BEFORE THE

ADMINISTRATIVE HEARING COMMISSION

STATE OF MISSOURI
FILED
MAY 03 2011
WORLDS OF FUN/OCEANS OF FUN,
Petitioner,
v.
DIRECTOR OF REVENUE,
Respondent.
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Case No. 08-1935 RS
ADMINISTRATIVE HEARING
COMMISSION
RESPONDENT'S RESPONSE TO PETITIONER'S MOTION FOR SUMMARY
DECISION AND RESPONDENT'S CROSS-MOTION FOR SUMMARY DECISION
Respondent, Director of Revenue, requests this Commission to deny Petitioner's Motion
for Summary Decision and, under Missouri Code of State Regulations I CSR 15-3.446, to enter
a decision in favor of the Director on the grounds that there are no genuine issues as to any
material fact as set forth in this brief and that the Director is entitled to summary decision as a
matter oflaw. 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 Fun
amusement park in Kansas City, Missouri. Along with the parks, Worlds of Fun also has cabins
and cottages available for guests who wish to stay multiple days at the park. The cabins contain
furniture, appliances, and linens for the guests to use during their stay. Worlds of Fun paid
Missouri use tax on its purchases of these items. Worlds of Fun claims these items are not
subject to use tax because they are "sold" to the guest for the duration of the guest's stay by the
guest's payment of the charge for the cabin or cottage. The recent Missouri Supreme Court
decision in Brinker Missouri, Inc, v. Director of Missouri, 319 S.W.3d 433, (Mo. banc 2010) is
directly on point, and conclusively demonstrates that Worlds of Fun's purchase of the items in
question were subject to use tax.
PARTIES AND JURISDICTION
Worlds 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 the
State of Missouri and qualified to do business in the State of Missouri.
Respondent, the Missouri Director of Revenue, is the duly-qualified, appointed, and
acting official charged with the responsibility of implementing and enforcing the revenue and tax
laws of the State of Missouri.
The Administrative Hearing Commission has jurisdiction over this cause of action and
review, in that the final decision herein disputed constitutes a final determination by The
Director subject to review pursuant to Sections 144.261
1
and 621.050.
PROPOSED FINDINGS OF FACT
1. 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 McCarty
3. Worlds of Fun purchased items such as furniture, appliances, and linens for use
by guests of Worlds 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 of Missouri, as amended, unless otherwise noted.
2
6. Worlds of Fun paid $19,049.50 in Missouri use tax on the items at issue in this
case. Complaint.
7. Worlds of Fun has abandoned its use tax refund claim of $515.78 for the
purchases 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 LAW
I. 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. I
CSR 15-3.446(5). Here, the facts supporting a favorable decision for the The Director are not
genuinely disputed by either party; consequently, the Director is entitled to a summary decision
in her favor.
2. Worlds of Fun has the burden of proof on the issues it has raised pursuant to
Section 621.050.2.
3. Section 144.020.1(6) imposes a sales tax "equivalent to four percent on the
amount 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 or
consuming 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 of
Revenue. 75 S.W.3d 725, 727 (Mo. banc 2001). "[T]axation is the rule; exemption is the
exception; and that claims for exemption are not favored in the law." Bethesda General Hospital
v. State Tax Commission, 396 S.W.2d 631,633 (Mo. 1965). "Exemptions from taxation are to
be strictly construed 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 is allowed only upon clear and unequivocal proof, and doubts are resolved against the
party claiming it." Branson Props. US.A., L.P. v. Director of Revenue, 110 S.W.3d 824, 825
(Mo. banc 2003).
SUGGESTIONS IN SUPPORT
The 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 its
Worlds of Fun Village. Worlds of Fun claims that its purchases are exempt from use tax because
the items are purchased for resale to its guests. However, the Missouri Supreme Court's recent
decision 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 and
are subject to sales and use tax on their purchase.
Section 144.610.1 imposes a use tax "for the privilege of storing, using or consuming
within this state any article of tangible personal property.... " Missouri Code of State
Regulations 12 CSR1O-4.1 05 states:
Tangible personal property held solely for resale in the regular
course 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 held
by the purchaser. Terminology is not determinative. The purchaser
and holder of the property can be called a wholesaler, but
wholesalers 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 the
guests are allowed to take those items home with them at the end of their stay. There is no extra
charge imposed for the use of the items at issue in this case. The guests' use of these items is
limited to their brief stay within their cabin or cottage.
Worlds of Fun relies on Ronnoco Coffee Co. v. Director of Revenue in asserting that it
meets 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 that
the "loan" of the equipment constituted a sale and that it qualified for the resale exemption
contained in Section 144.615(6). In order to detennine if the "loan" qualified for the resale
exemption, the Missouri Supreme Court looked for three elements that must be met: "(I) a
transfer, barter, or exchange; (2) of the title or ownership of tangible personal property, or the
use, 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 the
customer, the customer paid additional consideration for the equipment. The facts in the case at
hand are completely different from Ronnoco. Here, the customer is allowed to use of the
furniture, appliances, and linens during their short stay at the Worlds of Fun Village. There is no
extra 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, 83
S. W.3d 548 (Mo. banc 2002) and claims that the facts in this case are almost identical. Kansas
City 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 guest
rooms. 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's
purchase 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 facts
found in Kansas City Power. In Kansas City Power, the electricity was used by the hotel guests
and could not be reused. In essence, Kansas City Power was simply another in a line of cases
stating 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 or
cottage for use by future guests.
The Supreme Court's decision in Brinker Missouri, Inc, v. Director of Missouri, 319
S.W.3d 433, (Mo. banc 2010) is distinguishable from Kansas City Power and precisely on point
to the case at hand. Brinker Missouri, 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 dinnerware provided 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 the tables, chairs, silverware, and dishes in its overhead and that its
customers 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 overhead
one way or another (at least if the business is to break even), it would mean that
everything a customer touches in the restaurant in that sense is resold and not
subject to use tax. That cannot be what the legislature intended when it enacted
these statutes. A "transfer, barter, or exchange" of "the title or ownership of
tangible personal property, or the right to use, store, or consume the same" does
not 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 the
sense that the reusable items are used as a mechanism to facilitate delivery of their
food and drink, this degree of control is de minimus and does not rise to the level
of an actual transfer of a right to use. The plates, tables and chairs are not in any
real sense transferred to customers any more than a piece of the restaurant floor is
transferred to a customer when he or she walks on it or a bottle of ketchup is
transferred when a customer picks it up to use or inspect it or a menu is
transferred 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 language
of the Court cited above. Indeed, the Supreme Court answered Worlds of Fun's claim when it
went on to distinguish the facts in Brinker from similar cases:
The cases cited by Brinker to support a contrary position are inapposite. Those
cases finding a sale when the cost was included in overhead did so because, in
fact, title was passed from the taxpayer to a third party in exchange for a
purchase, and, therefore, a permanent transfer had occurred. See, e.g., Kansas
City Royals Baseball Corp. v. Dir. Of Revenue, 32 S.W.3d 560, 561 (Mo. bane
2000) (with purchase of admission tickets, fans received outright title to
promotional 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 could
obtain outright title to arcade prizes); Sipco, Inc. v. Dir. of Revenue, 875 S.W.2d
539, 542 (Mo. bane 1994) (customers received outright title to the dry ice
packaged in pork shipments and used to preserve the pork); King v. Nat 'I Super
Mkts., Inc., 653 S.W.2d 220, 222 (Mo. bane 1983) (customers received outright
title 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 of
possession and title, the taxpayer did not merely incorporate the cost of the items
in overhead, as Brinker has done here, but charged an additional consideration for
the right to use the item for an extended period. For example, in Ronnoco Coffee
Co., Inc v. Dir. ofRevenue, 185 S.W.3d 676, 677 (Mo. bane 2006), the taxpayer
sought a section 144.615(6) resale exemption for the use tax paid on certain
coffee equipment. A grocery store could choose to buy the coffee equipment and
pay 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 a
higher 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 held
that Ronnoco's charge of separate consideration for the "loan agreement" of the
equipment 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 unfurnished
room, 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 of
its use tax.
As set forth by the Missouri Supreme Court in Branson Properties USA, L. P. vs. Director
of Revenue, 110 S.W.3d 824, 826 (Mo. banc 2003), the party claiming a refund of tax has the
burden to show it qualifies for an exemption. Utilicorp United, Inc. v. Director of Revenue, 75
S.W.3d 725, 727 (Mo. banc 2001). "[T]axation is the rule; exemption is the exception; and that
claims for exemption are not favored in the law." Bethesda General Hospital v. State Tax
Commission, 396 S.W.2d 631, 633 (Mo. 1965). "Exemptions from taxation are to be strictly
construed 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 is
allowed only upon clear and unequivocal proof, and doubts are resolved against the party
claiming it." Branson Props. US.A., L.P. v. Director of Revenue, 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 and
Worlds of Fun has the burden of proof that its purchases of furniture, appliances, and linens
qualify for exemption from tax. Worlds of Fun has not demonstrated through clear and
unequivocal proof that it qualifies for the exemption and exemptions are resolved against it as a
taxpayer. 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 for
refund should be denied.
WHEREFORE, the Director requests that this Commission deny Petitioner's Motion for
Summary Determination and grant the Director's Cross-Motion for Summary Decision, and for
such further relief as deemed proper.
Respectfully submitted,
Trevor Bossert
General Counsel
Department of Revenue
i opher R ~ e h ~ ~
L al Counsel
issouri Department of Revenue
Truman State Office Building
301 West High, Room 670
P.O. Box 475
Jefferson City, MO 65105-0475
Phone (573) 751-0961
Fax (573) 751-7151
Attorneys for Respondent Director of Revenue
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CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing was mailed, postage prepaid,
on May 3, 2011, to:
Bruce Farmer
Oliver Walker Wilson, LLC
40I Locust Street, Suite 406
PO Box 977
Columbia, MO 65205-0977
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BEFORE THE
ADMINISTRATIVE HEARING COMMISSION
STATE OF MISSOURI
WORLDS OF FUN/OCEANS OF FUN,
Petitioner,
v.
DIRECTOR OF REVENUE,
Respondent.
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Case No. 08-1935 RS
AFFIDAVIT OF JOHN MCCARTY
JOHN 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 of my personal knowledge and belief, and if called as a witness, 1would and could
testify to the matters set forth in this affidavit.
2. 1 am a Staff Audit Reviewer with the Field Compliance Bureau at the Missouri
Department of Revenue. 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 the
cabins and cottages in accordance with Section 144.020.1(6).
FURTHER AFFIANT SAYETH NOT.
Dated: !5 - '2l &0 II
Subscribed and sworn to before me,
This 3- day of jJJO--u ,2011.
::s
i , 0Lor
Notary Public
Cole County, Missouri
My commission expires 10 II D /80\ a
SHARON l. FARLEY
Notal)' Public - Notal)' Seal
State of Missouri
Commissioned for Cole County
My Commission Expires: October 10 2012
Commission Number: 08535493