Opinion ID: 1631284
Heading Depth: 1
Heading Rank: 1

Heading: Pallets

Text: Bags of charcoal produced by Floyd are shipped to its customers on wooden pallets. Floyd purchases the pallets from various pallet makers and gives them sales tax exemption certificates on the basis that Floyd's purchase is for resale. Pallets cost Floyd approximately four dollars each. Upon sales by Floyd, it invoices customers approximately five dollars for each pallet involved in a shipment. The pallet is then shipped with the finished product to Taxpayer's customer and when the merchandise is removed from the pallet the customer may ship the pallet back to Taxpayer and receive full credit for any and all charges made by Taxpayer to the customer on a per pallet basis. Taxpayer will credit the customer's next purchase order for each pallet returned in the amount indicated above. The purchase price of the pallet to Taxpayer by the pallet makers is usually an amount less than the charges made by Taxpayer to the customers on a per pallet basis.    Taxpayer indicated that on many occasions the pallets are not returned to Taxpayer and that in those instances there is an outright sale of the pallet by the Taxpayer to Taxpayer's customer. The hearing officer concluded that the sales tax was properly levied on the purchases by Floyd of pallets for the reason that in the cases where the pallets were returned to Floyd, there was no sale and therefore Floyd did not purchase for resale; that in the cases where the purchaser retained and paid for the pallets, Floyd neither collected sales tax on the part of the sales price represented by the pallets nor obtained a certificate from the purchaser that it acquired the pallet for resale, and therefore Floyd was obliged to collect the tax as on a sale at retail; that Floyd had no reason to complain that the tax was assessed against it on the basis of the price it paid for the pallets rather than the price for which it sold them. In this court the parties treat the issue essentially as whether or not the case of Smith Beverage Co. of Columbia, Inc. v. Reiss, 568 S.W.2d 61 (Mo.banc 1978), is applicable under these facts. Respondent asserts that it is and requires the conclusion that its purchases of pallets were for resale and therefore not subject to tax. At issue is the definition of Sale at retail as the transfer of title to the purchaser for use or consumption     and not for resale in any form as tangible personal property   . § 144.010(8). Smith involved a use tax exemption of tangible personal property     held    solely for resale in the regular course of business. § 144.615(6). (Respondent places no reliance on Section 144.011, enacted in 1973 and in effect during a portion of the time covered by the assessment in dispute. That enactment excluded from sale at retail     the transfer of reusable containers used in connection with the sale of tangible personal property contained therein for which a deposit is required and refunded on return.) Smith was a declaratory judgment action on the validity of a regulation of the Department of Revenue relating to the use tax on purchases by bottlers-jobbers of soda bottles. It was decided on a record which incorporated complete information regarding the transactions in question. See Smith Beverage Co. of Columbia, Inc. v. Spradling, 533 S.W.2d 606 (Mo.1976). Here the assessment is against the purchaser on the theory that its purchases were under an improper claim of exemption, as authorized by Section 144.210. The burden was upon Floyd to sustain its claim of exemption by reason of purchase for resale. On this sparse record, it has failed to do so. There is, for example, no showing of how many pallets are returned by purchasers from Floyd. The only thing appearing is the indication by the taxpayer that on many occasions the pallets are not returned    . Taxpayer relies upon the fact that its charge to its customers for pallets is in excess of the cost of the pallets and points out that in Smith the fact that the deposit required by the bottler was less than the cost of the item was held to evidence no sale. That is a factor for consideration but absent some evidence of the practical effect of the transaction, it would not be conclusive of a sale. In any event, if the taxpayer's transfer to its customers is a sale, there is nothing of record to negative the finding that respondent was obliged to collect a tax on the transaction. Respondent's brief asserts that its customers are wholesalers. However, the record which is the basis of review does not contain that fact. The trial court erred in overturning the assessment for tax on the pallets.