TO PETITIONER'S RESPONSE TO RESPONDENT'SMOTION FOR SUMMARY DECISION

Respondent, Director of Revenue, requests this Commission to deny Petitioner's Motionfor Summary Decision and, under Missouri Code of State Regulations 1 CSR 15-3.446, to entera decision in favor of the Director on the grounds that there are no genuine issues as to anymaterial fact as set forth in this brief, and that the Director is entitled to summary decision as amatter of law.

In support of her response to Petitioner's motion, the Director states:STATEMENT OF THE CASE

Petitioner, Cedar Fair, LP ("Worlds of Fun") operates the Worlds of Fun/Oceans of Funamusement park in Kansas City, Missouri. Along with the parks, Worlds of Fun also has cabinsand cottages available for guests who wish to stay multiple days at the park. The cabins containfurniture, appliances, and linens for the guests to use during their stay. Worlds of Fun paidMissouri use tax on its purchases of these items. Worlds of Fun claims these items are notsubject to use tax because they are "sold" to the guest for the duration of the guest's stay by theguest's payment of the charge for the cabin or cottage. The Director's position is that this case isdirectly on point with the recent Missouri Supreme Court decision in Brinker Missouri, Inc, v.Director ofMissouri, 319 S.W.3d 433, (Mo. banc 2010) and that Worlds of Fun's purchase ofthe items in question were subject to use tax.


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ARGUMENTWorlds of Fun in its reply continues to claim that the Supreme Court's decision in

Brinker Missouri, Inc, v. Director of Missouri, 319 S.W.3d 433, (Mo. banc 2010) is

distinguishable from the case at hand. However, Brinker is precisely on point. BrinkerMissouri, Inc. ("Brinker") owned several restaurants which served food and drinks to customers.Customers could either eat the food at the restaurant using tables, chairs, and dinnerwareprovided by Brinker or it could get the food "to go". Brinker claimed that it "resold" the tables,chairs, and dinnerware used by their customers. Brinker argued that it included the cost of thetables, chairs, silverware, and dishes in its overhead and that its customers were not onlypurchasing the food, but also the tables, chairs, silverware, and dishes. In response, the SupremeCourt stated:

This argument proves too much. As every cost is normally included in overheadone way or another (at least if the business is to break even), it would mean thateverything a customer touches in the restaurant in that sense is resold and notsubject to use tax That cannot be what the legislature intended when it enactedthese statutes. A "transfer, barter, or exchange" of "the title or ownership oftangible personal property, or the right to use, store, or consume the same" doesnot occur when Brinker provides the benches, chairs, bar stools, tables, menus,dishes, tableware, glassware, booster seats and high chairs to supply meals to itscustomers conveniently. While Brinker customers do acquire temporary use in thesense that the reusable items are used as a mechanism to facilitate delivery of theirfood and drink, this degree of control is de minimus and does not rise to the levelof an actual transfer of a right to use. The plates, tables and chairs are not in anyreal sense transferred to customers any more than a piece of the restaurant floor istransferred to a customer when he or she walks on it or a bottle of ketchup istransferred when a customer picks it up to use or inspect it or a menu istransferred to a customer who reads it. (Emphasis added.)

Ibid at 439.Worlds of Fun now attempts to distinguish the case at hand by claiming that the guests at

its Worlds of Fun Village exercised more than de minimus control because they used thefurniture, appliances, and linens for a longer period of time and that the legislature included thelanguage "right to use". This is clearly at odds with the plain language of the Court cited above.The Supreme Court went on to distinguish the facts in Brinker from similar cases stating:

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The cases cited by Brinker to support a contrary position are inapposite. Thosecases finding a sale when the cost was included in overhead did so because, infact, title was passed from the taxpayer to a third party in exchange for apurchase, and, therefore, a permanent transfer had occurred. See, e.g., KansasCity Royals Baseball Corp. v. Dir. OfRevenue, 32 S.W.3d 560, 561 (Mo. bane2000) (with purchase of admission tickets, fans received outright title topromotional baseball caps, trading cards, baseball gloves, batting gloves and Tshirts); Aladdin's Castle, Inc. v. Dir. of Revenue, 916 S.W.2d 196, 197 (Mo.bane 1996) (in exchange for tickets supplied by arcade games, customers couldobtain outright title to arcade prizes); Sipco, Inc. v. Dir. ofRevenue, 875 S.W.2d539, 542 (Mo. bane 1994) (customers received outright title to the dry icepackaged in pork shipments and used to preserve the pork); King v. Nat'l SuperMkts., Inc., 653 S.W.2d 220, 222 (Mo. bane 1983) (customers received outrighttitle to paper sacks the grocery store used to bag groceries).

Brinker at 440. The Court also went on to distinguish Ronnoco, supra, stating:In those few cases finding a sale took place absent a permanent transfer ofpossession and title, the taxpayer did not merely incorporate the cost of the itemsin overhead, as Brinker has done here, but charged an additional consideration forthe right to use the item for an extended period. For example, inRonnoco CoffeeCo., Inc v. Dir. ofRevenue, 185 S.W.3d 676, 677 (Mo. bane 2006), the taxpayersought a section 144.615(6) resale exemption for the use tax paid on certaincoffee equipment. A grocery store could choose to buy the coffee equipment andpay one price for coffee beans it purchased from Ronnoco, or it could choose notto buy the coffee equipment but be permitted to use it so long as the store paid ahigher price for coffee beans as well as a $1 loan fee for use of the equipment,subject to Ronnoco's right to remove its equipment at any time. This Court heldthat Ronnoco's charge of separate consideration for the "loan agreement" of theequipment constituted a transfer for consideration. Id. at 677-79.

Ibid at 440.In the case at hand, there is no permanent transfer of the furniture, appliances, or linens.

The guests merely use them for the short duration of the stay and then the next guests use them,and so on. Further, Worlds of Fun does not charge an extra fee for use of the furniture,appliances, and linen. Worlds of Fun's new argument that Section 144.605(7) gives a broaddefinition to "sale" also fails due to the plain reading of the Court's decision in Brinker.

Worlds of Fun again attempts to use Kansas City Power & Light Co. v. Director ofRevenue, 83 S.W.3d 548 (Mo. banc 2002), to bolster its case and claims that the facts in this caseare almost identical. Kansas City Power supplied electricity to Hyatt Regency Crown CenterHotel in Kansas City, Missouri (Hyatt). Hyatt would use the electricity to light, heat, and cool

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the hotel and guest rooms. The Court found that Kansas City Power's sale of the electricity foruse by guests in their rooms was a sale at retail as included in the charge for the rooms andHyatt's purchase of the electricity qualified for the resale exclusion in Section 144.010.1(10).

The guests, not the hotel, controlled the use of the electricity in the guests' rooms.The facts of this case before the Commission are completely different from the facts

found in Kansas City Power. In Kansas City Power, the electricity was entirely consumed by thehotel guests and could not be reused. In the case at hand, the furniture, appliances, and linens arereused in the cabins and cottages by guests over and over again. While a guest is allowed to usethe items for a short time, those items remain in the cabin or cottage for use by future guests.Worlds of Fun's new argument that the items are subject to depreciation is unsupported by anycites to case law or statute and therefore fails to meet Worlds ofFun's burden in this case.

As set forth by the Missouri Supreme Court in Branson Properties USA, L.P. vs. DirectorofRevenue, 110 S.W.3d 824, 826 (Mo. banc 2003), the party claiming a refund of tax has theburden to show it qualifies for an exemption. Utilicorp United, Inc. v. Director ofRevenue, 75S.W.3d 725, 727 (Mo. banc 2001). "[T]axation is the rule; exemption is the exception; and thatclaims for exemption are not favored in the law." Bethesda General Hospital v. State TaxCommission, 396 S.W.2d 631, 633 (Mo. 1965). "Exemptions from taxation are to be strictlyconstrued against the taxpayer, and any doubt is resolved in favor of application of the tax." Sw.Bell Tel. Co. v. Dir. of Revenue, 182 S.W.3d 226, 228 (Mo. banc 2005). "An exemption isallowed only upon clear and unequivocal proof, and doubts are resolved against the partyclaiming it." Branson Props. U.S.A., L.P. v. Director ofRevenue, 110 S.W.3d 824, 825 (Mo.banc 2003).

As stated by the Missouri Supreme Court, exemptions are not favored in the law andWorlds of Fun has the burden of proof that its purchases of furniture, appliances, and linensqualifY for exemption from tax. Worlds of Fun has not demonstrated through clear and

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unequivocal proof that it qualifies for the exemption and exemptions are resolved against it as ataxpayer. Worlds of Fun's purchases of furniture, appliances, and linens were subject to tax, asoriginally reported and paid by it, and its claim for refund of these taxes should be denied.

WHEREFORE, Respondent requests that this Commission deny Petitioner's Motion forSummary Determination and grant Respondent's Cross-Motion for Summary Decision, and forsuch further reliefas deemed proper.

Respectfully submitted,Trevor BossertGeneral CounselDepartment ofRevenue

IS pher R. Fegal ounselisso ri Department ofRevenueTr an State Office Building301 West High, Room 670P.O. Box 475Jefferson City, MO 65105-0475Phone (573) 751-0961Fax (573) 751-7151Attorneys for Respondent

CERTIFICATE OF SERVICEI hereby certify that a true and correct copy of the foregoing was mailed, postage prepaid,

on June 10,2011, to:Bruce FarmerOliver Walker Wilson, LLC401 Locust Street, Suite 406PO Box 977Columbia, MO 65205-0977

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Mo Reply to Worlds of Fun Resp