Krispy Kreme Doughnut Corp. v. Director of Revenue
2011 Mo. LEXIS 254
Mo.2011Background
- Missouri imposes a 4% general sales tax and a 1% reduced rate for certain food under Mo. Rev. Stat. §144.014.
- Food qualifies for the reduced rate only for products/foods eligible under the Food Stamp Program, and, for non-vending-machine sales, if the store’s prepared-food receipts do not exceed 80% of total receipts.
- Krispy Kreme sought a partial refund for taxes paid 2003–2005, totaling $324,237, later reduced to $277,992.20, based on 144.014.
- The director denied the refund, prompting Krispy Kreme to seek review at the AHC.
- The AHC ruled that some items qualified under the first part of 144.014, but more than 80% of Krispy Kreme’s receipts came from foods prepared for immediate consumption, sustaining the director’s position.
- The Missouri court held the case presented questions of statutory interpretation and remanded with instructions to proceed under the AHC’s procedural rules.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper interpretation of the 80/20 test | Krispy Kreme argues for a broad reading, counting all food prepared for immediate consumption as part of the 80/20 test. | Director argues a narrower or differently scoped interpretation of the 80/20 threshold. | Court adopts broad interpretation: 'on or off the premises' modifies 'immediate consumption' to include consumption at purchase, while traveling, or on arrival without further prep. |
| Scope of 'food prepared ... for immediate consumption on or off the premises' for 80/20 | Donuts and other items may be consumed immediately in various settings, affecting the 80/20 calculation. | Unclear factual thresholds; focuses on statutory language and its relation to consumption practices. | Food eaten at the place of purchase or during travel, or immediately upon arrival at another location without further prep, fits the phrase. |
| Whether summary judgment was appropriate | There are material facts about consumption and preparation timing supporting Krispy Kreme. | Director contends undisputed facts show ineligibility for the reduced rate. | Neither party was entitled to summary decision; AHC correctly overruled Krispy Kreme, but sustaining the director’s motion was error; remand. |
| Relation between the 80/20 test and the first part of §144.014 | Part one applies and Krispy Kreme’s products qualify for the reduced rate under §144.014.2. | The case should focus on the 80/20 test to determine eligibility for the reduced rate. | This case concerns only the 80/20 test; the court provides interpretation for the 80/20 standard and remands for further proceedings. |
Key Cases Cited
- Wehrenberg, Inc. v. Dir. of Revenue, 352 S.W.3d 366 (Mo. banc 2011) (interprets §144.014; concession that concessions not always needed for part one)
- ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371 (Mo. banc 1993) (summary judgment standards and burden of proof on movant/months)
- State v. Moore, 303 S.W.3d 515 (Mo. banc 2010) (statutory interpretation requires giving effect to every word/phrase)
- E & B Granite, Inc. v. Dir. of Revenue, 331 S.W.3d 314 (Mo. banc 2011) (de novo review of revenue-law interpretations)