Case Name: Richard A. KING, Director of Revenue, State of Missouri, Appellant, v. LACLEDE GAS COMPANY, et al., Respondents
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 1983-03-29
Citations: 648 S.W.2d 113
Docket Number: No. 64265
Parties: Richard A. KING, Director of Revenue, State of Missouri, Appellant, v. LACLEDE GAS COMPANY, et al., Respondents.
Judges: RENDLEN, C.J., and HIGGINS, GUNN and BLACKMAR, JJ., concur.
Reporter: South Western Reporter Second Series
Volume: 648
Pages: 113–117

Head Matter:
Richard A. KING, Director of Revenue, State of Missouri, Appellant, v. LACLEDE GAS COMPANY, et al., Respondents.
No. 64265.
Supreme Court of Missouri, En Banc.
March 29, 1983.
Concurring Opinion April 26, 1983.
Rehearing Denied April 26, 1983.
John Ashcroft, Atty. Gen., Melodie A. Powell, Asst. Atty. Gen., Jefferson City, for appellant.
Lawrence J. Bannes, St. Louis, for respondents.

Opinion:
BILLINGS, Judge.
Appeal by the Department of Revenue from an order of the Administrative Hearing Commission granting a tax exemption to Laclede Gas and thereby reversing the decision of the Director to assess sales tax on electricity used by the taxpayer in its public utility business. Exclusive jurisdiction is in this Court. Mo. Const., Art. V, § 3. We reverse the decision of the Administrative Hearing Commission.
The relevant facts have been stipulated. Taxpayer Laclede Gas operates an underground storage field in northern St. Louis County and part of St. Charles County. The field is used to store natural gas during the slack summer season for use during winter months of peak demand. Laclede also constructed an underground cavern for the storage of thirty million gallons of liquid propane which can be vaporized and added to its distribution system when customer demand outstrips the available pipeline supply. Almost half of Laclede's customer requirements during severe cold weather must be met from these facilities. Thus, the storage of natural gas and storage and vaporization of liquid propane are essential for continuous service of Laclede's customers.
In 1979 taxpayer requested exemptions from sales tax on electricity used in the operation of these facilities on the grounds that the electricity was used in a non-commercial, non-domestic, and non-industrial manner; and under § 144.020, RSMo 1978, the Sales Tax Law, was exempt from taxation. The Department denied the application, finding that none of the exemptions set forth in § 144.020, subd. 1(3) applied. Taxpayer appealed to the Administrative Hearing Commission which ruled that under the consolidated holdings of State ex rel. Kansas City Power and Light Co. v. Smith, 342 Mo. 75, 111 S.W.2d 513 (Mo. banc 1938) and Kansas City Power and Light Co. v. Kansas City Public Service Co., 342 Mo. 45, 111 S.W.2d 516 (Mo. banc 1938), the use of the electricity was non-commercial and not subject to the tax. Relying on the definition of "commercial" set out in those cases the Commission chose to characterize the underground storage facilities as internal operations and, thus, non-commercial phases of Laclede's business.
Section 144.020, RSMo 1978 states:
1. A tax is hereby levied and imposed upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state. The rate of tax shall be as follows:
. (3) a tax equivalent to three percent (3%) of the basic rate paid or charged on all sales of electricity or electrical current, water and gas, natural or artificial to domestic commercial or industrial consumers, .
12 CSR 10-3.184(6) interprets this statutory language:
Sales of electricity, water or gas to licensed or regulated utilities or common carriers such as water or pipeline companies, telephone and telegraph companies and railroads are subject to the sales tax unless it is demonstrably shown that the electricity, water or gas is not used for commercial or industrial purposes. (Emphasis added)
The only issue here is the statutory interpretation of the term "commercial" in § 144.020. Administrative agency decisions based on the agency's interpretation of law are matters for the independent judgment of the reviewing court. Daily Record Company v. James, 629 S.W.2d 348, 351 (Mo. banc 1982). We are mindful that the primary objective of statutory construction is to ascertain the intent of the legislature from the language used, and to give effect to that intent if possible. In doing so we are to consider the words used in the statute in their plain and ordinary meaning. State v. Kraus, 530 S.W.2d 684, 685 (Mo. banc 1975). Tax statutes are to be strictly construed in favor of the taxpayer. Staley v. Missouri Director of Revenue, 623 S.W.2d 246 (Mo.1981). However, the words of statutes — including revenue acts — should be interpreted where possible in their ordinary, everyday senses. Hanover Bank v. Commissioner of Internal Revenue, 369 U.S. 672, 687, 82 S.Ct. 1080, 1088, 8 L.Ed.2d 187 (1961).
Webster's New International Dictionary (Second Edition) defines "commercial" as that which has financial profit as a primary aim. It distinguishes the term "mercantile" from "commercial" by noting that "mercantile" refers to the actual buying and selling of commodities, while "commercial" suggests the larger aspects of the operations of exchange.
In the cases on which the Administrative Hearing Commission relies, Kansas City Power and Light Co. v. Smith, 342 Mo. 75, 111 S.W.2d 513 (Mo. banc 1938) and Kansas City Power and Light Co. v. Kansas City Public Service Co., 342 Mo. 45, 111 S.W.2d 516 (Mo. banc 1938), the Court declined to use "commercial" in a broad sense, but chose to read it as pertaining only to the buying, selling or exchanging of commodities. The Court reasoned that to broaden the meaning to include everything pertaining to commerce could make the companion statutory term "industrial" superfluous, thereby defeating the maxim of statutory construction to give every word in a statute a meaning if possible. State ex rel. Kansas City Power and Light Co. v. Smith, 111 S.W.2d at 515.
In the present case we do not construe the term "commercial" so broadly as to blur its distinctions. Nor can we use the term so narrowly as to preclude a common sense understanding of the operations of this taxpayer.
In the context of governmental regulation, it is well established that:
Commerce, in its simplest signification means an exchange of goods; but in the advancement of society, labor, transportation, intelligence, care, and various mediums of exchange, become commodities, and enter into commerce; the subject, the vehicle, the agent, and their various operations, become the objects of commercial regulation, (emphasis added)
Lorenzetti v. American Trust Co., et al., 45 F.Supp. 128, 132 (N.D.Cal.1942), reversed on other grounds, 137 F.2d 742 (9th Cir.1943), cert. denied, 320 U.S. 770, 64 S.Ct. 82, 88 L.Ed. 460 (1943).
The facts of this case clearly indicate that the use of the electricity was such an integral part of the commercial activities of the taxpayer that to construe the use as unrelated to commerce would result in a rejection of the plain meaning of the statute. Almost half of Laclede's customer requirements during severe winter weather could be met only by the operation of these facilities. The facilities were essential to the utility's successful commercial operation.
Insofar as Smith and its companion case can be read to conflict with this holding, they are no longer to be followed.
The decision of the Administrative Hearing Commission granting taxpayer Laclede Gas Company an exemption from sales tax pursuant to § 144.020, subd. 1(3), RSMo 1978 is reversed.
RENDLEN, C.J., and HIGGINS, GUNN and BLACKMAR, JJ., concur.
WELLIVER and DONNELLY, JJ., dissent in separate opinions filed.
. The application requested exemptions for five areas of operation: underground storage of natural gas; storage of liquid propane gas and vaporization thereof; holder stations, which are located at strategic points in the distribution system and allow for short term storage of gas needed to meet hourly changes in customer demands; telemetering and cathodic protection; and "other".
. The 1979 amendment to this statute contains identical language.
. The statute in Smith, a precursor of the present statute, imposed a tax on "sales of electricity or electrical current, water, sewer services, gas (natural or artificial), to domestic commercial or industrial consumers."