Case Title: Krispy Kreme Doughnut Corp. v. Dir. of Revenue

Citation: 

Docket Number: SC95181

State: missouri

Court: Missouri Supreme Court

Date: 2016-05-03T00:00:00Z

Document:
SUPREME COURT OF MISSOURI 
en banc 
KRISPY KREME DOUGHNUT  
 
) 
 
 
 
CORPORATION,  
 
 
 
) 
 
 
 
 
 
 
 
) 
 
 
 
 Appellant, 
 
 
 
) 
 
 
 
 
 
 
 
) 
v. 
 
 
 
 
 
 
) 
No. SC95181 
 
 
 
 
 
 
 
) 
 
 
 
 
 
DIRECTOR OF REVENUE, 
  
 
)  
   
 
 
) 
Respondent.  
 
 
) 
 
PETITION FOR REVIEW OF A DECISION OF THE  
ADMINISTRATIVE HEARING COMMISSION 
The Honorable Karen A. Winn, Commissioner 
Opinion issued May 3, 2016 
 
Krispy Kreme Doughnut Corporation petitions for review of the Administrative 
Hearing Commission's decision ruling that Krispy Kreme is not entitled to a refund of 
sales tax paid on food items sold from its stores between April 2003 and December 2005.  
The Commission ruled Krispy Kreme failed to prove, by a preponderance of the 
evidence, that not more than 80% of its food products were sold for immediate 
consumption on or off the premises of the establishment; therefore, the lower tax rate 
authorized by § 144.0141 did not apply to Krispy Kreme's food sales.  Krispy Kreme 
argues the Commission's decision is contrary to the only evidence in the record and 
conflicts with the reasonable interpretation of § 144.014.2.  Because Krispy Kreme's 
                                              
1 Statutory citations are to RSMo 2000, unless otherwise indicated. 
petition involves the construction of a revenue law of this state, this Court has jurisdiction 
pursuant to article V, section 3 of the Missouri Constitution.  The Commission's decision 
is affirmed. 
Factual and Procedural History 
 
This Court previously summarized much of the relevant background in Krispy 
Kreme Doughnut Corp. v. Dir. of Revenue (Krispy Kreme I), 358 S.W.3d 48 (Mo. banc 
2011), a decision that remanded the case to the Commission.  After remand and 
subsequent disposition by the Commission, the case has returned to this Court.  The 
relevant pre-remand background is provided, again, for full context. 
Krispy Kreme owns and operates stores in Missouri that are engaged primarily in 
the production and retail sale of donuts.  The stores offer "dine-in" accommodations on 
their premises and alert potential customers when freshly-made donuts are available with 
a "HOT DOUGHNUTS NOW" sign.  In addition to donuts, the stores sell related food 
products, such as bagged coffee beans and ground coffee, coffee and related coffee 
drinks, hot chocolate, milk, bottled water, bottled juices, and other soft drinks.  Between 
April 2003 and December 2005 (the relevant tax periods), Krispy Kreme collected and 
remitted sales tax from its retail sales based on the 4% rate imposed by § 144.020.  
However, in 2006, Krispy Kreme took notice of § 144.014, which imposes only a 1% 
sales tax rate "on all retail sales of food."  Subsection 2 of § 144.014 adds further 
qualifications: 
For the purposes of this section, the term "food" shall 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 as contained 
3 
 
in 7 U.S.C. Section 2012, as that section now reads or as it may be 
amended hereafter, and shall include food dispensed by or through vending 
machines.  For the purpose of this section, except for vending machine 
sales, the term "food" shall not include 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, regardless of whether such 
prepared food is consumed on the premises of that establishment, including, 
but not limited to, sales of food by any restaurant, fast food restaurant, 
delicatessen, eating house, or cafe. 
 
Arguing the 1% tax rate under § 144.014 was applicable, rather than the 4% tax 
rate under § 144.020, Krispy Kreme sought a refund for sales tax it had remitted on retail 
sales of donuts, non-hot beverages, juices, milk, coffee beans, and ground coffee during 
the relevant tax periods.  It did not seek a refund for sales tax remitted on retail sales of 
hot drinks.  Krispy Kreme's original refund claim totaled $324,237.33.  The director of 
revenue denied this claim.  After conceding it was not entitled to a refund on dine-in 
sales, Krispy Kreme reduced its claim to $277,992.20 and sought review of the director's 
decision by the Administrative Hearing Commission.  
Before the Commission, Krispy Kreme argued its products, other than hot drinks, 
qualified as "food" under § 144.014.2 and that its retail sales were not disqualified from 
the lower tax rate by § 144.014.2's "80/20 test" because not more than 80% of its gross 
receipts were derived from "food prepared . . . for immediate consumption."  Because 
most sales were attributable to donuts, whether Krispy Kreme derived more than 80% of 
its gross receipts from food prepared for immediate consumption depended on the 
characterization of its donuts.  Krispy Kreme argued that, while its donuts were often 
consumed immediately, not all of its donuts should count toward the 80% threshold 
4 
 
because not all were prepared for immediate consumption.  It asserted that any or all of 
the following should not count as food prepared for immediate consumption: (1) donuts 
that were not purchased within an hour of being prepared and ready to eat; (2) donuts 
sold by the dozen; and (3) donuts that customers did not eat at the store or in transit.  If 
any of these categories of donuts did not count toward the 80% threshold, Krispy Kreme 
was not disqualified from § 144.014's lower tax rate by the 80/20 test.  The director 
argued that all of Krispy Kreme's donuts should count as food prepared for immediate 
consumption because they were all capable of being eaten without further preparation by 
the customers.   
Both sides filed cross-motions for summary decision.  The Commission sustained 
the director's motion for summary decision, overruled Krispy Kreme's motion, and denied 
Krispy Kreme's refund.  The Commission ruled that although Krispy Kreme's products 
qualified as "food" under the Federal Food Stamp Program's definition, the director's 
interpretation of § 144.014.2 yielded a more reasonable result when considering the 80/20 
test; therefore, Krispy Kreme failed to carry its burden of showing that not more than 
80% of its gross receipts were derived from the sale of food prepared for immediate 
consumption.  Krispy Kreme then petitioned for review in this Court. 
In Krispy Kreme I, this Court rejected both the director's and Krispy Kreme's 
interpretations and, instead, provided the following interpretation of § 144.014.2: 
The proper interpretation of the 80/20 test becomes apparent when all of the 
words "food prepared by such establishment for immediate consumption on 
or off the premises of the establishment" are given their full effect.  Of 
particular importance are the words "on or off the premises," which modify 
"immediate consumption," clarifying that "immediate consumption" is not 
5 
 
an abstract concept (food that could be consumed immediately) but a 
concrete event (actual consumption at the time of purchase or within the 
time necessary to travel to another location "off the premises").  
Accordingly, "food prepared … for immediate consumption on or off 
the premises" means all food that is eaten at the place of preparation 
and purchase, or while traveling to, or immediately upon arrival at 
another location without any further preparation." 
 
358 S.W.3d at 53 (emphasis added).  This Court held, therefore, neither party was 
entitled "to a favorable decision based on a correct understanding of the substantive law," 
reversed the Commission's decision sustaining the director's motion for summary 
decision, and remanded the case.  Id. at 53. 
 
Following remand, Krispy Kreme attempted to produce evidence of its customers' 
actual consumption habits during the relevant tax period.  It conducted an online survey 
between September and November 2012 that asked its customers where they eat the 
donuts they purchase from a Krispy Kreme store and when they eat such donuts after 
arriving at the place of consumption.  Based on the results, Krispy Kreme concluded that 
if "immediate consumption" meant consumed within 60 minutes, then enough of its 
donuts were not immediately consumed for it to be disqualified by the 80/20 test.  That is, 
those donuts that were, in actuality, not consumed within an hour of arriving at the place 
of consumption were not donuts prepared for immediate consumption and, therefore, did 
not count toward the 80% threshold.  
Understanding that the results of its survey were based on customers' responses in 
2012, rather than during the relevant tax periods, Krispy Kreme offered evidence 
attempting to show the 2012 survey results were equally applicable to the relevant tax 
periods.  Both Alison Holder, the vice president of brand development for Krispy Kreme, 
6 
 
and Mike Parker, manager of the Missouri stores, testified that customer behavior had not 
materially changed from 2003 to 2012; therefore, the survey results also reflected 
customer behavior during the relevant tax periods.  Krispy Kreme also offered several 
other past surveys tending to show that customers' motivations for purchasing Krispy 
Kreme donuts had remained largely unchanged over the years.  The director did not offer 
any evidence, but objected to the admission of the 2012 survey. 
 
The Commission again denied Krispy Kreme's refund.  The Commission ruled the 
2012 survey was admissible, but found the survey did "not establish, by a preponderance 
of the evidence, that it reflects [Krispy Kreme customers'] consumption habits during the 
tax periods."  The Commission explained that Krispy Kreme's witnesses and other past 
surveys failed to address the key issue—"when customers eat their doughnuts."  The 
Commission further noted a conundrum it perceived created by this Court's interpretation 
in Krispy Kreme I: 
We recognize that our conclusion raises the question: given the Supreme 
Court's framing of the issue in this case, how can a retailer prove that not 
more than 80% of its total gross receipts derives from food prepared by the 
establishment that is eaten at the place of preparation and purchase, or 
while traveling to, or immediately upon arrival at, another location without 
any further preparation?  Such a question can never be answered with 
absolute certainty and precision, so is Krispy Kreme's 2012 survey and 
testimony linking consumer habits from the survey periods to the tax 
periods sufficient?  Or is it possible that adequate proof for the tax periods 
at issue simply cannot be found at this point, but a similar survey, made 
during future tax periods, will suffice for future contemporaneous refund 
claims? 
 
Krispy Kreme petitioned this Court for review. 
 
 
 
7 
 
Standard of Review 
 
 
This Court will affirm the Commission's 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."  801 Skinker 
Blvd. Corp. v. Dir. of Revenue, 395 S.W.3d 1, 3–4 (Mo. banc 2013) (internal quotations 
omitted); see also § 621.193.  This Court defers to the Commission's findings of fact, but 
reviews the Commission's determination of issues of law de novo.  Michael Jaudes 
Fitness Edge, Inc. v. Dir. of Revenue, 248 S.W.3d 606, 608 (Mo. banc 2008). 
Analysis 
 
Krispy Kreme first argues the Commission erred because its decision was contrary 
to the only evidence in the record.  Krispy Kreme argues it presented substantial evidence 
of its customers' actual consumption habits that established it was not disqualified from 
§ 144.014's lower tax rate by the 80/20 test.  Krispy Kreme concedes that it had the 
burden of proof and that the usual standard of review—upholding the Commission's 
decision if "supported by competent and substantial evidence"—is not applicable when 
reviewing a decision in favor of the party without the burden of proof.  See, e.g., Bakelite 
Co. v. Miller, 372 S.W.2d 867, 871–72 (Mo. 1963).  That Krispy Kreme had the burden 
of proof means it had both the burden of production and burden of persuasion.  White v. 
Dir. of Revenue, 321 S.W.3d 298, 304 (Mo. banc 2010).  The burden of persuasion means 
Krispy Kreme had "to convince the fact-finder to view the facts in a way that favors" 
Krispy Kreme.  Id. at 305.  Krispy Kreme did not carry its burden simply by the fact that 
it offered evidence to support its position and the director offered no evidence.  The 
8 
 
Commission "may disregard evidence which in its judgment is not credible, even though 
there is no countervailing evidence to dispute or contradict it."  State ex rel. Rice v. Pub. 
Serv. Comm'n, 220 S.W.2d 61, 65 (Mo. banc 1949).  "The rule is established in this State 
that the triers of fact under their duty to weigh the evidence may disbelieve evidence 
although it is uncontradicted and unimpeached."  Id.  The director needed only to contest 
Krispy Kreme's evidence, which may be done through cross-examination or pointing out 
"internal inconsistencies" or credibility issues.  White, 321 S.W.3d at 308.  Because the 
director contested Krispy Kreme's evidence, this Court defers to the Commission's 
determinations about persuasiveness of the evidence.  Id.   
Here, the Commission gave little weight to Krispy Kreme's evidence and 
concluded that Krispy Kreme did not carry its burden of persuasion.  Krispy Kreme 
suggests it offered so much persuasive evidence that this Court must apply a new, and 
more appropriate, standard of review for this context and ask whether the Commission's 
decision is "against the weight of the evidence."  However, this ignores that "against the 
weight of the evidence" is already inherently part of this Court's standard of review for 
administrative cases.  See Hampton v. Big Boy Steel Erection, 121 S.W.3d 220, 223 (Mo. 
banc 2003) ("Whether the award is supported by competent and substantial evidence is 
judged by examining the evidence in the context of the whole record.  An award that is 
contrary to the overwhelming weight of the evidence is, in context, not supported by 
competent and substantial evidence.").  And this Court will only reverse on an against-
the-weight-of-the-evidence basis as a check on "potential abuse of power in weighing the 
evidence . . . in rare cases, when it has a firm belief that the decree or judgment is 
9 
 
wrong."  Ivie v. Smith, 439 S.W.3d 189, 206 (Mo. banc 2014).  As discussed below, this 
Court has no such belief that the Commission's decision is wrong.   
Krispy Kreme secondly argues the Commission erred because its decision is 
contrary to the reasonable expectations of the General Assembly and conflicts with the 
reasonable interpretation of § 144.014.2.  Krispy Kreme asserts that this Court should 
reconsider its Krispy Kreme I interpretation of the words "food prepared . . . for 
immediate consumption" and that, by its plain terms, § 144.014.2 is referring only to food 
that is prepared specifically for consumption at once, without delay, such as a hamburger 
or steak.  Krispy Kreme suggests that, under this proposed interpretation, donuts are not 
food prepared for immediate consumption because, unlike a restaurant-prepared 
hamburger or steak, donuts may be consumed after some delay.  Echoing the 
Commission, Krispy Kreme also notes the difficulty of proof seemingly created by 
Krispy Kreme I's focus on actual consumption.   
 
Concerns over how Krispy Kreme would meet its burden of proof required to 
obtain the refund are understandable.  In an effort to meet its burden of proof in accord, 
Krispy Kreme attempted to demonstrate when and where its customers ate the donuts 
they purchased between April 2003 and December 2005.  Indeed, by interpreting the 
language of § 144.014.2 to merely focus on actual consumption, this Court encouraged an 
effort to determine when and where an establishment's individual customers actually 
consume food that is taken off the establishment's premises.  But, borrowing from the 
Illinois Supreme Court, this Court does not believe the General Assembly "intended that 
retailers interrogate their customers as to when they plan on eating the food.  Indeed, any 
10 
 
sort of policing would be impractical and absurd."  Canteen Corp. v. Dep't of Revenue, 
525 N.E.2d 73, 78 (Ill. 1988).  Rather, § 144.014.2's terms should be "viewed in the light 
of reality" and not "be stripped of common sense" or construed "to establish arbitrary 
loopholes."  Id.  Accordingly, further analysis of the legislative history and legislative 
intent from this Court appears necessary. 
 
Subsection 1 of § 144.014 provides that "the tax levied and imposed . . . on all 
retail sales of food shall be at the rate of one percent."  Subsection 2 further defines what 
is meant by "food."  As originally enacted, subsection 2 of § 144.014 read only: 
For the purposes of this section, the term "food" shall 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 as contained 
in 7 U.S.C. Section 2012, as that section now reads or as it may be 
amended hereafter, and shall include food dispensed by or through vending 
machines. 
 
RSMo Supp. 1997.  In relevant part, the definition of "food" for purposes of the Federal 
Food Stamp Program is "any food or food product for home consumption except . . . hot 
foods or hot food products ready for immediate consumption."  7 U.S.C. § 2012(k)(1).  
Accordingly, "food" under § 144.014 meant that which was for home consumption, 
unless it was hot and ready for immediate consumption.  At first glance, this definition 
would appear to, for tax purposes, distinguish food purchased from grocery stores and 
establishments similar to grocery stores (i.e., food for home consumption) from food 
purchased from restaurants and establishments similar to restaurants2 (i.e., food that was 
                                              
2 Hereinafter, the term "grocery stores" will be used broadly to refer to both grocery stores and 
establishments similar to grocery stores, such as convenience stores.  Likewise, the term 
11 
 
either not for home consumption or was hot and ready for immediate consumption).  
After all, the higher tax rate in § 144.020 explicitly applies to "meals and drinks furnished 
at any . . . restaurant, eating house . . . or other place in which . . . meals or drinks are 
regularly served to the public."  Consequently, food purchased from grocery stores 
would, for the most part, be taxed at the 1% rate in § 144.014, while food purchased from 
restaurants would be taxed at the higher rate in § 144.020. 
Instead of accomplishing this intended distinction, the definition of "food" created 
a tax anomaly, allowing many foods sold by restaurants to be taxable at the 1% rate 
largely intended for foods sold by grocery stores.  This is because the tax rate applicable 
to food purchased from a restaurant could very much depend on what food was ordered 
and how it was ordered.  If a customer purchased food from a restaurant to go or for 
home delivery, the food was presumably for home consumption.  Whether or not such 
food was "food" for purposes of § 144.014 and its lower tax rate turned solely on whether 
the food was hot.  If hot, the food was not "food" for purposes of § 144.014 and taxed at 
the higher rate; if not hot, the food was "food" for purposes of § 144.014 and taxable at 
the lower rate.  For example, a cold deli sandwich ordered to-go or for home delivery 
would, under the dictates of § 144.014, be taxable at a lower rate than a hot deli sandwich 
ordered to go or for home delivery from the same establishment.  Moreover, if a customer 
ordered a non-hot food item, whether or not it was "food" for purposes of § 144.014 
turned solely on where the food was to be consumed.  For example, if a cold deli 
                                                                                                                                                  
"restaurants" will be used broadly to refer to both restaurants and establishments similar to 
restaurants, such as delicatessens and cafes. 
12 
 
sandwich was ordered to go or for home delivery, the sandwich would be "food" for 
purposes of § 144.014 and taxable at the lower rate; if the same cold deli sandwich was 
ordered for "dine-in" from the same establishment, the sandwich would not be "food" for 
purposes of § 144.014 because it would not be for home consumption.  In short, 
unintended inconsistencies could abound due to the limited definition of "food" 
incorporated by § 144.014.2. 
Accordingly, just two years after adopting § 144.014, the General Assembly added 
the following to subsection 2: 
For the purpose of this section, except for vending machine sales, the term 
"food" shall not include 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, regardless of whether such prepared food is consumed on 
the premises of that establishment, including, but not limited to, sales of 
food by any restaurant, fast food restaurant, delicatessen, eating house, or 
cafe. 
 
RSMo Supp. 1999.  With this addition, food sold by grocery stores is much more 
effectively distinguished from food sold by restaurants for tax purposes.  Because of the 
80/20 test, all food sales from restaurants are now disqualified from § 144.014's lower tax 
rate—not just food that is ordered for dine-in or hot and ready for immediate 
consumption.  That this was the intended effect is confirmed, most obviously, by the 
addition's last line emphasizing that the 80/20 test is meant to capture "sales of food by 
any restaurant, fast food restaurant, delicatessen, eating house, or cafe."   
Of course, this attempted distinction between grocery stores and restaurants can 
only be accomplished if the establishments intended to fail the 80/20 test do indeed 
13 
 
derive more than 80% of gross receipts from the sale of food prepared for immediate 
consumption.  Key language found in the addition to subsection 2 ensures that this 80% 
threshold will be met by the intended targets.  First, the addition refers to "food prepared 
by such establishment for immediate consumption," without reference to whether such 
food is hot, as the Federal Food Stamp Program does.  § 144.014.2.  This dispels any 
notion that food previously qualifying for the lower tax rate as non-hot food is not 
intended to count toward the 80% threshold.  It does not matter whether the food that is 
prepared for immediate consumption is hot, cold, or room temperature—it all counts 
toward the 80% threshold.  Second, the addition refers to "food prepared by such 
establishment for immediate consumption on or off the premises of the establishment."  
§ 144.014.2 (emphasis added).  This "on or off the premises" language dispels any notion 
that food previously qualifying for the lower tax rate as food for home consumption is not 
intended to count toward the 80% threshold.  It does not matter whether the food that is 
prepared for immediate consumption is for a dine-in order, a to-go order, or a delivery 
order—it all counts toward the 80% threshold. 
"This Court's primary rule of statutory interpretation is to give effect to legislative 
intent as reflected in the plain language of the statute at issue."  Parktown Imports, Inc. v. 
Audi of Am., Inc., 278 S.W.3d 670, 672 (Mo. banc 2009).  As demonstrated above, 
because the addition to subsection 2 does not limit itself to "hot" food and because it 
expressly includes the words "on or off the premises," the general purpose of the addition 
to subsection 2 is readily apparent—ensuring that food sold by restaurants is no longer 
taxable at § 144.014's lower rate.  With this purpose in mind, there is no need to place 
14 
 
undue emphasis on certain terms of § 144.014.2.  Because the 80/20 test was intended to 
capture restaurants by counting food prepared for immediate consumption toward the 
80% threshold, the pertinent question in determining whether an establishment's food 
should count toward the 80% threshold is whether the food is akin to the food primarily 
sold by "restaurant[s], fast food restaurant[s], delicatessen[s], eating house[s], [and] 
cafe[s]."  See § 144.014.2.  In contrast to grocery stores, restaurants primarily sell foods 
that they have prepared and that are often, though not always, consumed immediately.   
Accordingly, in keeping with the plain language of § 144.014.2 and the intent of the 
General Assembly, if food is prepared by an establishment and regularly consumed by 
the establishment's customers immediately—that is, "at the place of preparation and 
purchase, or while traveling to, or immediately upon arrival at another location without 
any further preparation"—it is "food prepared . . . for immediate consumption" for 
purposes of § 144.014.2.3  See Krispy Kreme I, 358 S.W.3d at 53.      
Notably, in Krispy Kreme I, this Court rejected the argument that "food prepared 
for . . . immediate consumption" meant food that was merely capable of being 
immediately consumed.  Id. at 52.  A food that is capable of immediate consumption is 
not necessarily a food that is indeed regularly consumed immediately.  A loaf of bread, 
for example, is certainly food capable of being immediately consumed, but is not one 
                                              
3  Krispy Kreme's argument that only foods prepared specifically for consumption at once, 
without delay, are intended to count toward the 80% threshold is belied by the fact that 
§ 144.014.2 does not refer only to "hot food" that is ready for immediate consumption, as the 
Federal Food Stamp Program does.  Rather, it refers broadly to all food prepared for immediate 
consumption, without reference to temperature that could affect when the food should be 
consumed.  See § 144.014.2.  
15 
 
regularly consumed immediately.  Restaurants typically sell foods that are not just 
capable of immediate consumption, but are, in actuality, regularly consumed 
immediately—such as sandwiches, hamburgers, and salads.  Merely focusing on 
capability of immediate consumption is an incomplete analysis as it does not fully reach 
the essence of what restaurants primarily sell.  If a food is not one that is regularly 
consumed immediately, it is not a food typically sold by restaurants and is not intended to 
count toward the 80% threshold.   
In this limited sense, customers' actual consumption habits matter.  See id. at 53.  
However, the classification of a food does not change based on an individual's actual 
consumption of that food.  If a food qualifies as a "food prepared . . . for immediate 
consumption" based on the above criteria, all sales of that food count toward the 80% 
threshold regardless of whether a particular customer actually consumes the food 
immediately.  Krispy Kreme I's emphasis on actual consumption should not be read to 
authorize otherwise.  Furthermore, whether a food meets the above criteria often would 
be readily apparent by the surrounding circumstances indicating the general nature of the 
food, with actual or survey evidence of customer consumption optional.  
Krispy Kreme's case is illustrative of this point.  Here, Krispy Kreme sells donuts 
that it has fully prepared for consumption.  Krispy Kreme's donuts may be eaten without 
delay and without further preparation on the part of the customers and are, by their very 
nature, portioned into individual servings, even when sold by the dozen.  Krispy Kreme's 
donuts are typically a stand-alone snack or meal, rather than food that is purchased to be 
used in conjunction with other foods to create an entirely different meal.  Krispy Kreme 
16 
 
offers dine-in seating for the consumption of donuts and also sells drinks, such as coffee 
and milk, that lose their appeal if not consumed immediately and are complementary of 
donut consumption.  Furthermore, Krispy Kreme alerts potential customers when freshly-
made donuts are available with a "HOT DOUGHNUTS NOW" sign, the inference being 
that many customers prefer to consume donuts that have just been made.  Given these 
circumstances, Krispy Kreme does not dispute—and its own statistical evidence 
confirms—that it prepares its donuts and that the donuts are regularly consumed 
immediately by its customers.  Therefore, Krispy Kreme's donuts are akin to food sold by 
restaurants and count toward the 80% threshold as "food prepared . . . for immediate 
consumption."   
This is true even for the donuts that are not actually consumed immediately. 
Statistical evidence about individual consumption showing that some donuts are not 
actually consumed immediately does not change the general nature of Krispy Kreme's 
donuts.  Simply put, a donut is a donut.  Krispy Kreme does not prepare certain donuts 
suitable only for immediate consumption and separate, different donuts that are also 
suitable for non-immediate consumption.  All donuts are prepared the same in this 
respect, and all donuts, in general, are regularly consumed immediately by its customers.  
A donut is no less a food prepared for immediate consumption simply because a customer 
chooses to eat it two hours after purchase rather than right away.   
As seen in this case, to hold otherwise encourages the hopeless endeavor of trying 
to prove individual customers' actual consumption habits after they leave an 
establishment's premises.  More importantly though, to hold otherwise provides a 
17 
 
potential arbitrary loophole for the type of establishments that the General Assembly was  
trying to preclude from the benefits of a lower tax rate provided by § 144.014.  In short, 
Krispy Kreme's stores operate more like restaurants than grocery stores.  They are best 
described as places in which "meals or drinks are regularly served to the public," and its 
sales are intended to be taxed at the higher rate under § 144.020.  As the type of 
establishment intended to be disqualified from the lower rate by the 80/20 test, Krispy 
Kreme has failed to meet the burden of proof to be entitled to a sales tax refund pursuant 
to interpretation of § 144.014.2.  Giving effect to the General Assembly's intent and the 
plain language of § 144.014.2, all of Krispy Kreme's donuts are "food prepared . . . for 
immediate consumption."   
The Commission's decision denying Krispy Kreme a refund under § 144.014 is 
consistent with the reasonable expectations of the General Assembly and authorized by 
law.  After review of the record, this Court concludes Krispy Kreme failed to prove that 
sales of food prepared for immediate consumption did not constitute more than 80% of its 
total gross receipts and failed to show it was entitled to the lower tax rate under 
§ 144.014.  The Commission's decision is affirmed. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Zel M. Fischer, Judge 
 
All concur.