Link to Mo. Sup. Ct. Opinion
The Supreme Court of Missouri held that Revised Statutes of Missouri § 144.014, which imposed a one percent state sales tax on the sale of food items that can be purchased with food stamps, did not apply to Wehrenberg, Inc.’s concession sales in its movie theaters. The court reasoned that because the federal food stamp program defined food as “any food product for home consumption,” that Wehrenberg’s concession sales did not meet this definition.
I. Facts and Holding
Wehrenberg, Inc. (Wehrenberg) operates twelve movie theaters and movie theater concession stands in Missouri.[2] Concession items included “popcorn, nachos, candy and soda.”[3] Additionally, at the four movie theaters where Wehrenberg operates a restaurant-style concession stand, it sold “hotdogs, hamburgers, pizza, French fries, and similar items.”[4] On the sale of all its concession items, Wehrenberg charged its customers a four percent sales tax, pursuant to Revised Statutes of Missouri § 144.020.[5]
Wehrenberg filed a claim for a state sales tax refund with the Missouri Director of Revenue.[6] Wehrenberg claimed that the concession items “should have been taxed at the one percent rate set forth in section 144.014.”[7] Wehrenberg argued that because concession items such as “popcorn or nachos are ‘types of food’ for which food stamps may be redeemed,” that the one percent tax imposed by § 144.014 on items which can be bought with food stamps should apply to its concession stands.[8]
The Director of Revenue and the Administrative Hearing Commission (AHC) both rejected Wehrenberg’s claim.[9] Wehrenberg subsequently sought review by the Supreme Court of Missouri of the AHC’s decision.[10]
The Supreme Court of Missouri held that the one percent sales tax on food that may be purchased with food stamps did not apply to Wehrenberg’s concession sales.[11] The court reasoned that the definition of “products and types of food” subject to the one percent sales tax in Revised Statutes of Missouri § 144.014 was linked to the definition of “food” as used in the Federal Food Stamp Act.[12] “Food,” as defined in the Federal Food Stamps Act, includes “any food or food product for home consumption.”[13] Because the food sold at Wehrenberg’s concession stands is for consumption at the theater rather than home consumption, the court reasoned that the one percent sales tax imposed by § 144.014 did not apply to the concession sales.[14]
II. Legal Background
A. Revised Statutes of Missouri § 144.020
Revised Statutes of Missouri § 144.020 imposes a tax upon all sellers engaging in the “business of selling tangible personal property or rendering taxable services at retail” in the state of Missouri.[15] Specifically, a four percent tax is imposed upon all sales of meals and drinks furnished at a restaurant or other place in which meals or drinks are regularly served to the public.[16] The word “public” is defined as those members of the public who can patronize a business.[17]
B. Revised Statutes of Missouri § 144.014
Revised Statutes of Missouri § 144.014 essentially modifies the tax levied and imposed pursuant to § 144.020.[18] Section 144.014 imposes a one percent tax on all retail sales of food that are taxed under § 144.020.[19] Food is defined to include “only those products and types of food for which food stamps may be redeemed pursuant to the provisions of the Federal Food Stamp Program.”[20] Food is defined in the Federal Food Stamp Program to mean “any food or food product for home consumption.”[21]
The definition of food in § 144.014 also excludes food or drink sold by any establishment “where the gross receipts derived from the sale of food prepared by such establishment for immediate consumption on or off the premises of the establishment constitutes more than eighty-percent of the total gross receipts of that establishment.”[22] The statute suggests that this limitation might apply to “sales of food by any restaurant, fast food restaurant, delicatessen, eating house, or cafe.”[23]
C. Krispy Kreme Doughnut Corp. v. Director of Revenue[24]
Krispy Kreme Doughnut Corporation (Krispy Kreme) filed a complaint challenging the Director of Revenue’s denial of Krispy Kreme’s claim for a state sales tax refund.[25] Krispy Kreme argued that the sale of its food items should be taxed at the lower sales tax rate in § 144.014.[26] The AHC found that Krispy Kreme was not entitled to a tax refund.[27] Although the AHC concluded that the food items sold by Krispy Kreme could be purchased with food stamps, the items sold did not meet the definition of food in § 144.014.[28]
In interpreting § 144.014, the AHC drew a line “between food generally purchased for home consumption and food generally purchased for immediate consumption.”[29] The AHC explained that the former, “like donuts by the dozen,” are eligible for the reduced tax rate, whereas the latter, “like prepared hamburgers,” are not eligible.[30] However, Krispy Kreme did not qualify for the reduced tax rate because it could not show that “less than 80% of its stores’ gross receipts derive from the sale of foods prepared for immediate consumption, regardless of where the food was consumed.”[31]
III. Comment
Assuming that one can purchase concession items at a movie theater with food stamps, Wehrenberg’s argument on its face seems plausible.[32] Unfortunately for Wehrenberg, statutory construction and a technical definition of food defeated its claim for a sales tax refund.
Section 144.014 is not a newly enacted statute. The Missouri General Assembly passed legislation enacting the statute in 1997.[33] Yet, Wehrenberg is just now getting around to claiming a tax refund. So what, or who, brought this statute to Wehrenberg’s attention? The current economic condition is one possibility. In a bad economy, companies often have negative cash flow. These claims for sales tax refunds might be attempts to boost cash flow. Another possibility is that it was a third party, such as a tax consulting firm, that suggested Wehrenberg file a claim for a refund based on this statute. If the claim had been successful, this would have been a win-win situation for both parties. The consultant would have received a share of the refund in exchange for doing all the work in filing the claim.
Wehrenberg is not the only company to attempt to claim a refund under § 144.014 this year. Krispy Kreme also claimed and was denied a sales tax refund.[34] Unlike the court in Wehrenberg, the AHC found that the food items sold by Krispy Kreme could be purchased with food stamps.[35] Thus, Krispy Kreme met the first part of the definition of food in § 144.014.[36] However, because Krispy Kreme could not show that “less than 80% of its stores’ gross receipts derive from the sale of foods prepared for immediate consumption,” it could not satisfy the second part of the statute and thus did not meet the definition of food in § 144.014.[37]
It appears that Wehrenberg and Krispy Kreme are the first two cases challenging the interpretation of § 144.014. Both the court's decision in Wehrenberg and the AHC’s decision in Krispy Kreme are adverse to taxpayers. By construing various terms in § 144.014, they reduce the scope of food that can be taxed at a lower rate.
-Lauren K. Shores, CPA
[1] No. SC91283 (Mo. Oct. 4, 2011) (en banc), available at http://www.courts.mo.gov/file.jsp?id=49732. The West reporter citation is Wehrenberg, Inc. v. Director of Revenue, 352 S.W.3d 366 (Mo. 2011) (en banc).
[2] Id. at 1.
[3] Id.
[4] Id.
[5] Id. at 2.
[6] Id.
[7] Id.
[8] Id. at 3.
[9] Id. at 1, 2.
[10] Id. at 1.
[11] Id. at 2.
[12] Id. at 2.
[13] Id.
[14] Id. at 2-3.
[15] Mo. Rev. Stat. § 144.020.1. (2000).
[16] Mo. Rev. Stat. § 144.020.1(6). (2000).
[17] J.B. Vending Co. v. Dir. of Revenue, 54 S.W.3d 183, 186 (Mo. 2001) (en banc).
[18] Mo. Rev. Stat. § 144.014.1 (2000).
[19] Id.
[20] Mo. Rev. Stat. § 144.014.2 (2000).
[21] 7 U.S.C. § 2012(k) (2011).
[22] Mo. Rev. Stat. § 144.014.2 (2000).
[23] Id.
[24] No. 06-1044 RS (AHC). Krispy Kreme petitioned the Supreme Court of Missouri for review. The Court heard oral arguments, but has yet to hand down an opinion.
[25] Id. at 1.
[26] Id.
[27] Id.
[28] Id. at 5.
[29] Id. at 8.
[30] Id.
[31] Id. at 8-9.
[32] Neither the AHC decision nor the Supreme Court of Missouri decision addressed whether food stamps could be used to purchase concession items at a movie theater.
[33] L. 1997 H.B. 491
[34] Krispy Kreme Doughnut Corp. v. Director of Revenue, No. 06-1044 RS (AHC). The Director of Revenue and the AHC both denied the claim. Id. The AHC found that Krispy Kreme did not meet the definition of food in § 144.014 because it did not meet the eighty-percent test outlined in § 144.014.2 Id.
[35] Id. at 8.
[36] Id.
[37] Id. at 5, 8-9.
