Case Name: Richard A. KING, Director of Revenue, State of Missouri, Petitioner, v. L & L MARINE SERVICE, INC., et al., Respondents
Court: Supreme Court of Missouri
Jurisdiction: Missouri
Decision Date: 1983-03-29
Citations: 647 S.W.2d 524
Docket Number: No. 64189
Parties: Richard A. KING, Director of Revenue, State of Missouri, Petitioner, v. L & L MARINE SERVICE, INC., et al., Respondents.
Judges: WELLIVER, HIGGINS, GUNN and DONNELLY, JJ., concur.
Reporter: South Western Reporter Second Series
Volume: 647
Pages: 524–531

Head Matter:
Richard A. KING, Director of Revenue, State of Missouri, Petitioner, v. L & L MARINE SERVICE, INC., et al., Respondents.
No. 64189.
Supreme Court of Missouri, En Banc.
March 29, 1983.
John Ashcroft, Atty. Gen., Richard L. Wielder, Asst. Atty. Gen., Jefferson City, for petitioner.
William G. Guerri, Thompson & Mitchell, St. Louis, for respondents.

Opinion:
BILLINGS, Judge.
Appeal by the Director of Revenue from an order of the Administrative Hearing Commission invalidating the assessment of Missouri use tax by the Department of Revenue against L & L Marine Service, Inc., taxpayer. The Commission determined the taxpayer was not liable for taxes under the provisions of the Missouri use tax, § 144.-610, RSMo 1978. Exclusive jurisdiction is in this Court. Mo. Const. Art. V, § 3. We affirm.
The facts, as stipulated by the parties, are brief. Taxpayer, L & L Marine, purchased a Rockwell Sabreliner 40 aircraft in 1977 for $575,000. A vice-president for the company accepted delivery of the aircraft in Delaware on July 14,1977, then flew it to Newark International Airport to finish conducting corporate business in New York. The following day, July 15, the aircraft was flown to St. Louis to return this corporate officer to Missouri. It was used on July 16 to deliver another corporate officer to a meeting in Michigan and has subsequently been used in conducting the business of L & L Marine and its affiliated corporations and partnerships both in and outside of Missouri.
L & L admittedly took delivery in Delaware to avoid liability for Missouri sales and use taxes. No sales tax or use tax was ever paid on the purchase, use or storage of the aircraft, either in Delaware or Missouri. No personal property tax has ever been paid on the aircraft.
The Department of Revenue assessed taxpayer for unpaid tax and penalties for the period July 1, 1977 to December 12, 1978. Taxpayer appealed. The Administrative Hearing Commission held, that because the aircraft was already engaged in interstate commerce prior to its initial entry into Missouri and was never withdrawn from interstate commerce, there was no taxable moment at the time of entry or any other time covered by the assessment. Therefore, taxpayer was not liable for the use tax assessed by the Department.
Section 144.610, RSMo 1978 states:
1. A tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property purchased on or after the effective date of sections 144.600 to 144.745 in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020. This tax does not apply with respect to the storage, use or consumption of any article of tangible personal property purchased, produced or manufactured outside this state until the transportation of the article has finally come to rest within this state or until the article has become commingled with the general mass of property of this state.
2. Every person storing, using or consuming in this state tangible personal property purchased from a vendor is liable for the tax imposed by this law, and the liability shall not be extinguished until the tax is paid to this state .
The use tax is a levy on the privilege of using within the taxing state property purchased outside the state, if the property would have been subject to the sales tax had it been purchased at home. Southwestern Bell Telephone Company v. Morris, 345 S.W.2d 62, 66 (Mo. banc 1961). This Court has previously noted that:
[U]se taxes have consistently been upheld by the United States Supreme Court and recognized as not only a means to augment state revenues but also as a means to eliminate the incentive to purchase from out-of-state merchants in order to escape local sales taxes thereby keeping in-state merchants competitive with sellers in other states.
Management Services, Inc. v. Spradling, 547 S.W.2d 466, 468 (Mo. banc 1977).
Taxpayer L & L Marine readily admits structuring the purchase transaction to evade this tax. We have strongly criticized such evasion in the past and do so again here.
It begs credibility to believe the Missouri legislature intended to relieve purchases . from out of state merchants from the compensating use tax but to require that sales made by in-state merchants . be subject to the sales tax and thereby give a substantial competitive advantage to out-of-state merchants over resident merchants.
Farm & Home Savings Association v. Spradling, 538 S.W.2d 313, 317 (Mo.1976).
For the purposes of the use tax § 144.-605(7) defines "storage" as "the keeping or retention in this state of tangible personal property purchased from a vendor for any purpose, except sale or subsequent use solely outside the state." The term "use" is defined as "the exercise of any right or power over tangible personal property incident to the ownership or control of that property, except that it does not include storage or the sale of the property in the regular course of business". Section 144.-605(10), RSMo 1978.
The stipulated facts establish that the aircraft has been used for wholly intrastate travel, is hangared and serviced between flights in Missouri, and is owned and controlled by a corporation which locates its principal offices in Missouri. These factors bring the aircraft within the purview of the Missouri use tax. However, appellant contends such an assessment is precluded in this case because the plane was placed in interstate commerce by virtue of the diversion from Delaware to New Jersey before it was brought to Missouri.
No state may impose a tax on the transaction of interstate commerce. U.S. Const. Art. I, § 8, Cl. 3; Helson & Randolph v. Kentucky, 279 U.S. 245, 252, 49 S.Ct. 279, 281, 73 L.Ed. 683 (1929). The United States Supreme Court has upheld application of a use tax in California where rolling stock and other railroad equipment were ordered out of state, brought in and subsequently used in interstate commerce. The Court reasoned:
We think there was a taxable moment when the [articles] had reached the end of their interstate transportation and had not begun to be consumed in interstate operation. At that moment, the tax on storage and use—retention and exercise of a right of ownership respectively—was effective. The interstate movement was complete. The interstate consumption had not begun.
Southern Pacific Company v. Gallagher, 306 U.S. 167, 177, 59 S.Ct. 389, 393, 83 L.Ed. 586 (1939).
However, in that case, the equipment had not been placed in interstate commerce prior to entry into California. In this case, the plane had been engaged, albeit fleetingly, in interstate commerce. Therefore, we must reluctantly conclude at the time of the entry into Missouri, the plane was already being "consumed in interstate commerce." Where an airplane has become an instrumentality of interstate commerce prior to entry into the assessing state, there is no taxable to moment upon entry. See W.R. Grace & Co. v. Comptroller, 255 Md. 550, 258 A.2d 740 (Md.1969).
There still remains the issue of whether the plane was withdrawn from interstate commerce, that is, whether a taxable moment occurred after arrival. The airplane was hangared and serviced in Missouri between flights. It was flown on at least twenty wholly intrastate trips out of a total of 531 during the assessment period. However, use taxes may only be imposed if the article to be taxed is employed in a local activity separate from an aspect of interstate commerce. "The mere cessation of flight and lapse of time between the flights of aircraft does not, in itself, indicate a withdrawal of the aircraft from interstate commerce." W.R. Grace, 258 A.2d at 747.
We must conclude that the plane was placed in interstate commerce before its entry into Missouri and never withdrawn during the assessment period. The application of the Missouri use tax in this situation would be repugnant to the commerce clause of the United States Constitution.
The judgment of the Administrative Hearing Commission is affirmed.
WELLIVER, HIGGINS, GUNN and DONNELLY, JJ., concur.
BLACKMAR, J., dissents in separate opinion filed.
RENDLEN, C.J., dissents and concurs in separate dissenting opinion of BLACK-MAR, J.
. During the assessment period, July 1977 through December 1978, approximately 97 percent of the aircraft's total flight time was logged on interstate travel, while approximately 3 percent was logged during the course of wholly intrastate trips.