579 S.W.3d 212
Mo.2019Background
- Business Aviation (a multi-member LLC) purchased an aircraft in Kansas and immediately leased it to Burgess Aircraft Management (a Missouri Part 135 common carrier). Burgess moved and operated the aircraft from Missouri.
- Lease granted Burgess "exclusive care, custody and control" and required Burgess to manage operations, provide pilots and supplies, and perform maintenance in accordance with federal regs; Business Aviation retained payment obligations for maintenance, insurance, and hangar fees.
- Lease provided Burgess would pay Business Aviation $900 per flight hour (net), but for flights chartered by certain owners (Zimmerman Properties and Foster) Burgess charged and paid only a discounted $434.77 per hour; monthly statements credited Business Aviation for hours flown at either $900 or $434.77 as applicable.
- Missouri Director of Revenue assessed use tax (plus additions/interest) against Business Aviation and affiliated parties; AHC concluded the lease transferred the right to use but not "for valuable consideration," so the resale/common-carrier exemption did not apply.
- The Supreme Court reviewed de novo whether the transaction qualified as a sale (for both sales- and use-tax definitions) under sections 144.018.1(4), 144.615(3) (cross-referencing 144.030.2(20)), and reversed the AHC, holding the lease transferred the right to use for valuable consideration and therefore qualified for the exemption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the lease transferred the "right to use" the aircraft | Business Aviation: lease gave Burgess exclusive custody/control for operations, so right to use was transferred | Director: Business Aviation retained certain financial obligations and possible residual rights, so transfer was not complete | Transfer of the right to use occurred; AHC did not err in finding transfer (and Court rejected any "fully transferred" requirement) |
| Whether the transfer was "for valuable consideration" under use- and sales-tax definitions of "sale" | Business Aviation: payments/credits in monthly statements (either $900 or $434.77) constituted valuable consideration even if discounted for certain charters | Director: discounted internal charters mean no actual valuable consideration (or inadequate consideration), so exemption inapplicable | Court held monetary credits/payments (including the $434.77 credits) satisfied "valuable consideration"; adequacy of consideration is not judicially reweighed |
| Whether Business Aviation qualifies for resale/common-carrier exemption (144.018.1(4) via 144.615(3) & 144.030.2(20)) | Business Aviation: because lease was a sale (right to use transferred for valuable consideration) to a common carrier, the purchase is exempt | Director: because the transfer lacked valuable consideration, the exemption does not apply | Court held interplay of statutes yields exemption: purchase qualified for resale/common-carrier exemption and use tax assessment reversed |
| Whether any additional penalties remain at issue | Business Aviation: AHC erred in imposing an additional penalty for failure to file returns | Director: penalties appropriate | Court did not address penalties because it resolved the exemption in Appellants' favor; remanded accordingly |
Key Cases Cited
- Five Delta Alpha, LLC v. Director of Revenue, 458 S.W.3d 818 (Mo. banc 2015) (examined whether lease to common carrier transferred right to use an aircraft)
- Brambles Industries, Inc. v. Director of Revenue, 981 S.W.2d 568 (Mo. banc 1998) (use-tax “sale” requires transfer of title or right to use for consideration)
- Fall Creek Construction Co. v. Director of Revenue, 109 S.W.3d 165 (Mo. banc 2003) (use tax applies to out-of-state purchases used in Missouri)
- Brinker Missouri, Inc. v. Director of Revenue, 319 S.W.3d 433 (Mo. banc 2010) (standards for appellate review of AHC decisions)
- Bartlett International, Inc. v. Director of Revenue, 487 S.W.3d 470 (Mo. banc 2016) (tax exemptions construed strictly against taxpayer)
- TracFone Wireless, Inc. v. Director of Revenue, 514 S.W.3d 18 (Mo. banc 2017) (taxpayer must prove exemptions by clear and unequivocal proof)
- Brown v. Weare, 152 S.W.2d 649 (Mo. 1941) (courts will not weigh adequacy of consideration)
- Moore v. Seabaugh, 684 S.W.2d 492 (Mo. Ct. App. 1984) (consideration need not show actual benefit)
- Asbury v. Lombardi, 846 S.W.2d 196 (Mo. banc 1993) (undefined statutory words are given ordinary dictionary meanings)