Case Title: Balloons Over the Rainbow, Inc. v. Dir. of Revenue

Citation: 

Docket Number: SC93039

State: missouri

Court: Missouri Supreme Court

Date: 2014-04-15T00:00:00Z

Document:
SUPREME COURT OF MISSOURI 
en banc 
 
BALLOONS OVER THE   
 
) 
RAINBOW, INC. 
 
 
 
) 
) 
Appellant, 
 
) 
v. 
 
 
 
 
 
) 
No.  SC93039 
) 
DIRECTOR OF REVENUE, 
 
) 
) 
                                             
Respondent.  
) 
 
PETITION FOR REVIEW OF A DECISION OF THE 
ADMINISTRATIVE HEARING COMMISSION 
The Honorable Karen A. Winn, Commissioner 
 
Opinion issued April 15, 2014 
 
 
Balloons Over the Rainbow, Inc., a Missouri corporation, seeks review of the 
administrative hearing commission’s (AHC) denial of its claim for a refund of sales taxes 
paid and its challenge to the assessment of sales and use taxes.  In its petition for review, 
Balloons claims that the AHC erred in concluding that it owed sales taxes under section 
144.020.1(2),1 on gross receipts of hot air balloon rides because such taxes are prohibited 
by the federal Anti-Head Tax Act (AHTA), 49 U.S.C. § 40116.  Balloons also claims that 
sales taxes assessed on the sale of balloon rides through flight certificates sold by out-of-
state third party vendors are not taxable because they are not “sales at retail” in Missouri, 
as defined in section 144.010(11), and qualify for the resale exemption in section 
144.210.1.  Balloons further claims that the AHC erred in concluding that it owed use 
 
1 Unless otherwise specified, all statutory references are to RSMo Supp. 2011.   
taxes under section 144.030.2 on its out-of-state purchase of a hot air balloon and inflator 
fan from Texas because Balloons is a “common carrier” under section 144.032.2 and 
exempt from paying such taxes. 
 
This Court reverses the ruling of the AHC as to the assessment of sales taxes on all 
sales of hot air balloon rides—those purchased directly from Balloons in Missouri and 
those purchased by flight certificate from the out-of-state third-party vendors—because 
the taxes on those gross receipts are state taxes on “air commerce,” which are prohibited 
by the AHTA.  This Court rejects, however, Balloons’ claim that it does not owe use 
taxes on the hot air balloon and inflator fan purchased in Texas because Balloons is not a 
common carrier for purposes of use tax exemptions under section 144.030.2.(3).  
Accordingly, the decision of the AHC is affirmed in part and reversed in part, and the 
case is remanded. 
Factual and Procedural Background 
Balloons Over the Rainbow, Inc., is a Missouri corporation that sells rides on 
untethered hot air balloons in the St. Louis area.  At the time of their scheduled balloon 
rides, Balloons’ customers meet at the Jefferson County Library in High Ridge, Missouri.  
From there, they are transported to a launch point that varies depending on prevailing 
wind directions.   
 
Each flight lasts about an hour and is piloted by a commercial pilot licensed by the 
Federal Aviation Administration.  The pilot typically tries to confine the balloon flights to 
Missouri.  However, the flight path ultimately is dictated by prevailing wind patterns, 
which cause flights occasionally to enter into Illinois’ airspace.  According to Balloons, 
this happens less than 10 percent of the time.  Balloons’ pilots also attempt to steer clear 
of airports, but if wind patterns do carry flights over airports, pilots fly at an altitude of 
more than 10,000 feet2 to avoid the airports’ airspace, which extends from 0 to 10,000 
feet.  At the end of each flight, pilots attempt to land the balloons in Missouri as close to 
the launch site as possible.  Regardless of the landing location, all passengers are shuttled 
back to the Jefferson County Library upon landing.  
 
To ride with Balloons, customers either must purchase rides in Missouri directly 
from Balloons or buy a flight certificate on the internet through out-of-state third-party 
vendors with a contractual relationship with Balloons.  All customers buying directly 
from Balloons pay the same rate, while customers purchasing flight certificates from an 
out-of-state third-party vendor pay a price set by the vendor.  When a customer presents a 
flight certificate to Balloons, the customer receives a balloon ride if Balloons decides to 
fly that customer.  Subsequently, the third-party vendor pays Balloons a flat fee for the 
redeemed flight certificate based on its contract with Balloons.  No payment is exchanged 
between Balloons and the third-party vendor prior to the customers presenting Balloons 
with the flight certificate, and Balloons never collected or remitted sales taxes on the 
payment it received for those flights.  Balloons did collect sales tax, however, on receipts 
of balloon rides purchased in Missouri by customers directly from Balloons from October 
2007 through March 2010. 
In January 2011, Balloons requested a refund of those sales taxes in the amount of 
$7,761.51 from the director of revenue.  It claimed that it was entitled to a refund of those 
                                             
 
2 Regular flying altitude is anywhere between 1,500 and 3,000 feet. 
3 
 
taxes because the federal AHTA prohibits Missouri from assessing sales taxes on the sale 
of hot air balloon rides; therefore, section 144.020—the Missouri statute under which 
Balloons paid the Missouri sales tax—is preempted by the AHTA.  The director denied 
Balloons’ refund request. 
Prior to Balloons’ January 2011 refund request, the department of revenue audited 
Balloons for sales and withholding taxes for the period of January 1 2007, through 
December 31, 2009, and for use taxes during the period of January 1, 2005, through 
December 31, 2009.  After the audit, the director of revenue assessed Balloons for unpaid 
sales taxes of $2,729.76, plus additions and interest, and use taxes of $1,184.44.  The 
sales taxes were for the gross receipts from rides sold through the internet by out-of-state 
third-party vendors.  The use taxes were assessed on, among other items, a $1,000 
inflator fan purchased in Texas in May 2008 and an $18,000 hot air balloon purchased in 
Texas in June 2008.3 
Balloons sought the AHC’s review of the director’s decisions in two complaints.  
In its first complaint filed in April 2011, Balloons appealed the director’s denial of its 
request for a refund of the sales taxes on rides purchased in Missouri directly from 
Balloons.  In its second complaint filed in June 2011, Balloons challenged the director’s 
assessment of sales taxes on the amount paid to Balloons by third-party vendors and use 
taxes on the balloon and inflator fan purchased in Texas.  
                                             
 
3 Balloons’ audit initially resulted in a finding that Balloons was liable for use taxes in the 
amount of $1,698.31, and Balloons agreed to make a partial payment of $617.17.  This 
payment, however, was made “under protest” because Balloons disputed its liability for 
use taxes on items it claimed were personal in nature or purchased online for its business 
in Albuquerque.  After Balloons made its “payment under protest,” the director then 
assessed $1,184.65 in use tax. 
4 
 
After a hearing, the AHC ruled partially in favor of the director on both 
complaints.4  Balloons now petitions this Court for review of the AHC’s decision.  
Because review of the AHC’s decision involves construction of the revenue laws of the 
state, this Court has jurisdiction.  Mo. Const. art. V, sections 3, 18. 
Standard of Review 
This Court reviews the decision of the AHC pursuant to section 621.189, which 
directs this Court to uphold the AHC’s decision if 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.”  Street v. Dir. of Revenue, 361 
S.W.3d 355, 357 (Mo. banc 2012).  This Court reviews the AHC’s interpretation of 
revenue law de novo.  Id. 
Section 144.020(2) is Preempted by the Federal Anti-Head Tax Act 
Balloons first challenges the AHC’s decision that Balloons was not entitled to a 
refund of the sales taxes it paid and was liable for additional sales taxes assessed, 
pursuant to section 144.020.1, on the hot air balloon rides it sold.  Balloons claims that it 
does not owe sales tax because the plain language of the AHTA prohibits states from 
taxing proceeds from the sale of untethered hot air balloon rides. 
Balloons concedes that, if not for the AHTA, it would owe taxes under section 
144.020.1.  Section 144.020 imposes a tax on “all sellers for the privilege of engaging in 
                                             
 
4  The AHC ruled in favor of Balloons’ claim the items used for personal use should not 
have been subject to the use tax.  After deducting the taxes paid on Balloon’s purchases 
subject to use tax in 2005, the amount subject to use tax in 2005 is less than $2,000.  
Therefore, the AHC also found that Balloons does not have to pay consumer’s use tax for 
that year. 
5 
 
the business of selling tangible personal property or rendering taxable service at retail in 
this state.”  The tax imposed on Balloons was “equivalent to four percent of the amount 
paid for admission and seating, accommodations, or fees paid to, or in any place of 
amusement, entertainment or recreation, games and athletic events.”  Section 
144.020.1(2).  Balloons claims, however, that the federal AHTA prohibits the director’s 
assessment of taxes under section 144.020.1 on its sales of untethered hot air balloon 
rides.  Pursuant to the Supremacy Clause of the United States Constitution, the 
imposition of sales tax under section 144.020 is preempted by the AHTA when the tax 
imposed is in conflict with the AHTA.  See United States Const. art. VI, cl. 2; see also 
State ex rel. Proctor v. Messina, 320 S.W.3d 145, 148 (Mo. banc 2010). 
Originally codified at 49 U.S.C. § 1513(a), and now codified at 49 U.S.C.             
§ 40116, the AHTA prohibits a state from imposing a tax, fee, head charge or other 
charge on an individual traveling in air commerce or the sale of air transportation to an 
individual.  The prohibitions read:   
(b) Prohibitions. Except as provided in subsection (c) of this section . . . a 
State . . . may not levy or collect a tax, fee, head charge, or other charge 
on—(1) an individual traveling in air commerce; (2) the transportation of 
an individual traveling in air commerce; (3) the sale of air transportation; or 
(4) the gross receipts from that air commerce or transportation. 
 
(c) A State or political subdivision of a State may levy or collect a tax on or 
related to a flight of a commercial aircraft or an activity or service on the 
aircraft only if the aircraft takes off or lands in the State or political 
subdivision as part of the flight.  
 
 
6 
 
49 U.S.C. § 40116.5  Because Balloons is disputing state taxes levied on the gross 
receipts of its hot air balloon rides, the applicable prohibition in this case is section 
40116(b)(4), which pertains specifically to taxes on gross receipts from air commerce.6  
The parties did not cite any cases, and no cases were found, determining whether the sale 
of rides on untethered hot air balloons falls within these provisions of the AHTA.  
Therefore, as a matter of first impression, this Court considers whether the AHTA 
prohibits states from taxing the sale of untethered hot air balloon rides.   
                                             
 
5 The language in subdivision (c) of section 40116 appears to exempt the prohibitions in 
subdivision (b) from taxes on an aircraft that takes off or lands in the state imposing the 
tax.  Such an interpretation, however, has been rejected by a federal court.  See Twp. Of 
Tinicum v. U.S. Dep’t of Transp., 582 F.3d 482, 490 (3rd Cir. 2009).  Rather, 
subdivisions (b) and (c), when read together, provide that “a tax falling within an 
enumerated category [of subdivision (b)] is prohibited, and a tax not falling within an 
enumerated category is not prohibited, except that a tax on a subject flight lacking a 
ground nexus is prohibited even if such tax does not belong to an enumerated category.”  
Id.  A contrary interpretation would render subdivision (b) superfluous because 
subdivision (c) would subsume subdivision (b).  Therefore, the Court finds the federal 
interpretation of the interaction between subdivisions (b) and (c) persuasive and finds that 
the AHTA bans a state tax on any aircraft that takes off or lands in Missouri if it falls 
within any of the four prohibitions enumerated in subdivision (b). 
6 The AHC found that the AHTA does not preempt collecting a sales tax from Balloons 
because individuals do not “travel” nor are they “transported” in hot air balloons.  It is 
not clear, however, that section 40116(b)(4) requires “travel” or “transportation” for the 
preemption of a tax on the gross receipts from “air commerce.”  Even if it did, the FAA, 
charged with regulating airspace travel, characterizes the movement of hot air balloons as 
launching, then “travel[ing],” then landing.  Balloon Flying Handbook, FAA-H-8082-
11A (DOT/FAA, 2008); see also 49 U.S.C. 106(g) (authority granting the FAA with the 
duty to promulgate regulations to promote safety in air commerce).  In its handbook, the 
FAA also states that hot air balloons are “distinct from other aircraft in that [they] travel 
by moving with the wind.”  The FAA advises that “balloon flight travel” can be predicted 
using certain preflight tactics, id. at 3-2 (emphasis added), and that the pilot “should 
always face the direction of travel, especially at low altitudes, id. at 7-11 (emphasis 
added).  
 
7 
 
A court’s analysis of the scope of a federal preemption statute begins with its text, 
but “interpretation of that language does not occur in a contextual vacuum.  Rather, a 
court’s interpretation is informed by two presumptions about the nature of pre-emption.”  
Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996).  First, there is a presumption that a 
federal statute does not preempt the historic police powers of the states unless Congress 
clearly intended preemption.  Id.  Second, a court should be guided by the congressional 
purpose behind enacting the statute when determining the scope of that statute’s 
preemption.  Id. at 485-86.  Congressional purpose and intent, while primarily ascertained 
from “the language of the pre-emption statute and the ‘statutory framework’ surrounding 
it,” also is revealed in the “structure and purpose of the statute as a whole.”  Id. at       
485-86.  A preemption statute’s purpose and structure, of course, is revealed in the text 
but also in the “reviewing court’s reasoned understanding of the way in which Congress 
intended the statute and its surrounding regulatory scheme to affect business, consumers, 
and the law.”  Id.  
The AHTA is contained in subtitle VII—“Aviation Programs”—of Title 49, the 
transportation code.  See 49 U.S.C. § 40116.  Subtitle VII consists of five “parts:” Air 
Commerce and Safety (Part A), Airport Development and Noise (Part B), Financing (Part 
C), Public Airports (Part D), and Miscellaneous (Part E).  See 49 U.S.C. §§ 40101-50105.  
Part A, “Air Commerce and Safety,” contains the AHTA and is divided further into four 
subparts, including General Provisions (Subpart I) under which the AHTA falls.  See 49 
U.S.C. §§ 40101-40130.  Subpart I, “General Provisions,” consists of 30 different 
sections ranging from the topic of sovereignty and the use of airspace (§ 40103) to safety 
8 
 
of air commerce (§ 40104) to state taxation in the AHTA (§ 40116).  Also contained in 
subpart I is a section defining various statutory terms, including terms used in the AHTA.  
See Id.  Importantly, section 40102 defines those terms as they apply to the entirety of 
Part A, “Air Commerce and Safety.” 49 U.S.C. § 40102(a).  Accordingly, the  definitions 
of the terms contained in the AHTA cannot be viewed as if they were intended to apply 
specifically to the AHTA or the taxes it preempts, but rather, as they apply to “Air 
Commerce and Safety” as a whole.   
 “Air commerce” is defined in subtitle VII as “[1] foreign air commerce,              
[2] interstate air commerce, [3] the transportation of mail by aircraft, [4] the operation of 
an aircraft within the limits of a Federal airway, or [5] the operation of aircraft that 
directly affects, or may endanger safety in, foreign or interstate air commerce.”              
49 U.S.C. § 40102(a)(3).  Balloons does not assert that it operates in foreign air 
commerce or transports mail.  Rather, Balloons claims it operates in “interstate 
commerce,” “within federal airways,” or as “an aircraft that directly affects or may 
endanger safety in interstate air commerce.”  
The evidence before the AHC was that fewer than 10 percent of Balloons’ flights 
travel through airspace over any place outside of Missouri, so only a small portion of 
Balloons’ flights could be found to operate in “interstate commerce.”  Additionally, the 
findings of the AHC raise the issue whether Balloons presented sufficient evidence of the 
location of federal airways to prove it operates its balloons “within federal airways.”   
Therefore, the final category—operation of aircraft that directly affects or may endanger 
safety in interstate or foreign air commerce—will be considered first.   
9 
 
To fall within this category of air commerce, Balloons’ hot air balloons must be 
aircraft.  Under Part A, “Air Commerce and Safety,” “aircraft” is defined as “any 
contrivance invented, used, or designed to navigate, or fly in, the air.”  49 U.S.C.               
§ 40102(a)(6).  The director concedes that a hot air balloon falls within this definition.  
The standard for determining whether an aircraft directly affects or may endanger safety 
in interstate, overseas or foreign air commerce was discussed by the Court of Appeals for 
the Tenth Circuit in Hill v. National Transportation Safety Board,  886 F.2d 1275, 1280 
(10th Cir. 1989).  In Hill, the court considered the definition of “air commerce” from     
49 U.S.C. App. § 1301(4), which is nearly identical to the definition under section 
40102(a)(3), in the context of discipline of a helicopter pilot’s license.7  Id.  The court 
held that the term “air commerce” “should be construed broadly to effectuate a valid 
congressional purpose,” and the valid purpose is to protect air safety.  Id. at 1279-80 
(quoting FAA v. Landy, 705 F.2d 624, 634 (2d. Cir. 1983)).  Consistent with this purpose, 
the court in Hill determined that there need not be any actual endangerment or even a 
demonstrable threat but, rather, there must be only the potential for the aircraft to 
endanger safety in interstate air commerce.  Id. at 1280; see Gorman v. Nat’l Trans. 
Safety Bd., 558 F.3d 580, 591 (D.C. Cir. 2009).  The court’s broad interpretation of the 
                                             
 
7 In Hill, the FAA suspended and the National Transportation Safety Board affirmed the 
suspension of a helicopter pilot’s license after he piloted two flights resulting in personal 
injury and property damage.  866 F.2d at 1276-77.  In affirming that ruling of the NTSB, 
the court examined the various statutes giving the FAA the authority to regulate air safety 
and, in turn, to suspend the pilot’s license.  Id. at 1278-80.  One of those sections,          
49 U.S.C. App § 1429(a), authorized the FAA to revoke or suspend an aviation certificate 
if it is determined that “safety in air commerce or air transportation and the public 
requires.” Id.  (Emphasis added).  The court went on to apply the definition of “air 
commerce” from section 1301(4).  Id. 
10 
 
potential to endanger safety and, in turn, “air commerce” was based on the Federal 
Aviation Administration’s (FAA) broad authority to regulate air safety under Subtitle I, 
“Department of Transportation” of the transportation code.  Id. at 1278-80; see also 49 
U.S.C. § 106(g). 
Like the AHTA, the FAA is codified under subtitle VII and is governed by the 
definitions in § 40102.  The FAA8 was created and given its broad authority in the 
Federal Aviation Act of 19589 to provide safe and efficient use of navigable airspace by 
both civil and military operations.  H.R. Rep. No. 85–2360, at 1 (1958), reprinted in 1958 
U.S.C.C.A.N. 3741, 3741; see Air Line Pilots Ass’n, Int’l v. Quesada, 276 F.2d 892,      
894-95 (2d Cir. 1960).  The act requires the FAA administrator to “promote safe flight of 
civil aircraft in air commerce” by prescribing various minimum safety standards and 
regulations.  49 U.S.C. § 44701(a)(1) (emphasis added); see e.g. Morris v. Cessna 
Aircraft Co., 833 F. Supp. 2d 622, 627 (N.D. Tex. 2011).  Regulations codified by the 
FAA to promote the safety of “aircraft” within “air commerce” promotes safety in the 
same “air commerce” that is contemplated by the AHTA because the definition of “air 
commerce” in section 40102 applies to the statutes governing the FAA and the statutes 
governing the AHTA.  49 U.S.C. § 40102(a)(3); § 40116; § 106(g). 
The FAA has fulfilled its duty to promote the “safe flight of aircraft[s] in air 
commerce” by promulgating regulations governing, inter alia, the safe operation of hot 
air balloons.  Perhaps the most applicable to the issues here are the regulations found in 
                                             
 
8 When enacted, the Federal Aviation Act actually created the “Federal Aviation 
Agency,” which later became the Federal Aviation Administration.  See Pub. L. No.     
85-726, 1958 U.S.C.A.A.N. (72 Stat. 731) 855, 870. 
9 The Federal Aviation Act currently is codified at 49 U.S.C. § 44701. 
11 
 
chapter 1, subchapter C “Aircraft” and subchapter F “Air Traffic and General Operating 
Rules.”  See 14 C.F.R. §§ 31.1-.85, 91.1-.171.  These regulations dictate various 
measures—to be taken before, during, and after the balloon flight—to ensure not only the 
safety of the hot air balloon and its passengers but also the safety of other aircraft.  See Id.  
For instance, a large portion of subchapter C pertains to “airworthiness standards” 
for manned hot air balloons.  See 14 C.F.R. § 31.1-31.85.  Dictating one such 
airworthiness standard, conspicuity, section 31.83 requires that the exterior surface of the 
hot air balloon must be of “contrasting color or colors so that it will be conspicuous 
during operation.”  14 C.F.R. § 31.28.  The FAA’s purpose in promulgating section 31.83 
is obviously to decrease the potential danger posed to both the hot air balloon and to other 
aircraft in flight by ensuring that hot air balloons are easily visible.  The FAA’s concern 
for hot air balloons’ interaction with other aircraft is further apparent in section 91.113, 
which dictates priorities among converging aircraft.  14 C.F.R. § 91.113.  This regulation 
provides that “[w]hen aircraft of the same category are converging at approximately the 
same altitude . . . , the aircraft to the other’s right has the right-of-way.  If the aircraft are 
of different categories, —(1) a balloon has the right-of-way over any other category of 
aircraft.”  14 C.F.R. § 91.113(d)(1).  Section 91.113(d)(1) demonstrates that hot air 
balloons do have the potential to endanger safety in air commerce and that preventive 
measures are needed to curb that potential.  Once again, like section 31.83, section 
91.113(d)(1) does not state the FAA’s purpose in requiring all other aircraft to yield to 
hot air balloons.  See id.  It again can be inferred, however, that the purpose is grounded 
in a hot air balloon pilot’s inherent lack of control of the balloon—a characteristic that 
12 
 
undeniably heightens a hot air balloon’s potential to endanger safety in air commerce.  
Undoubtedly, an aircraft with engines, propellers, and steering mechanisms more easily 
can maneuver to avoid a collision with an aircraft whose direction is controlled strictly by 
the wind pattern.  Recognizing this inherent handicap of hot air balloons, the FAA was 
compelled to promulgate regulations to prevent problems between hot air balloons and 
other in-flight aircraft.   
The FAA’s concern for hot air balloons’ lack of control is further evident in the 
FAA handbook for hot air balloons, where many of the regulations codified in title 14 of 
the code of federal regulations are given an applicable meaning. See Balloon Flying 
Handbook, FAA-H-8082-11A (DOT/FAA, 2008).10  The handbook consists of 11 
chapters of varying topics, ranging from balloon flight training and preflight preparation, 
to the national airspace system, to weather theory and inflight maneuvers.  See Id. In the 
handbook, the FAA discusses the physics of the hot air balloons, explaining that the 
balloon is the “simplest of all flying machines” in that it “travels by moving with the 
wind and cannot be propelled through the air in a controlled manner.”  Id. at 2-2.  It goes 
on to warn the pilot to be “vigilant for obstacles, especially power lines and traffic.”       
Id. at 7-11.   
As demonstrated through these statutes, regulations and guidelines, the operation 
of untethered, pilot-driven hot air balloons has the potential to endanger safety in 
interstate air commerce.  Indeed, if hot air balloons did not have the potential to endanger 
                                             
 
10 This handbook is available online.  See Balloon Flying Handbook, FAA-H-8082-11A 
(DOT/FAA, 2008), available at http://www.faa.gov/regulations_policies/ 
handbooks_manuals/aircraft. 
13 
 
safety in interstate air commerce, then the FAA could not regulate them under its broad 
authority to regulate air safety.  See 49 U.S.C § 106(g).  But the FAA does regulate hot 
air balloons, which demonstrates to this Court that hot air balloons do have the potential 
to endanger safety in interstate air commerce.  Because hot air balloons have a potential 
to endanger safety in interstate air commerce, hot air balloons fall within the definition of 
“air commerce” in section 40102.  
While clearly not binding, an opinion letter from the United States Department of 
Transportation and private letter tax rulings from the departments of revenue of various 
states are consistent with this Court’s holding.  The regulating authorities each conclude 
that the AHTA would preempt a state tax on gross receipts on hot air balloon rides 
because hot air balloons operate in air commerce.  See Question on Taxation of Hot Air 
Balloon Flights, U.S. Dept. of Transp. Off. Gen. Counsel Op. (June 29, 2010); See also 
Kan. Private Letter Ruling No. P-2010-003 (June 30, 2010); Wis. Rev. Ruling No. 
W0124006 (Mar. 22, 2001); N.M. Rev. Ruling No. 422-98-1 (Apr. 29, 1998); Ariz. 
Trans. Tax Ruling No. TPR 92-1 (Mar. 10, 1992).  
Balloons’ second claim that it did not owe sales taxes on balloon rides sold by   
out-of-state third-party vendors under the “resale exemption” in section 144.210.1 is 
rendered moot by the finding that none of its sales are subject to tax under section 
144.020.1.  Accordingly, the rulings by the AHC on Balloons’ claims for a refund on 
sales taxes and assessment of future sales tax are reversed.  
 
 
14 
 
Taxpayer is Liable for Use Taxes on Equipment Purchased Outside of Missouri 
 
Balloons also challenges the AHC’s assessment of use taxes on a hot air balloon 
and inflator fan purchased in Texas but used in Missouri.  It asserts that the AHC erred in 
upholding the assessment of those taxes because Balloons qualifies for a tax exemption 
under section 144.030.2 in that it is a “common carrier” for purposes of the exemption. 
 
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.  Aquila 
Foreign Qualifications Corp. v. Dir. of Revenue, 362 S.W.3d 1, 3 (Mo. banc 2012).  
Exemptions are allowed only on “clear and unequivocal proof,” and any doubt is resolved 
in favor of taxation.  Id.  
 
Missouri’s use tax at issue is imposed on “the privilege of storing, using, or 
consuming within this state any article of tangible personal property.”  Section 144.610.  
An entity otherwise liable for this use tax, however, may escape liability if it qualifies 
under an applicable tax exemption.  Section 144.615(3).11  The two exemptions under 
which Balloons makes its claims, section 144.030.2(3) and (20), pertain to “common 
carriers.” Section 144.030.2(3) and (20) provide exemptions for:  
(3) Materials, replacement parts and equipment purchased for use 
directly upon, and for the repair and maintenance or manufacture of, motor 
vehicles, watercraft, railroad rolling stock, or aircraft engaged as common 
carriers of persons or property . . .  
(20) All sales of aircraft to common carriers for storage or for use in 
interstate commerce . . . . 
                                             
 
11 Section 144.615(3) makes sales tax exemptions applicable to the use tax in section 
144.610.  It provides in relevant part: “there are specifically exempted from the taxes 
levied in sections 144.600 to 144.745: . . . (3) Tangible personal property, the sale of 
which, if made in this state, would be exempt from . . . Missouri sales tax pursuant to the 
provisions of subsection 2 of section 144.030.”  Section 144.615(3). 
15 
 
 
Balloons’ purchase of a hot air balloon and an inflator fan undisputedly qualify as 
either “aircraft” or “material, replacement parts and equipment purchased for use directly 
upon aircraft.”  Id.  The dispute, then, is whether Balloons meets the criteria for being a 
“common carrier.”  Because section 144.030 does not provide a statutory definition of 
“common carrier,” this Court must otherwise ascertain its meaning.   
This Court’s primary responsibility in statutory interpretation is to determine the 
legislative intent from the language of the statute and to give effect to that intent.  Aquila, 
362 S.W.3d at 4.  “Absent a statutory definition, words used in statutes are given their 
plain and ordinary meaning with help, as needed, from the dictionary.”  Am. Healthcare 
Mgmt., Inc. v. Dir. of Revenue, 984 S.W.2d 496, 498 (Mo. banc 1999).  Moreover, when 
construing a statute, this Court considers statutes involving related subject matter if such 
statutes provide necessary definitions or shed light on the meaning of the statute being 
construed.  BASF Corp. v. Dir. of Revenue, 392 S.W.3d 438, 444 (Mo. banc. 2012) 
(citing State ex rel. Rothermich v. Gallagher, 816 S.W.2d 194, 200 (Mo. banc 1991)).  
“When the legislature enacts a statute referring to terms that have had other judicial or 
legislative meaning attached to them, the legislature is presumed to have acted with 
knowledge of that judicial or legislative action.”  Cook Tractor Co., Inc. v. Dir. of 
Revenue, 187 S.W.3d 870, 873 (Mo. banc 2006). 
Although section 144.030 does not define “common carrier,” this Court previously 
has ascertained the plain and ordinary meaning of “common carrier” under each section 
144.030.2 exemption claimed by Balloons.  See Cook, 187 S.W.3d at 873-74 (interpreting 
“common carrier” under section 144.030.2(3)); Emerson Elec. Co. v Dir. of Rev., 133 
16 
 
S.W.3d 31, 32 (Mo. banc 2004) (interpreting “common carrier” under section 
144.030.2(20)).  In doing so, this Court looked to a number of sources, including 
dictionary definitions, statutory definitions from related statutes, the state regulations of 
the Missouri Department of Revenue and prior Missouri case law and determined that the 
plain and ordinary meaning of “common carrier” is both well-established by Missouri 
case law and consistent with statutory and dictionary definitions.  Cook Tractor Co., 187 
S.W.3d at 874; see Emerson Elec. Co., 133 S.W.3d at 32 (referencing two different 
statutory provisions defining “common carrier” to interpret “common carrier” in section 
144.030.2(20)).   
Webster’s dictionary defines common carrier as “a carrier offering its services to 
all comers. . . .”  WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 458 (unabridged 
1993) (emphasis added).  Similarly, Black’s Law Dictionary states that a “common 
carrier” is a “commercial enterprise that holds itself out to the public as offering to 
transport passengers or freight for a fee.  A common carrier is generally required, by law, 
to transport freight or passengers . . . , without refusal, if the approved fare or charge is 
paid.” BLACK’S LAW DICTIONARY 242 (9th ed. 2009) (emphasis added).  The director’s 
regulations offers an almost identical regulation, defining a common carrier as “any 
person that holds itself out to the public as engaging in the transportation of passengers or 
property for hire [and is] required by law to transport passengers . . . without refusal if the 
fare or charge is paid.”  12 CSR-10-110.300(2)(A); Cook Tractor Co., 187 S.W.3d at 
874. 
17 
 
Finally, chapter 390, which regulates motor carriers and previously has been used 
by this Court to interpret section 144.030.2(3), defines a “common carrier” as “any 
person which holds itself out to the general public to engage in the transportation by 
motor vehicle of passengers or property for hire or compensation upon public highways 
and airlines engaged in intrastate commerce[.]”  Section 390.020(6); see Cook Tractor 
Co., 187 S.W.3d at 873; Emerson Elec. Co., 133 S.W.3d at 32.  Common among these 
definitions is the requirement that to be a “common carrier” an entity must “hold itself 
out” to the public or “to all comers.”  See WEBSTER’S THIRD NEW INTERNATIONAL 
DICTIONARY 458 (unabridged 1993); see also BLACK’S LAW DICTIONARY 242 (9th ed. 
2009); 12 CSR-10-110.300(2)(A); section 390.020(6). 
This Court has interpreted “common carrier” consistently with these dictionary, 
statutory, and regulatory definitions since its first interpretation of the term nearly 80 
years ago.  See State ex. rel. Anderson v. Witthaus, 102 S.W.2d 99 (Mo. banc 1937).   In 
Anderson, this Court defined “common carrier” as “anyone who holds himself out to the 
public as ready to undertake for hire or reward the transportation of goods from place to 
place . . . and so invites custom of the public, is in estimation of the law a ‘common 
carrier.’”  Id. at 99.  Since this initial discussion of “common carrier,” this Court has 
expounded on what exactly a carrier must do in order to “hold itself out to the public” 
and has determined that “holding out” can be accomplished by “advertising or soliciting 
by agents.”  Cook Tractor Co., 187 S.W.3d at 874.  In addition, it may also result “from a 
course of business or conduct.”  Id.  (citing State ex rel. Pub. Serv. Comm’n v. Logan, 
411 S.W.2d 86, 88-89 (Mo. 1967)).  Either way, it “must be a public offering of the 
18 
 
service that communicates that it is available to those who wish to use it.”  Id.  A 
common carrier does not have the ability to pick and choose whom it serves, but rather 
must “hold himself out to carry for everyone who asks him.”  Id. 
 
Balloons challenges the AHC’s decision that it was not a common carrier under 
this law.  The AHC specifically concluded that Balloons did not sufficiently demonstrate 
that it held itself “out to carry everyone” who asks it because there was evidence that 
Balloons “chooses” whether to accept particular passengers for hot air balloon rides.  The 
AHC found this exercise of discretion precluded Balloons from being a “common 
carrier” under section 144.030.2.  The evidence relied on by the AHC was the testimony 
of Robert Fear, the president of Balloons:   
Q: A customer walks into your place and presents you with a gift certificate.  
You’re obligated to fly that customer based on the gift certificate? 
A: Not at all.  
Q: You fly that customer based on the gift certificate?  
A: If I choose to fly that customer, yeah.  
Despite this testimony before the AHC, Balloons now asserts that it carries anyone 
that pays for a ride as long as weather conditions permit, which, coupled with its 
advertising, proves Balloons is a “common carrier” under the common law definition.  
See Id.  This current contention by Balloons, however, does not change the fact that the 
evidence heard by the AHC from Mr. Fear demonstrated that Balloons exercises 
discretion as to whether it flies a customer, and this discretion contradicts Missouri case 
law requiring a “common carrier” to carry all people indifferently.  Cook Tractor Co., 
19 
 
20 
 
Inc., 187 S.W.3d at 874.  Accordingly, the AHC could properly believe this evidence and 
conclude that Balloons was not entitled to a section 144.040.2(3) or (20) exemption for 
the purchases at issue because Balloons failed to show that it operated as a “common 
carrier” as required under those exemptions.  Because the AHC’s decision is authorized 
by law and supported by competent and substantial evidence upon the whole record, this 
Court affirms the AHC’s decision as to the assessment of use tax.  
Conclusion 
The sales taxes assessed on Balloons for all hot air balloon rides—those purchased 
directly from Balloons in Missouri and those purchased by flight certificate from         
out-of-state third-party vendors—are state sales taxes on “individuals traveling in air 
commerce,” which are prohibited and, consequently, preempted by the AHTA.  
Accordingly, the AHC’s decision upholding the director of revenue’s assessment of these 
taxes on Balloons is unauthorized by law and is reversed. 
Conversely, the AHC’s decision upholding the assessment of use taxes on 
Balloons is authorized by law and also supported by competent and substantial evidence.  
In light of strict construction of tax exemptions and the taxpayer’s burden of proving that 
it falls within the statutory language, the AHC was justified in determining that Balloons 
was not entitled to a section 144.030.2(3) or (20) exemption because it failed to show it 
operated as a “common carrier.”  Accordingly, the decision of the AHC is affirmed in 
part and reversed in part, and the case is remanded.  
 
 
 
 
 
 
 
 
_________________________________ 
 
 
 
 
 
 
 
   PATRICIA BRECKENRIDGE, JUDGE 
All concur.