Mo Resp to Worlds of Fun MSJ

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

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BEFORE THEADMINISTRATIVE HEARING COMMISSION

STATE OFMISSOURIFILED

MAY 03 2011WORLDS OF FUN/OCEANS OF FUN,

Petitioner,v.

DIRECTOROF REVENUE,Respondent.

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Case No. 08-1935 RS

ADMINISTRATIVE HEARINGCOMMISSION

RESPONDENT'S RESPONSE TO PETITIONER'S MOTION FOR SUMMARYDECISION AND RESPONDENT'S CROSS-MOTION FOR SUMMARY DECISION

Respondent, Director of Revenue, requests this Commission to deny Petitioner's Motionfor Summary Decision and, under Missouri Code of State Regulations I 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 oflaw. In support of her response to Petitioner's motion, the Director states:

STATEMENT OF THE CASEPetitioner, Cedar Fair, LP ("Worlds of Fun") operates the Worlds of Fun/Oceans of Fun

amusement 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 recent Missouri Supreme Courtdecision in Brinker Missouri, Inc, v. Director ofMissouri, 319 S.W.3d 433, (Mo. banc 2010) is


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directly on point, and conclusively demonstrates that Worlds of Fun's purchase of the items inquestion were subject to use tax.

PARTIES AND JURISDICTIONWorlds of Fun is an entity in which Cedar Fair, Inc. has an ownership interest and which

is, and was during all times relevant herein, a partnership in good standing under the laws of theState ofMissouri and qualified to do business in the State ofMissouri.

Respondent, the Missouri Director of Revenue, is the duly-qualified, appointed, andacting official charged with the responsibility of implementing and enforcing the revenue and taxlaws of the State ofMissouri.

The Administrative Hearing Commission has jurisdiction over this cause of action andreview, in that the final decision herein disputed constitutes a final determination by TheDirector subject to review pursuant to Sections 144.261 1 and 621.050.

PROPOSED FINDINGS OF FACT1. Worlds of Fun owns and operates Worlds of Fun Village, which is a tourist cabin

and tourist camp where the cabins and cottages are located. Petitioner's Exhibit 1.2. Worlds of Fun collects and remits sales tax on its charges for its guests' use of the

cabins and cottages in accordance with Section 144.020.1(6). Affidavit of John McCarty3. Worlds of Fun purchased items such as furniture, appliances, and linens for use

by guests ofWorlds of Fun Village. Complaint.4. All of the furniture, appliances, and linens in this case are used repeatedly in the

cabins and cottages by different guests. Petitioner's Exhibit 1.5. There is no extra charge imposed for the use of the items at issue in this case.

Petitioner's Exhibit 2.1 All statutory references are to the 2000 Revised Statues ofMissouri, as amended, unless otherwise noted.

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6. Worlds of Fun paid $19,049.50 in Missouri use tax on the items at issue in thiscase. Complaint.

7. Worlds of Fun has abandoned its use tax refund claim of $515.78 for thepurchases of com roasters. Petitioner's Motion for Summary Decision.

8. The Director denied Worlds of Fun's refund claim on September 10, 2008.8. Worlds of Fun timely filed this appeal on November 6, 2008.9. The Director timely filed her answer on December 3, 2008.

CONCLUSIONS OF LAWI. The Commission may grant a motion for summary decision if a party establishes

facts that entitle any party to a favorable decision and no party genuinely disputes such facts. ICSR 15-3.446(5). Here, the facts supporting a favorable decision for the The Director are notgenuinely disputed by either party; consequently, the Director is entitled to a summary decisionin her favor.

2. Worlds of Fun has the burden of proof on the issues it has raised pursuant toSection 621.050.2.

3. Section 144.020.1(6) imposes a sales tax "equivalent to four percent on theamount of sales or charges for all rooms, meals and drinks furnished at any hotel, motel, tavern,inn, restaurant, eating house, drugstore, dining car, tourist cabin, tourist camp..."

4. Section 144.610.1 imposes a use tax "for the privilege of storing, usmg orconsuming within this state any article of tangible personal property... "

5. As set forth by the Missouri Supreme Court in Branson Properties USA, L.P. vs.Director ofRevenue, 110 S.W.3d 824,826 (Mo. banc 2003), the party claiming a refund oftax:

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has the burden to show it qualifies for an exemption. Uti/icorp United, Inc. v. Director ofRevenue. 75 S.W.3d 725, 727 (Mo. banc 2001). "[T]axation is the rule; exemption is theexception; and that claims for exemption are not favored in the law." Bethesda General Hospitalv. State Tax Commission, 396 S.W.2d 631,633 (Mo. 1965). "Exemptions from taxation are tobe strictly construed against the taxpayer, and any doubt is resolved in favor of application of thetax." Sw. Bell Tel. Co. v. Dir. of Revenue, 182 S.W.3d 226, 228 (Mo. banc 2005). "Anexemption is allowed only upon clear and unequivocal proof, and doubts are resolved against theparty claiming it." Branson Props. US.A., L.P. v. Director of Revenue, 110 S.W.3d 824, 825(Mo. banc 2003).

SUGGESTIONS IN SUPPORTThe Commission is asked to decide whether Worlds of Fun may seek a refund of the use

tax it paid on its purchases of furniture, appliances, and linens for its cottages and cabins at itsWorlds of Fun Village. Worlds of Fun claims that its purchases are exempt from use tax becausethe items are purchased for resale to its guests. However, the Missouri Supreme Court's recentdecision in Brinker Missouri, Inc, v. Director of Missouri, 319 S.W.3d 433, (Mo. banc 2010)held that items that are reused from customer to customer are not "resold" to the customer andare subject to sales and use tax on their purchase.

Section 144.610.1 imposes a use tax "for the privilege of storing, using or consumingwithin this state any article of tangible personal property. .. ." Missouri Code of StateRegulations 12 CSR1O-4.1 05 states:

Tangible personal property held solely for resale in the regularcourse of business to other persons is not subject to the use tax.The test is what is to be done with the property purchased and heldby the purchaser. Terminology is not determinative. The purchaserand holder of the property can be called a wholesaler, butwholesalers are also, at times, consumers themselves.

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There is no factual dispute regarding the items at issue in this case. The furniture,appliances, and linens are reused in the cottages and cabins by different guests. None of theguests are allowed to take those items home with them at the end of their stay. There is no extracharge imposed for the use of the items at issue in this case. The guests' use of these items islimited to their brief stay within their cabin or cottage.

Worlds of Fun relies on Ronnoco Coffee Co. v. Director ofRevenue in asserting that itmeets the resale exemption under Section 144.615(6). 185 S.W.3d 676 (Mo. banc 2006).Ronnoco involved the sale of coffee and the "loan" of coffee equipment. Ronnoco claimed thatthe "loan" of the equipment constituted a sale and that it qualified for the resale exemptioncontained in Section 144.615(6). In order to detennine if the "loan" qualified for the resaleexemption, the Missouri Supreme Court looked for three elements that must be met: "(I) atransfer, barter, or exchange; (2) of the title or ownership of tangible personal property, or theuse, store, or consume the same; (3) for consideration paid or to be paid." The Court found that,because Ronocco's customers paid more for coffee if the equipment was provided to thecustomer, the customer paid additional consideration for the equipment. The facts in the case athand are completely different from Ronnoco. Here, the customer is allowed to use of thefurniture, appliances, and linens during their short stay at the Worlds of Fun Village. There is noextra charge for the use of these items; they simply come with the cottage or cabin.

Worlds of Fun also relies on Kansas City Power & Light v. Director of Revenue, 83S.W.3d 548 (Mo. banc 2002) and claims that the facts in this case are almost identical. KansasCity Power & Light supplied electricity to Hyatt Regency Crown Center Hotel in Kansas City,Missouri (Hyatt). Hyatt would use the electricity to light, heat, and cool the hotel and guestrooms. Id at 550. The Court found that Kansas City Power's sale of the electricity for use by

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guests in their rooms was a sale at retail as included in the charge for the rooms and Hyatt'spurchase of the electricity qualified for the resale exclusion in Section 144.010.1(10). Id at 553.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 factsfound in Kansas City Power. In Kansas City Power, the electricity was used by the hotel guestsand could not be reused. In essence, Kansas City Power was simply another in a line of casesstating that if the customer takes title to the item, it is a resale. In the case at hand, the fumiture,appliances, and linens are reused in the cabins and cottages by guests over and over again.While a guest is allowed to use the items for a short time, those items remain in the cabin orcottage for use by future guests.

The Supreme Court's decision in Brinker Missouri, Inc, v. Director of Missouri, 319S.W.3d 433, (Mo. banc 2010) is distinguishable from Kansas City Power and precisely on pointto the case at hand. Brinker Missouri, Inc. ("Brinker") owned several restaurants which servedfood and drinks to customers. Customers could either eat the food at the restaurant using tables,chairs, and dinnerware provided by Brinker or it could get the food "to go". Brinker claimed thatit "resold" the tables, chairs, and dinnerware used by their customers. Brinker argued that itincluded the cost of the tables, chairs, silverware, and dishes in its overhead and that itscustomers were not only purchasing the food, but also the tables, chairs, silverware, and dishes.In response, the Supreme Court 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 its

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customers 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.

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

Worlds of Fun Village exercised more than de minimus control because they used the furniture,appliances, and linens for a longer period of time. This is clearly at odds with the plain languageof the Court cited above. Indeed, the Supreme Court answered Worlds of Fun's claim when itwent on to distinguish the facts in Brinker from similar cases:

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. Of Revenue, 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 T-shirts); 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 'I 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, in Ronnoco 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 not

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to 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. Guests do not have the option of paying a certain price for an unfurnishedroom, and then upgrading, a la carte, to additional furnishings for an additional price.Following the Supreme Court's decision in Brinker, Worlds of Fun is not entitled to a refund ofits use tax.

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. US.A., L.P. v. Director ofRevenue, 110 S.W.3d 824, 825 (Mo.banc 2003).

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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 andunequivocal proof that it qualifies for the exemption and exemptions are resolved against it as ataxpayer. To the contrary, all of the authority plainly shows that its purchases of furniture,appliances, and linens were subject to tax, as originally reported and paid, and its claim forrefund should be denied.

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

Respectfully submitted,Trevor BossertGeneral CounselDepartment ofRevenue

i opher R e h ~ ~L al Counselissouri Department ofRevenueTruman State Office Building301 West High, Room 670P.O. Box 475Jefferson City, MO 65105-0475Phone (573) 751-0961Fax (573) 751-7151Attorneys for Respondent Director of Revenue

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

on May 3, 2011, to:Bruce FarmerOliver Walker Wilson, LLC40 I Locust Street, Suite 406PO Box 977Columbia, MO 65205-0977

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BEFORE THEADMINISTRATIVE HEARING COMMISSION

STATE OFMISSOURIWORLDS OF FUN/OCEANS OF FUN,

Petitioner,v.

DIRECTOR OF REVENUE,Respondent.

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Case No. 08-1935 RS

AFFIDAVIT OF JOHN MCCARTYJOHN MCCARTY, first being duly sworn, states:1. 1 am more than twenty-one years of age and competent to make this affidavit. It is

based on the best ofmy personal knowledge and belief, and if called as a witness, 1would and couldtestify to the matters set forth in this affidavit.

2. 1 am a Staff Audit Reviewer with the Field Compliance Bureau at the MissouriDepartment ofRevenue. 1have held this position since July I, 2010.

3. Worlds of Fun collects and remits sales tax on its charges for its guests' use of thecabins and cottages in accordance with Section 144.020.1(6).

FURTHER AFFIANT SAYETHNOT.Dated: !5 - '2l &0 II

Subscribed and sworn to before me,This3 - day of jJJO--u ,2011.::s~ J i D o 1 _ ' - - h ~ O , 0LorNotary PublicCole County, MissouriMy commission expires 10 II D /80\a

SHARON l . FARLEYNotal)'Public -Notal)' SealState ofMissouriCommissioned for Cole CountyMy Commission Expires: October 10 2012Commission Number: 08535493

Documents

Mo Resp to Worlds of Fun MSJ