Opinion ID: 2291175
Heading Depth: 1
Heading Rank: 3

Heading: restaurants prepare rather than manufacture meals

Text: Section 144.610.1 imposes a tax for the privilege of storing, using or consuming within this state any article of tangible personal property. Brinker admits this taxing provision applies to the items as to which it seeks a refund of use tax but argues that it is entitled to an exemption from Missouri use tax under sections 144.615(3) and 144.030.2(4) and (5) for the stoves, refrigerators, dispensers and other items it uses to prepare food and drink for its customers. Brinker bears the burden of showing that it qualifies for an exemption. Branson Props. U.S.A., L.P. v. Dir. of Revenue, 110 S.W.3d 824, 825 (Mo. banc 2003). Exemptions from taxation are to be strictly construed against the taxpayer, and any doubt is resolved in favor of application of the tax. Sw. Bell Tel. Co. v. Dir. of Revenue, 182 S.W.3d 226, 228 (Mo. banc 2005). Section 144.615(3) exempts from use tax [t]angible personal property, the sale of which ... would be exempt from or not subject to the Missouri sales tax under the provisions of subsection 2 and 3 of section 144.030.  (emphasis added). Brinker argues that it qualifies for the exemptions provided in section 144.030.2(4) and (5), which it calls the production exemptions. Brinker's theory is that when it cooks and serves food, it in effect is making a product; therefore, its restaurants qualify for these production exemptions. It says that the commission erred in holding that these exemptions apply only to manufacturers and not to retail sale restaurants, which merely engage in preparation of food to be served to restaurant diners. Brinker reads the exemptions too broadly. Section 144.030.2(5) exempts machinery and equipment used to expand or establish manufacturing, mining and fabricating plants from sales tax, stating: (5) Machinery and equipment ... purchased and used to establish new or to expand existing manufacturing, mining or fabricating plants in the state if such machinery and equipment is used directly in manufacturing, mining, or fabricating a product which is intended to be sold ultimately for final use or consumption ... (emphasis added). While Brinker is correct that this provision does not use the word retail, it does use the word plants. It expressly states that the machinery and equipment must be used for new or expanded plants that manufacture, mine or fabricate products intended to be sold ultimately for final use or consumption by others. Neither Chili's, Macaroni Grill, On the Border nor Maggiano's Little Italy are plants, [3] and they do not fabricate, manufacture or mine products to be sold ultimately for final use or consumption. By its terms, this exemption simply does not apply to purchases of new or expanded kitchen equipment in Brinker's restaurants. The commission did not err in rejecting Brinker's request for a refund of $21,588.19 in use tax it paid on new or expanded plant machinery and $1,909.56 in use tax it paid on new or expanded plant equipment. Brinker also argues some of its kitchen equipment qualifies for an exemption for replacement machinery, equipment and parts under section 144.030.2(4), which states: (4) Replacement machinery, equipment, and parts and materials and supplies solely required for the installation or construction of such replacement machinery, equipment, and parts, used directly in manufacturing, mining, fabricating or producing a product which is intended to be sold ultimately for final use or consumption ... While section 144.030.2(4) does not repeat the reference to plants expressly, it says it applies to replacement machinery, equipment and parts. As just noted, machinery, equipment and parts qualify for the exemption only if they are used to establish new or expanded manufacturing, mining or fabricating plants. [W]ords used in proximity to one another must be considered together. Albanna v. State Bd. of Registration for Healing Arts, 293 S.W.3d 423, 431 (Mo. banc 2009). Moreover, statutory provisions are not read in isolation but [are] construed together, and if reasonably possible, the provisions will be harmonized with each other. Bachtel v. Miller Cnty. Nursing Home Dist., 110 S.W.3d 799, 801 (Mo. banc 2003). Exemptions are interpreted to give effect to the General Assembly's intent, using the plain and ordinary meaning of the words. Branson Props. U.S.A., 110 S.W.3d at 825-26. The legislature did not intend to allow a use tax exemption for replacement machinery, equipment or parts that is broader than that for the equipment it replaces. Brinker argues that this interpretation of the exemption is too narrow and that the words manufacture and produce should be read broadly to include preparing and cooking food. Brinker argues as though all that is required to avail itself of the exemption is simply to refer to preparing food as producing it and cooking food as manufacturing or transforming it. Brinker's argument ignores the fact that it is seeking to take advantage of an exemption. An exemption is allowed only upon clear and unequivocal proof, and doubts are resolved against the party claiming it. Id. at 825. [4] This Court will give the language used in the statute a narrow construction, not the exceedingly broad and peculiar meaning argued for by Brinker. Dir. of Revenue v. Armco, Inc., 787 S.W.2d 722, 724 (Mo.1990) (Canons of construction direct that exemption statutes be strictly construed against the taxpayer). The narrow construction of this exemption also comports with the common sense understanding of the words used in the statute. Absent a statutory definition, the primary rule of statutory interpretation is to give effect to legislative intent as reflected in the plain language of the statute. Akins v. Dir. of Revenue, 303 S.W.3d 563, 565 (Mo. banc 2010). In lay terminology, one does not speak of a restaurant as manufacturing or producing food or drink; instead, restaurants prepare, cook and serve food and drink to their customers. This is how the term restaurant is used whenever it appears in Missouri's taxing and tourism statutes. For example, section 144.010.1(10)(e) defines sale at retail in relevant part as sales of meals and drinks furnished  in a place where meals or drinks are regularly served to the public (emphasis added). [5] Section 67.671.4(1) provides for a tourism tax on the sale of food and beverages sold for consumption on the premises of all restaurants ... or other establishments which are primarily used to provide food and beverage services  (emphasis added). Section 144.014.2 defines the word food and in so doing refers to food prepared by such establishment for immediate consumption... including, but not limited to, sales of food by any restaurant, fast food restaurant, delicatessen, eating house, or café. Section 66.500(3) defines `food establishment' as any restaurant which sells food at retail.... Accord § 82.850.1(2), RSMo Supp.2009; § 92.325(3); § 94.805. These definitions have in common that they treat restaurants as furnishing food and beverages to the public at retail, not as plants or production facilities that manufacture, mine, fabricate or produce food or drink. Had the legislature intended to include restaurants or restaurant equipment within the exemptions set forth in section 144.030.2, then it would have added the word restaurant to those statutes, as it did in the various statutes just cited when it wanted to impose or exempt certain establishments from various taxes, and just as it provided specific exemptions in other subsections of section 144.030 for items or processes ranging from feed for livestock or poultry and grain to be converted into foodstuffs which are to be sold ultimately in processed form at retail, § 144.030.2(1), to materials, replacement parts, and equipment [for] aircraft, aircraft power plants, and aircraft accessories. § 144.030.2(40) RSMo, Supp.2009. The legislature did not include the words restaurant or preparation or furnishing or serving in § 144.030.2, nor did it elsewhere indicate that it intended the words manufacturing, mining, fabricating or producing to be used in a broad sense to include preparation and cooking of food for service in a restaurant. The commission did not err in denying Brinker's request for refunds of $10,181.08, $1,310.54 and $297.59, respectively, paid in use tax on the replacement machinery, equipment and parts it used to prepare and cook food in its restaurants.