Case Name: SHELTER MUTUAL INSURANCE COMPANY, Respondent, v. DIRECTOR OF REVENUE, Appellant
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 2003-05-27
Citations: 107 S.W.3d 919
Docket Number: No. SC 84617
Parties: SHELTER MUTUAL INSURANCE COMPANY, Respondent, v. DIRECTOR OF REVENUE, Appellant.
Judges: LIMBAUGH, C.J., WHITE, BENTON, STITH and TEITELMAN, JJ., concur.
Reporter: South Western Reporter Third Series
Volume: 107
Pages: 919–928

Head Matter:
SHELTER MUTUAL INSURANCE COMPANY, Respondent, v. DIRECTOR OF REVENUE, Appellant.
No. SC 84617.
Supreme Court of Missouri, En Banc.
May 27, 2003.
Evan J. Buchheim, Attorney Generals Office, Jefferson City, for appellant.
Edward F. Downey, Bryan Cave LLP, Jefferson City, Juan D. Keller, John P. Barrie, B. Derek Rose, Bryan Cave LLP, St. Louis, for respondent.

Opinion:
WILLIAM RAY PRICE, JR., Judge.
I.
The Director of Revenue seeks review of the decision of the Administrative Hearing Commission ("AHC") that Shelter Mutual Insurance Company's cafeteria sales were not taxable under section 144.020.1(6), RSMo 2000. The decision of the Administrative Hearing Commission is affirmed.
II.
Shelter is a mutual benefit insurance company with its main office and corporate headquarters in Columbia, Missouri. Shelter limits access to the large office building at its headquarters by use of a key card system and receptionist. Only Shelter employees are issued key cards. Authorized guests may enter the building only after first seeing the receptionist and then only after a Shelter employee signs in the visitor and escorts the visitor through the building.
Shelter owns and operates a cafeteria-style dining facility within its office building for the convenience of its officers and employees. The cafeteria serves meals and drinks to Shelter employees and authorized visitors escorted to the cafeteria by a Shelter employee. All patrons are charged for food and beverages purchased at the cafeteria. However, Shelter subsidizes the operation of the cafeteria and the amount charged to cafeteria patrons does not cover the operating costs of running the cafeteria.
During the tax period at issue, Shelter did not pay sales tax on its purchases of food, drink or other restaurant supplies. Rather, Shelter issued tax exemption certificates to its suppliers on the basis that it was purchasing the items for resale. Shelter did, in fact, collect and remit to the Director sales tax on its sales of meals and drinks in the cafeteria in the amount of $110,053.97 during the tax period. Shelter thereafter sought a refund of that amount on the basis that the cafeteria is not a place that regularly sells meals and drinks to the public. The Director denied Shelter's claim. Shelter sought review of the Director's decision by the AHC, which ordered the refund.
III.
"This Court has jurisdiction pursuant to Mo. Const, art. V, section 3 and reviews the AHC's interpretation of revenue law de novo." Southwestern Bell v. Dir. of Revenue, 94 S.W.3d 388, 390 (Mo. banc 2002) (citations omitted). "This Court will uphold the AHC's decision if authorized by law and supported by competent and substantial evidence upon the whole record." Id. (internal quotations omitted) (citing section 621.193, RSMo 2000; Southwestern Bell v. Dir. of Revenue, 78 S.W.3d 763, 765 (Mo. banc 2002) (citations omitted)).
IV.
Section 144.020.1(6) levies a tax on "the amount of sales or charges for all . meals and drinks furnished at any hotel, motel, tavern, inn, restaurant, eating house, drugstore, dining car, tourist cabin, tourist camp or other place in which . meals or drinks are regularly served to the public." (emphasis added). This Court has previously addressed this language in Greenbriar Hills Country Club v. Director of Revenue, 935 S.W.2d 36 (Mo. banc 1996), and J.B. Vending Co. v. Director of Revenue, 54 S.W.3d 183 (Mo. banc 2001). A close reading of these cases reveals more than one criteria for determining whether a taxpayer regularly serves meals and drinks to the public.
A.
One criteria utilized in Greenbriar Country Club focused on the special relationship between the taxpayer and those to whom it serves meals and drinks. Greenbriar Country Club operated as a cooperative association for the benefit of its members and provided recreational and dining facilities to its members and their invited guests. Greenbriar, 935 S.W.2d at 37. Greenbriar charged a flat monthly fee to its members, covering a fixed gratuity for its food and beverage services, which this Court determined to be "part of Greenbriar's charge for meals and drinks." Id. at 36-38. However, the Director stipulated that Greenbriar did not serve meals and drinks to the public, but only to its members and their invited guests. Id. at 38. Because of the special relationship between co-owners or members and their association, there were no sales "to the public."
J.B. Vending was also decided, in part, based upon a láck of any special relationship between J.B. Vending Co. and those that it served in its cafeterias. J.B. argued that it only served employees and thus, did not regularly serve the public. J.B. Vending, 54 S.W.3d at 189. However, its sales were not to its own employees, but those of its client-companies. Id. This Court specifically noted that those eating in the cafeterias had "no contractual or other special relationship with J.B. [Vending]." Id. Thus, J.B.'s patrons were no different than "typical" restaurant patrons, most of whom would certainly be some other's employee. Id.
Wellesley College v. Attorney General, 313 Mass. 722, 49 N.E.2d 220 (Mass.1943), presents a remarkably similar situation to Shelter's and was also decided, in part, based upon a special relationship between the college and the patrons it served in its cafeterias. Massachusetts imposed a sales tax on meals "furnished at any restaurant, eating house, hotel, drug store, club, resort or other place where meals or food are regularly served to the public." Id. at 227. The college provided cafeteria service to dormitory residents and allowed non-resident students, faculty and invited guests to purchase meal tickets for use in its cafeterias. Id. at 223. Thus, there existed a special relationship between the college and its students and employees sufficient to render those sales nonpublic.
B.
Another related criteria for determining taxability is "whether [the taxpayer] . invited the trade of the public ." J.B. Vending, 54 S.W.3d at 187 (citing State ex rel. Anderson v. Witthaus, 340 Mo. 1004, 102 S.W.2d 99 (Mo banc 1937)). Indeed, J.B. Vending referred to this test no less than four times, noting, for example, that J.B. Vending "holds itself out ready to contract for cafeteria services with any company that hires its services." Id. at 189,184,187.
Greenbriar Country Club, unlike J.B. Vending, did not hold itself out as ready to contract with the public. Rather, Greenbriar served only its members and their invited guests. Greenbriar, 935 S.W.2d at 37. Even the Director stipulated that Greenbriar did not serve the public. Id. at 38.
Wellesley College based its decision primarily on this test. In determining that it was "plain that the college was not engaged in the business of regularly serving meals or food to the public", Wellesley College, 49 N.E.2d at 227, the court said:
Furnishing food to a comparatively small group of tenants for a short period of time is not serving food to the public within the meaning of the statute. The dining accommodations at the college are not open to the public. They are restricted to a small, well defined number of classes to the members of which they are available. The maintenance of dining rooms is not conducted as a commercial enterprise, separate and independent of the various other activities of the [college], but is conducted as an incidental but necessary undertaking if the college is to continue to function as an educational institution....
Id.
C.
The majority in J.B. Vending also based their decision, in part, on a determination that the word "public" as used in section 144.020.1(6) was not limited to the public as a whole, but also referred to subsets of the public. Two judges disagreed with that interpretation of the word public. That disagreement is irrelevant to the Court's decision here, however, for whichever meaning of the term "public" is correct, J.B. Vending did not hold that being a member of a subset of the public would provide a sufficient basis to impose the tax where, as here, the seller and buyer have a special relationship and the seller does not invite the trade of the public. For this reason, the Director's reliance on J.B. Vending is misplaced.
D.
As in Greenbriar and Wellesley College, and unlike J.B. Vending, there exists a special relationship between Shelter and those it serves in its cafeteria. Shelter's employees are not merely "typical" restaurant patrons, but are bound to Shelter by a special relationship. Thus, to the extent that Shelter sells meals and drinks to its own employees, it clearly is not regularly serving the public. Further, Shelter's de minimus sales directly to authorized and escorted guests should not invoke the taxing provisions of section 144.020.1(6).
It is also clear that Shelter has not "invited the trade of the public.... " J.B. Vending, 54 S.W.3d at 187. Just as Wellesley College did not maintain its cafeterias "as a commercial enterprise", Wellesley College, 49 N.E.2d at 227, neither did Shelter provide its dining services as "separate and independent", Id., of its primary business of insurance. Like Wellesley College, Shelter offered meals and drinks to its employees "as an incidental but necessary undertaking", Id., of its insurance business. In fact, Shelter deemed its cafeteria service so vital to the convenience and productivity of its employees that it subsidized the cafeteria's operating costs; offering the meals and drinks to its employees at prices insufficient to cover cafeteria operations.
Shelter's special relationship with those it serves and the fact that Shelter does not invite the trade of the public clearly establish that Shelter does not regularly serve meals or drinks to the public. As such, the taxing provisions of section 144.020.1(6) cannot apply.
V.
The Director argues that any refund due Shelter should be offset by the amount of unpaid tax due. See Westwood Country Club v. Dir. of Revenue, 6 S.W.3d 885, 887-88 (Mo. banc 1999). However, under section 144.250, when there is an alleged failure to remit taxes, the Director is required make an assessment of the delinquent tax and give notice of the estimated assessment. This assessment must be made before any refund can be credited toward the unpaid tax. Dyno Nobel, Inc. v. Dir. of Revenue, 75 S.W.3d 240, 243-44 (Mo. banc 2002). Further, the director has only three years to make any additional assessment of tax.
The Director contends that Shelter's stipulation of a possible tax amount relieved her from the assessment requirement. The stipulation stated: "If tax was due on Shelter's purchases of meal and drink components, Shelter would have incurred $50,456 in Missouri and local sales tax for the periods October 1995 through March 1999 ("Tax Periods")." This statement stipulated only the amount of possible tax, "[i]f tax was due", not that such amount was actually due and owing. Shelter did not specifically agree to this amount as an offset, nor does Shelter concede that it had no defenses or other affirmative avoidance to any such assessment. In fact, the stipulation was made after the applicable statute of limitations period had run. See section 144.220.
"The statute of limitations may be suspended or tolled only by specific disabilities or exceptions enacted by the Legislature and the courts are not empowered to extend those exceptions." Cooper v. Minor, 16 S.W.3d 578, 582 (Mo. banc 2000). Section 144.220 has only one exception to the running of the statute that could apply in this case: "[A] fraudulent return or [ ] neglect or refusal to make a return...." Id. "Whether a tax return is fraudulent is to be determined by considering all the facts and circumstances of each case. The elements of fraud include a positive, intentional deceit or subtle device to escape the sales tax." Odorite, Inc. v. Dir. of Revenue, 713 S.W.2d 833, 839 (Mo. banc 1986). "A misrepresentation as to a question of law is not fraud. And the question of what constitutes a . 'sale for resale' or 'sale at retail' is a question of law." Id. Shelter did not file a fraudulent return or refuse to make a return. No exception to the statute of limitation applies. The limitations period had passed when Shelter entered the stipulation.
The Director did not raise the issue of an offset in its pleadings to the AHC. The only issue presented was Shelter's refund claim. At the time the Director raised this issue and Shelter stipulated to a possible tax amount, the three-year limitations period had passed. The AHC's refusal to consider the Director's request for an offset of any tax refund was "authorized by law and supported by competent and substantial evidence.... " Southwestern Bell, 94 S.W.3d at 390.
YI.
For the foregoing reasons, the decision and judgment of the Administrative Hearing Commission is affirmed.
LIMBAUGH, C.J., WHITE, BENTON, STITH and TEITELMAN, JJ., concur.
WOLFF, J., concurs in part and dissents in part in separate opinion filed.
. All statutory references are to RSMo 2000 unless otherwise stated.
. It is questionable that Greenbriar involved a sale at all. Rather, the transaction might more appropriately be viewed as an accounting of expenses among the co-owners of the country club.
. Section 144.190.2 provides:
If any tax . has been paid . erroneously . such stun shall be credited on any taxes then due from the person legally obligated to remit the tax . and the balance, with interest . shall be refunded to the person legally obligated to remit the tax, but no such credit or refund shall be allowed unless duplicate copies of a claim for refund are filed within three years from date of overpayment.
. Section 144.250 provides:
4. Except in cases of fraud or evasion, if a person neglects or refuses to make a return and payment as required by sections 144.010 to 144.525, the director of revenue shall make an estimate based upon any information in his possession or that may come into his possession of the amount of the gross receipts of the delinquent for the period in respect to which he failed to make return and payment, and upon the basis of said estimated amount compute and assess the tax payable by the delinquent; such estimate may be reconstructed for that period of time for which the tax may be collected as prescribed by law.
5.Promptly thereafter, the director of revenue shall give to the delinquent written notice of such estimated assessment, the notice to be served personally or by certified or registered mail at his or its last known address.
. Section 144.220 states:
1. In the case of a fraudulent return or of neglect or refusal to make a return with respect to any tax under this chapter, there is no limitation on the period of time the director has to assess.
3. In other cases, every notice of additional amount proposed to be assessed under this chapter shall be mailed to the person within three years after the return was filed or required to be filed.
. The claim for refund does not list any ground concerning an offset, therefore sections 144.190.2 and 144.190.3 do not authorize an offset. See IBM v. Dir. of Revenue, 765 S.W.2d 611, 612-13 n. 5 (Mo. banc 1989).