Krispy Kreme Doughnut Corporation v. Director of Revenue
2016 Mo. LEXIS 120
| Mo. | 2016Background
- Krispy Kreme sold donuts and related items in Missouri; it collected 4% sales tax (§144.020) for April 2003–Dec. 2005 but later sought refunds under the 1% food tax (§144.014).
- §144.014.2 excludes from the 1% rate any establishment where >80% of gross receipts come from "food prepared... for immediate consumption on or off the premises." The statute targeted restaurants and similar establishments.
- Krispy Kreme argued most of its non‑hot items (notably donuts) should qualify for the 1% rate because many donuts were not actually consumed immediately; it presented a 2012 customer survey and witness testimony to show customer behavior was unchanged since 2003–2005.
- The Director argued all Krispy Kreme donuts are "food prepared…for immediate consumption" because they are ready‑to‑eat and thus count toward the 80% threshold; the Director offered no independent evidence but contested Krispy Kreme’s proof.
- The Administrative Hearing Commission found the 2012 survey insufficient to prove customer habits during the tax period and denied the refund; the Supreme Court of Missouri affirmed, holding donuts are the type of food intended to count toward the 80% test and Krispy Kreme failed to meet its burden of proof.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Krispy Kreme's non‑hot food sales qualify for the 1% food tax under §144.014 given the 80% disqualification test | Krispy Kreme: many donuts were not "prepared for immediate consumption" (e.g., sold by dozen, eaten >60 minutes later, not consumed in transit), so not all sales should count toward the 80% threshold | Director: donuts are ready‑to‑eat and thus all sales count as "food prepared for immediate consumption"; they should be included in the 80% calculation | Held: all Krispy Kreme donuts are "food prepared…for immediate consumption" for §144.014.2 purposes and count toward the 80% threshold; Krispy Kreme not entitled to refund |
| Whether Krispy Kreme's post‑period (2012) survey and testimony satisfied its burden to prove consumption habits during 2003–2005 | Krispy Kreme: survey evidence, plus testimony, shows customers often do not consume donuts immediately; survey reflects consistent behavior over time | Director: contested the survey's applicability and credibility; highlighted evidentiary weaknesses | Held: Commission reasonably found the 2012 survey and testimony failed to prove by a preponderance that consumption habits during the tax period were different; burden not met |
| Proper interpretation of "food prepared…for immediate consumption on or off the premises" in §144.014.2 | Krispy Kreme urged a narrow meaning: only food prepared specifically to be eaten immediately (e.g., a hamburger) counts | Director urged broad meaning: any ready‑to‑eat item counts because it is capable of immediate consumption | Held: Court adopts an interpretation focused on whether the food is the type regularly consumed immediately (actual consumption context matters but classification is objective); donuts are within that category |
| Standard of review when taxpayer bears burden of proof and agency offers no affirmative evidence | Krispy Kreme argued the Commission's decision was contrary to the only evidence and urged a weight‑of‑evidence review | Director relied on Commission's credibility determinations and procedural rules for administrative review | Held: Even when defendant offers no evidence, the trier of fact may disbelieve uncontradicted evidence; the Court defers to Commission's credibility findings and will overturn only in rare against‑the‑weight‑of‑evidence situations |
Key Cases Cited
- Krispy Kreme Doughnut Corp. v. Dir. of Revenue, 358 S.W.3d 48 (Mo. banc 2011) (prior decision interpreting "immediate consumption" and remanding for factual proof)
- State ex rel. Rice v. Pub. Serv. Comm'n, 220 S.W.2d 61 (Mo. banc 1949) (fact‑finder may disbelieve uncontradicted testimony)
- White v. Dir. of Revenue, 321 S.W.3d 298 (Mo. banc 2010) (burden of persuasion basics in administrative review)
- Ivie v. Smith, 439 S.W.3d 189 (Mo. banc 2014) (rare reversal for against‑the‑weight‑of‑the‑evidence standard)
- Canteen Corp. v. Dep't of Revenue, 525 N.E.2d 73 (Ill. 1988) (statutory interpretation should avoid impractical consumer policing and be viewed in light of reality)