Title: Great Southern Bank v. Director of Revenue
Citation: N/A
Docket Number: SC88943
State: Missouri
Issuer: Missouri Supreme Court
Date: November 4, 2008

SUPREME COURT OF MISSOURI 
en banc 
 
 
Great Southern Bank, 
 
 
 
) 
 
 
 
 
 
 
 
) 
 
 
Appellant, 
 
 
 
) 
 
 
 
 
 
 
 
) 
vs. 
 
 
 
 
 
 
) 
No. SC88943 
 
 
 
 
 
 
 
) 
Director of Revenue, 
 
 
 
) 
 
 
 
 
 
 
 
)  
 
 
Respondent.  
 
 
)  
 
Petition for Review of a Decision 
by the Administrative Hearing Commission  
  
Great Southern Bank seeks review of an Administrative Hearing Commission 
("AHC") decision determining that an aircraft sale and purchase did not meet the 
requirements for the “taken in trade” exemption from use taxes under section 144.025, 
RSMo 2000.1  The AHC decision is affirmed.  
I. Jurisdiction and Standard of Review 
This Court has jurisdiction to review the AHC's decision pursuant to Mo. Const. 
article V, section 3 because the case involves construction of state revenue laws.  The 
AHC's interpretation of revenue laws is reviewed de novo.  DST Sys., Inc. v. Dir. of 
Revenue, 43 S.W.3d 799, 800 (Mo. banc 2001).  The AHC's factual determinations will 
                                                 
1 All statutory references are to RSMo 2000. 
be upheld if the law supports them, and, after reviewing the whole record, there is 
substantial evidence that supports them.  Id. 
II. Facts 
On June 18, 2003, Great Southern entered into an agreement to sell a 
 Beechcraft airplane to Jet 1, Inc.  The sale price was $1,025,000.   Nine days later, Great 
Southern entered into a “Purchase Agreement” to buy a 1993 Cessna airplane from Scag 
Engineering, LLC for $1,925,000.   The Purchase Agreement included blank lines for 
“Trade-In Aircraft (if applicable),” including the make and model of the aircraft, trade-in 
delivery date, and delivery destination.  None of these blanks was filled in.  
In order to facilitate the transaction, Great Southern entered into an “Exchange 
Agreement” with Wachovia Bank, N.A..  The Agreement provided that Great Southern 
would acquire the Cessna from Wachovia and then relinquish the Beechcraft to 
Wachovia.  The transaction was structured to meet the requirements for an exchange of 
“like kind” property for purposes of Section 1031 of the United States Internal Revenue 
Code, which permits the deferral of certain federal taxes for property transfers that are 
channeled through a qualified intermediary.   Jet 1 directed its payment for the Beechcraft 
to a title insurer and then to Wachovia. Great Southern then made its payment to the same 
title company, which then forwarded the funds to Wachovia.  Wachovia then sent Great 
Southern’s $1,925,000 payment for the Cessna to Scag Engineering.  Great Southern paid 
use taxes on $900,000, which was the difference between the sale price of the Beechcraft 
($1,025,000) and the purchase price of the Cessna ($1,925,000). 
 
The Director of Revenue concluded that Great Southern owed use tax on the full 
price of the Cessna.  Great Southern filed a complaint with the AHC, arguing that it had 
acquired the Cessna in a trade and was thereby eligible for the “taken in trade” exemption 
in section 144.025.  The AHC concluded that Great Southern could not utilize the “taken 
in trade” exemption because there was no trade.  
III. Analysis 
In pertinent part, Section 144.025.1 provides as follows:  
Notwithstanding any other provisions of law to the contrary, in any 
retail sale other than retail sales governed by subsections 4 and 5 of 
this section, where any article on which sales or use tax has been paid, 
credited, or otherwise satisfied or which was exempted or excluded 
from sales or use tax is taken in trade as a credit or part payment on 
the purchase price of the article being sold, the tax imposed by 
sections 144.020 and 144.440 shall be computed only on that portion 
of the purchase price which exceeds the actual allowance made for the 
article traded in or exchanged, if there is a bill of sale or other record 
showing the actual allowance made for the article traded in or 
exchanged.    
 
The effect of the statute is to exempt the trade value from the use tax.  Because section 
144.025 is a tax exemption statute, Great Southern bears the burden of showing that it is 
entitled to an exemption under the statutes.  Branson Props.  USA, L.P. v. Dir. of 
Revenue, 110 S.W.3d 824, 825 (Mo. banc 2003).  Exemptions from taxation are to be 
construed strictly against the taxpayer, and any doubt is resolved in favor of application 
of the tax.  Id. 
The term “taken in trade” is not defined in the statute.  When a statutory term is 
not defined, courts apply the ordinary meaning of the term as found in the dictionary.  
Cook Tractor Co., Inc. v. Dir. of Revenue, 187 S.W.3d 870, 873 (Mo. banc 2006).    The 
word “trade” means “to give in exchange for another commodity.”  WEBSTER’S 
THIRD NEW INTERNATIONAL DICTIONARY (1993) at 2421.  The word 
“exchange” means “[t]he act of giving or taking one thing in return for another,” or “the 
process of reciprocal transfer of ownership (as between persons).” WEBSTER’S at 792. 
See also BLACK’S LAW DICTIONARY (7th Ed. 1999) (defining “exchange” as “the 
act of transferring interest, each in consideration for the other”).   A “trade,” then, 
requires that the parties each have title to or ownership of their respective items and then 
exchange them.   
There are no Missouri cases that interpret the “taken in trade” exemption.  
However, in Hutton v. Johnson, 956 S.W.2d 484 (Tenn. 1997), the Supreme Court of 
Tennessee applied its “taken in trade” exemption in a similar situation.  Hutton owned a 
Beech airplane.  Hutton entered into an exchange agreement with Bell Aviation, Inc., 
which purchased the Beech from Hutton.  Hutton then contracted with Cessna Aircraft 
Company to purchase another airplane.  Id. at 486.   Hutton assigned his rights under his 
agreement with Cessna to Bell Aviation, Inc.  Id. at 487.  Bell Aviation directed the funds 
from the Beech sale to Cessna, and Cessna then delivered title to Hutton.  Id.  
The Tennessee law, like Missouri’s, addresses items “taken in trade.” Id. at 488.  
The Tennessee Supreme Court noted that neither transaction was dependent upon the 
other.  Thus, the Court held that the two sales, despite the involvement of Bell Aviation, 
did not constitute a “trade.”  Id. at 489.  Instead, the sales were independent transactions 
between Hutton and a buyer and between Hutton and a different seller.  Id.  There was no 
trade, so the “taken in trade” exemption did not apply.  
Similarly, in this case, the sale of the Beechcraft and the purchase of the Cessna 
were two separate transactions.  Great Southern sold its Beechcraft to Jet I, purchased the 
Cessna from Scag Engineering, and used Wachovia as an intermediary to facilitate the 
transaction.  Although Wachovia acted as an intermediary to facilitate a transaction under 
Section 1031 of the United States Revenue Code, it does not follow that there was a 
“trade” exempting Great Southern from paying Missouri use taxes.  “When determining 
the merits of revenue cases, it is important to look beyond legal fictions and academic 
jurisprudence in order to discover the economic realities of the case.”  Scotchman’s Coin 
Shop v. Administrative Hearing Comm’n, 654 S.W.2d 873, 875 (Mo. banc 1983).   
Wachovia could not keep the Beechcraft or the Cessna or sell the Beechcraft to someone 
other than Jet 1.  Wachovia simply performed the duties assigned in its agreement with 
Great Southern.  Wachovia never took the Beechcraft in trade for anything.  Wachovia 
effectively was acting as Great Southern’s agent for the purpose of complying with 
federal regulations to take advantage of the tax deferral provisions of Section 1031.  That 
is not enough, under Missouri sales and use tax law, to conclude that Great Southern and 
Wachovia engaged in a trade.  
This conclusion is confirmed by the purchase agreement form that Great Southern 
used with Scag Engineering, which had blanks to be used if there had been a trade-in.  No 
trade-in was identified.  The explanation for this is that there was a sale and a purchase, 
but no trade.   
The AHC’s decision is affirmed.2  
 
 
 
 
 
 
 
 
_________________________________  
 
 
 
 
 
 
 
Richard B. Teitelman, Judge  
 
Stith, C.J., Price, Russell, Wolff and 
Breckenridge, JJ., and Newton, Sp.J., 
concur.  Fischer, J., not participating. 
  
  
 
 
                                                 
 
2 Great Southern also argues that if this court were to hold that the “taken in trade” exemption 
did not apply to the use tax, then the exemption would violate the Commerce Clause, U.S. Const. 
art. I § 8.  The exemption applies to the use tax.  Consequently, there is no need to address Great 
Southern’s Commerce Clause argument.