January 13, 2015
Link to the Supreme Court of Missouri Opinion
Alberici Constructors,
Inc., entered into a joint venture with Holcim (US), Inc., in 2006 to construct
a new cement manufacturing plant in Missouri.[1] Alberici made a refund request to the
director of revenue for use taxes paid.[2] The director of revenue denied that request,
and Alberici sought a hearing by the administrative hearing commission (AHC).[3] The AHC affirmed the decision, and Alberici
then issued a petition for review to the Supreme Court of Missouri.[4] The Supreme Court of Missouri affirmed the
AHC decision, because it found that “[t]he term ‘materials’ in section
144.030.2(5) does not include machinery such as cranes and welders. . .” and
because it was the parties’ “intention that the delivery service be a part of
the crane rental.”[5]
I.
Facts
and Holding
Alberici and Holcim entered into a joint venture to build
a cement manufacturing plan in Missouri in 2006.[6] Alberici was responsible for “installing and
constructing the steel supports and cement manufacturing equipment provided by
Holcim.”[7] In order to perform these tasks, Alberici
rented five “massive industrial cranes” from three out-of-state vendors.[8] Alberici also rented a welder and titled the
welder’s invoice “MACHINE RENTALS.”[9] Alberici paid a total of $440,075.39 for
rental of the cranes and the welder; within that total price was a $15,000 fee
paid to Bulldog Erectors, Inc. (Bulldog), for the transportation of the crane
to the job site.[10] Bulldog billed Alberici separately for the
$15,000 transportation fee, and Alberici paid that fee on November 20, 2008.[11]
On May 19, 2010, Alberici sought a use tax refund from
the department of revenue for use taxes paid on the crane and welder rentals
and the delivery charge.[12] Alberici did so in reliance on an exemption
certificate executed by Holcim on May 11, 2010.[13] The director of revenue denied Alberici’s
refund request.[14] Alberici requested review of the director’s
decision and was granted a hearing in front of the AHC.[15] At the hearing, Alberici’s vice president
testified that he believed Alberici was allowed to select a third-party carrier
to transport the crane and that it was normal practice for freight charges to
be separate from rental charges.[16] There was also evidence presented regarding “the
Holcim plant, the cement manufacturing process, and the cranes and welder at
issue.”[17]
The AHC ultimately upheld the director of revenue’s
decision in finding that “large industrial cranes and welders are not
‘materials’ exempt from use taxes under [Missouri Revised Statute] section
144.030.2(5).”[18] The AHC also upheld the director’s decision
regarding the $15,000 delivery fee.[19] The committee found that because the fee was
separately stated and because there was a 16-day space between the rental
agreement and the payment of the delivery charge, the parties intended that
Bulldog would include delivery service at a part of the crane rental.[20] Alberici petitioned the Supreme Court of
Missouri for a review of the AHC’s decision.[21]
The Supreme Court of Missouri affirmed the AHC’s
decision.[22] The court found that Alberici “owed use taxes
on the rentals of the cranes and the welder because the legislature did not
intend the term ‘materials’ in section 144.030.2(5) to include crane and
welders.”[23] The Court also upheld the AHC’s decision
regarding the $15,000 transportation fee by finding that the delivery was a
part of the crane rental itself and, therefore, the charge was subject to use
taxes as well.[24]
II.
Legal
Background
The Supreme Court of Missouri stated that review of an
AHC decision is based on Missouri Revised Statutes Section 621.189.[25] Section 621.189 states that the Court should
uphold the AHC decision when it is “authorized by law and supported by
competent and substantial evidence upon the record as a whole unless clearly
contrary to the reasonable expectations of the General Assembly.”[26] The Supreme Court reviewed the interpretation
of law de novo.[27]
The Court first held that cranes and welders are not
“materials” under Section 144.030.2(5).[28] Alberici argued that the charges for both the
cranes and welders were exempt from the use tax found in section 144.030.2(5).[29] Certain types of personal property are exempt
from the use tax imposed by Missouri law through Missouri Revised Statutes
Section 144.610.[30] The section 144.030.2(5) exemption applies
to:
Machinery and equipment, and parts of the
materials and supplies solely required for the installation or construction of
such machinery and equipment, purchased and used to establish new or to expand
existing manufacturing, mining or fabricating plants in the state if such
machinery and equipment is used directly in manufacturing, mining or
fabricating a product which is intended to be sold ultimately for final use of
consumption[.][31]
The Supreme Court of
Missouri explained “tax exemptions are to be construed strictly, and the
taxpayer claiming the exemption bears the burden of showing that it falls
within the statutory language.”[32] The Court was faced with determining whether
the cranes and welder were “materials” within the meaning of section
144.030.2(5).[33]
In determining what was meant by “materials,” the court
also explained that “[a]bsent statutory definition, words used in statutes are
given their plain and ordinary meaning with help, as needed, from the dictionary.”[34] The Court determined that although the
dictionary definition of “material” included machinery, the Missouri
legislature did not intend for machines such as cranes and welders to be
included in the “materials” category.[35] The Supreme Court of Missouri explained that
other provisions in section 144.030.2 use both the terms “machinery” and
“materials.”[36] The Court explained that “[t]he legislature’s
use of different terms in the same statute is presumed to be intentional,” and
therefore, it is clear the legislature meant “machinery” to mean something
different from “materials.”[37] Further, the Court supported its finding by
stating that “[w]hen interpreting a statute, provisions in the statute are to
be considered together, not read in isolation.”[38]
The Supreme Court of Missouri also held that the delivery
charge was not a taxable part of the sale.[39] Alberici, as with the tax exemption, bore the
burden of proving it was entitled to a refund because it did not owe use taxes
on the delivery charge.[40] The Court stated that “[i]n determining
whether a delivery charge is a part of the sales transaction, ‘the intention of
the parties is the guiding factor.’”[41] The following are factors that are relevant
to consider when determining whether a delivery was intended to be part of the
sale: “when title passes from the seller to the buyer, whether delivery charges
are separately stated, who controls the costs and means of delivery, who
assumes the risk of loss during delivery, and whether the seller derives financial
benefit from the delivery.”[42] The Court clarified this was not an exclusive
list of factors that could be considered when making a determination.[43]
After considering relevant factors, the Court determined
that “the parties intended the delivery service to be a part of the crane
rental.”[44] The Court mentioned specific factors such as
the preprinted language on the rental agreement, the parties’ own
interpretation of the agreement, the $15,000 charge for delivery paid to
Bulldog, and the two rental agreements that separately stated inbound and
outbound transportation charges.[45] Ultimately, the Court stated that Alberici
failed to meet the “burden of proving the $15,000 delivery charge was not
subject to use tax because the parties intended at the time of contracting that
the delivery service would be separate from the crane rental.”[46] Instead, the Court stated the weight of the
evidence supported that the parties intended the delivery service be a part of
the crane rental.[47]
III.
Comment
The Supreme Court of Missouri correctly reviewed this
decision, and the Court was also correct in upholding the AHC’s decision to
refuse a tax refund to Alberici. The
Court reviewed the case de novo and
upheld the AHC decision because the Court ultimately determined the decision
was authorized by law and supported by substantial evidence as required by
section 621.193. The Court also
correctly enforced the legislature’s intention by considering the rules of
construction when reviewing the decision.
The Court clearly explained that tax exemptions are to be construed
strictly and that the taxpayer claiming the exemption bears the burden of
showing how the claimed exemption falls within the statutory language. The Court also explained the rule of
construction that requires them to hold that when the legislature uses
different terms in the same statute it is presumed to be intentional.
The Court also made it clear that Alberici also bore the
burden of proving it did not owe use taxes and the delivery charge. After considering the factors regarding
intent of the parties, the Court simply held there was not enough evidence to
reach that burden. The Court followed
the appropriate standards of review, rules of construction, and burdens
required in this case, and therefore, the decision in upholding the AHC’s
decision was appropriate. Further, this
case should warn business owners to make sure they are able to reach the
required burdens of proof when claiming tax exemptions.
-
Tara A. Bailes
[1] Alberici Constructors, Inc. v.
Dir. of Revenue, 452 S.W.3d 632, 634 (Mo. banc 2015).
[2] Id. at 635.
[3] Id.
[4] Id.
[5] Id. at 640.
[6] Id. at 634.
[7] Id.
[8] Id.
[9] Id. at 634-35.
[10] Id. at 635.
[11] Id.
[12] Id.
[13] Id.
[14] Id.
[15] Id.
[16] Id.
[17] Id.
[18] Mo. Rev. Stat.§ 144.030.2(5)
(2000); Alberici Constructors, Inc.
452 S.W.3d 632 at 635.
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] Mo. Rev. Stat. § 144.030.2(5); Alberici Constructors, Inc. 452 S.W.3d
632 at 635.
[24] Id.
[25] Mo. Rev. Stat. § 621.189 (2000); Alberici Constructors, Inc. 452 S.W.3d
632 at 636.
[26] Mo. Rev. Stat. § 621.189; Alberici Constructors, Inc. 452 S.W.3d
632 at 636 (citing Street v. Dir. of
Revenue, 361 S.W.3d 355, 357 (Mo. banc 2012)).
[27] Alberici Constructors, Inc. 452 S.W.3d 632 at 636 (citing Street, 361 S.W.3d at 357).
[28] Mo. Rev. Stat. § 144.030.2(5); Alberici Constructors, Inc. 452 S.W.3d
632 at 636.
[29] Mo. Rev. Stat. § 144.030.2(5); Alberici Constructors, Inc. 452 S.W.3d
632 at 636.
[30] Mo. Rev. Stat. § 144.030.2(5); Alberici Constructors, Inc. 452 S.W.3d
632 at 636.
[31] Mo. Rev. Stat. § 144.030.2(5); Alberici Constructors, Inc. 452 S.W.3d
632 at 636.
[32]
Alberici Constructors, Inc.
452 S.W.3d 632 at 636 (citing Aquila
Foreign Qualifications Corp. v. Dir. of Revenue, 362 S.W.3d 1, 3, (Mo. banc
2012)).
[33] Mo. Rev. Stat. § 144.030.2(5); Alberici Constructors, Inc. 452 S.W.3d
632 at 636.
[34] Alberici Constructors, Inc. 452 S.W.3d 632 at 636 (citing Am. Healthcare Mgmt., Inc. v. Dir. of
Revenue, 984 S.W.2d 496, 498 (Mo. banc 1999)).
[35] Alberici Constructors, Inc. 452 S.W.3d 632 at 637.
[36] Mo. Rev. Stat. § 144.030.2(5); Alberici Constructors, Inc. 452 S.W.3d
632 at 637.
[37] Alberici Constructors, Inc. 452 S.W.3d 632 at 638 (citing State v. Moore, 303 S.W.3d 515, 520 (Mo.
banc 2010)).
[38] Alberici Constructors, Inc. 452 S.W.3d 632 at 638 (citing Union Elec. Co. v. Dir. of Revenue, 425
S.W.3d 118, 122 (Mo. banc 2014)).
[39] Alberici Constructors, Inc. 452 S.W.3d 632 at 638.
[40] Id.
[41] Alberici Constructors, Inc. 452 S.W.3d 632 at 6389 (citing May Dep’t Stores Co. v. Dir. of Revenue,
791 S.W.2d 388, 389 (Mo. banc 1990)).
[42] Alberici Constructors, Inc. 452 S.W.3d 632 at 6389 (citing S. Red-E-Mix v. Dir. of Revenue, 894
S.W.2d 164, 167 (Mo. banc 1995)).
[43] Id.
[44] Id.
[45] Id.
[46] Id. at 640.
[47] Id.
