Case Name: SIX FLAGS THEME PARKS, INC., Appellant, v. DIRECTOR OF REVENUE, Respondent
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 2003-01-14
Citations: 102 S.W.3d 526
Docket Number: No. SC 84563
Parties: SIX FLAGS THEME PARKS, INC., Appellant, v. DIRECTOR OF REVENUE, Respondent.
Judges: LIMBAUGH, C.J., WHITE, BENTON and PRICE, JJ., concur.
Reporter: South Western Reporter Third Series
Volume: 102
Pages: 526–535

Head Matter:
SIX FLAGS THEME PARKS, INC., Appellant, v. DIRECTOR OF REVENUE, Respondent.
No. SC 84563.
Supreme Court of Missouri, En Banc.
Jan. 14, 2003.
Rehearing Denied April 1, 2003.
Edward F. Downey, Jefferson City, Juan D. Keller, John P. Barrie, B. Derek Rose, St. Louis, for Appellant.
Jeremiah W. (Jay) Nixon, Atty. Gen., Ronald Molteni, Asst. Atty. Gen., Roger L. Freudenberg, Jefferson City, for Respondent.

Opinion:
RICHARD B. TEITELMAN, Judge.
Six Flags Theme Parks, Inc. (Six Flags) seeks review of the decision of the Administrative Hearing Commission (Commission) denying its claim for refunds of sales taxes paid to the Director of Revenue (Director) on certain admission ticket and season pass sales and video game machine receipts.
This Court has jurisdiction. Mo. Const, art. V, section S. The admission ticket and season pass sales at issue are subject to Missouri sales tax, and they are not exempt as sales in commerce between the states. Receipts from the video game machines at issue are not subject to Missouri sales tax because sales or use tax was paid on the purchase of the machines and the machines are subsequently rented to customers. The Commission's decision is affirmed in part, reversed in part and the case is remanded.
Background
Six Flags is a Delaware corporation doing business in Missouri. Six Flags operates an amusement park in Eureka, Missouri. The Eureka facility is a place of amusement offering attractions such as roller coasters, carnival games, video game machines, diving exhibitions and stage acts.
Six Flags filed a claim for a refund of certain Missouri sales taxes paid during the tax period July 1995 through November 1998, specifically: (1) a refund of Missouri sales tax paid on the Eureka facility's sales of admission tickets and season passes to customers who placed the order from, and received the tickets or passes outside of Missouri, pursuant to the statutory "in commerce" exception set forth in section 144.030.1; and (2) a refund of Missouri sales tax paid on receipts from video game machines, pursuant to the double taxation avoidance provision of section 144.020.1(8). The Director issued a final decision denying Six Flags' claims for refunds. The Commission also denied both claims, and Six Flags appeals.
Standard of review
This Court reviews the Commission's interpretation of revenue law de novo. Southwestern Bell Telephone Co. v. Director of Revenue, 78 S.W.3d 763, 765 (Mo. banc 2002). The Commission's "factual determinations are upheld if they are supported by the law and, after reviewing the whole record, there is substantial evidence to support them." Id.
Tickets and season passes
In the tax period at issue, customers who were admitted to Six Flags' Eureka facility used either single-day admission tickets or season passes. The Eureka facility sold some of the tickets and season passes to customers physically present at the amusement park, but it also sold them by mail or telephone. The Eureka facility accepted payment by credit card or by check or money order mailed to the Eureka facility. It then sent the purchased tickets or season passes to the purchaser's address. This appeal concerns only sales of tickets and season passes sent to a non-Missouri mailing address.
From July 1995 through November 1998, Six Flags collected and remitted Missouri sales tax on all tickets and season passes sold on behalf of the Eureka facility. Six Flags now seeks a refund of the sales taxes paid on the tickets purchased by mail or telephone and sent to a non-Missouri mailing address, arguing that an exemption applies.
Section 144.020.1(2) imposes a sales tax on 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.... " However, section 144.030.1 provides a sales tax exemption for "such retail sales as may be made in commerce between this state and any other state of the United States.... "
Six Flags argues that the ticket sales and season passes at issue are exempt under section 144.030.1 as sales "in commerce between" the states. The Director argues that the object of the tax is not ticket sales, but amounts paid to a place of amusement, and that the sales are thus taxable as occurring locally within Missouri.
Exemptions from taxation are to be strictly construed, and it is the burden of the taxpayer claiming the exemption to show that it fits the statutory language exactly. Westwood Country Club v. Director of Revenue, 6 S.W.3d 885, 887 (Mo. banc 1999).
The true object of the transactions in this case is the service of amusement, not .the sale of tangible personal property. There is no evidence that the tickets themselves have any value independent of the customer's permission to enter the amusement park. These transactions do not depend on the transfer of title or ownership in any tangible property; instead, they are the sale of permission to enter a place of amusement and become the recipient of a service.
Given that the thing of value purchased by the customer is not the ticket, but the entry into the amusement park, the transaction does not take place in commerce between the states. This Court has held that the collection of a portion of an admission fee while a chartered tour boat is on the Kansas side of the Missouri river does not render the transaction in interstate commerce when the obligation to pay for the tour arose in Missouri, the payments are kept in Missouri, and the boat is moored in Missouri. Lynn v. Director of Revenue, 689 S.W.2d 45, 48 (Mo. banc 1985). The transaction in this case is between the customer and an amusement park in Missouri for admission to the amusement park in Missouri. This is essentially a local transaction, despite its incidental or nonessential interstate elements, such as collection of a portion of the fee while in another state, processing the credit card payment outside Missouri, shipping the ticket to a non-Missouri mailing address, receiving the telephone ticket order from outside Missouri or providing the service to a customer who crossed a state border to get to Missouri.
The object of the transaction and the taxable event is the admission to a place of amusement in Missouri, which is taxable pursuant to section 144.020.1(2). The "in commerce" exemption of section 144.030.1 does not apply. Thus, Six Flags is not entitled to a refund of sales tax paid on its sales of tickets and season passes.
The Commission's decision denying the refund of sales taxes paid on sales of tickets and season passes is affirmed.
Video game machines
Six Flags' Eureka facility contained video game machines. Video game machines are cash-operated amusement devices that allow customers to test their skill by playing against a machine — similar to pinball games or in-home gaming systems such as Sega or Nintendo. They are tangible personal property. A customer plays one of the games by inserting the required amount of cash into the machine. A customer purchases an exclusive right to use the machine until the rules of the game determine that the game has ended.
Six Flags did not own the video game machines. The owner of the machines paid Missouri sales or use tax on its purchases of the machines. Six Flags had a contract with the owner that permitted the owner to place the machines at the Eureka facility. Six Flags and the owner split the receipts from the machines evenly. Six Flags collected and remitted all sales tax on the receipts.
Six Flags seeks a refund of sales tax paid on the video game machine receipts during the tax period July 1995 through November 1998, arguing that the sale of the machines had previously been taxed and the machines cannot be taxed twice.
Section 144.020.1(8) imposes:
A tax equivalent to four percent of the amount paid or charged for rental or lease of tangible personal property, provided that if the lessor or renter of any tangible personal property had previously purchased the property under the conditions of "sale at retail" as defined in subdivision (8) of section 144.010 or leased or rented the property and the tax was paid at the time of purchase, lease or rental, the lessor, sublessor, renter or subrenter shall not apply or collect the tax on the subsequent lease, sublease, rental or subrental receipts from that property....
Six Flags argues that sales or use taxes were previously paid on the video game machines, that customers at the Eureka facility lease or rent the machines and that section 144.020.1(8) bars taxation of the video game machine receipts. The Director argues that Six Flags is not entitled to avoid taxation pursuant to section 144.020.1(8) because Six Flags was not the owner of the video game machines and did not pay the sales or use tax when the machines were purchased. Further, the Director argues that the customer's use of the video game machine is not a lease, but a fleeting entitlement to indulge in an amusement.
Rather than describing an exemption, section 144.020.1(8) imposes a tax liability. While it is the taxpayer's burden to establish the right to an exemption, it is the Director's burden to show a tax liability. UtiliCorp United, Inc. v. Director of Revenue, 75 S.W.3d 725, 731 (Mo. banc 2001). Section 136.300.1 states in part: "With respect to any issue relevant to ascertaining the tax liability of a taxpayer all laws of the state imposing a tax shall be strictly construed against the taxing authority in favor of the taxpayer.... " Id.
The taxation of receipts from the video game machines is prohibited by this Court's holding in the similar circumstance of the rental to customers of golf carts. Westwood, 6 S.W.3d at 888-889. In Westwood, this Court determined that a country club owed no sales tax on fees it charged for golf cart usage because the golf carts were being rented to customers and the country club previously paid sales tax on its purchases and leases of the carts. Id. at 888. Section 144.020.1(8) governs such a transaction. Id. at 889.
Here, as with a golf cart, a Six Flags customer purchases the exclusive right to operate the video game machine for a term governed by the rules of the game. This is a rental agreement.
As in Westwood, the Director seeks to tax the rental of personal property previously taxed when purchased. Id. at 889. Since the owner of the video game machines paid a sales or use tax on the machines when it purchased them, the goal of taxing the property only once is met by not taxing the subsequent rental to customers. Id.
It is irrelevant that Six Flags does not own the machines. When Six Flags entered into its arrangement with the owner of the machines, both the owner and Six Flags became renters of the machines to customers and avoid taxation of the machines' receipts pursuant to section 144.020.1(8). The purpose of Missouri's sales tax system is to tax property once and not at various stages in the stream of commerce, regardless of who is receiving the benefit of the property. Id. at 888.
The Commission's decision denying the refund of sales taxes paid on video game machine receipts is reversed.
Conclusion
The Commission's decision denying the refund of sales taxes paid on video game machine receipts is reversed; in all other respects the decision is affirmed. The case is remanded.
LIMBAUGH, C.J., WHITE, BENTON and PRICE, JJ., concur.
WOLFF, J., concurs in part and dissents in part in separate opinion filed.
STITH, J., concurs in opinion of WOLFF, J.
. All statutory references are to RSMo 2000.
. In Bally's LeMan's Family Fun Centers, Inc. v. Director of Revenue, 745 S.W.2d 683 (Mo. banc 1988), this Court held that video arcades are places of amusement for the purposes of section 144.020.1(2). Section 144.020.1(8) was not at issue. Id. Westwood clarified that when section 144.020.1(8) is at issue, that more specific statute will be applied over the more general section 144.020.1(2). Westwood, 6 S.W.3d at 889.