Union Electric Co. d/b/a Ameren Missouri v. Director of Revenue
2014 Mo. LEXIS 13
| Mo. | 2014Background
- Ameren (seller) sought a sales-tax refund for electricity and natural gas supplied to Schnucks grocery-store bakery departments for equipment (ovens, proofers, retarders, fryers) used to finish frozen or partially prepared baked goods.
- Schnucks received products frozen or partially formed and used store equipment and energy to thaw, proof, bake, and otherwise prepare items for retail sale.
- Section 144.054.2 (2007) exempts energy used in "manufacturing, processing, compounding, mining, or producing" products; "processing" is defined in § 144.054.1(1).
- The Director denied the refund; the Administrative Hearing Commission (AHC) affirmed, finding bakery activities are cooking/preparation for retail sale, not "processing."
- Ameren argued the activity fits within the statutory term "processing" and pointed to a regulatory example (12 CSR 10-110.621(4)(O)) listing "a bakery" as exempt; the AHC found Schnucks fit that example but held the example conflicted with the statute.
- The Supreme Court of Missouri affirmed the AHC: tax exemptions are strictly construed, the burden is on the taxpayer, and "processing" in § 144.054.2 does not include in-store preparation/cooking for retail sale.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether energy used in Schnucks’ in-store bakery operations qualifies as exempt "processing" under § 144.054.2 | Ameren: thawing, proofing, and baking transform dough into a different state and thus constitute "processing." | Director: activities are retail cooking/preparation, not "processing" as used in statute. | Held: No — on-site retail food preparation is not "processing" under § 144.054.2. |
| Whether the regulatory example stating "a bakery" is exempt controls entitlement to refund | Ameren: AHC found Schnucks fits the bakery example, so Ameren can rely on the regulation’s example for exemption. | Director: a regulation cannot expand a statute; statute controls. | Held: Regulation cannot override or expand the statute; even if example applied, statute governs and excludes retail preparation. |
| Proper construction of "processing" given statutory context and precedent | Ameren: ambiguity in the statute should be read broadly to include food finishing. | Director: apply noscitur a sociis and related statutes; terms are industrial in connotation and exclude retail food prep. | Held: Apply noscitur a sociis and precedent (Aquila/Brinker); "processing" construed narrowly to exclude retail food preparation. |
| Whether the Court is bound by AHC’s factual finding that Schnucks is a "bakery" for the regulation example | Ameren: AHC factual finding should permit reliance on the example. | Director: the meaning of the regulation’s term is a legal question reviewed de novo. | Held: The definition of "bakery" in the regulatory example is a legal construction reviewed de novo; AHC’s broad reading was erroneous. |
Key Cases Cited
- Aquila Foreign Qualifications Corp. v. Director of Revenue, 362 S.W.3d 1 (Mo. banc 2012) (held preparation of food for retail consumption is not "processing" under § 144.054.2)
- Brinker Missouri, Inc. v. Director of Revenue, 319 S.W.3d 433 (Mo. banc 2010) (tax exemptions construed narrowly; restaurant food prep not within industrial exemptions)
- BASF Corp. v. Director of Revenue, 392 S.W.3d 438 (Mo. banc 2012) (statutory terms interpreted in context and in pari materia with related statutes)
- State ex rel. Mo. Pub. Defender Comm’n v. Waters, 370 S.W.3d 592 (Mo. banc 2012) (administrative regulations entitled to presumption of validity but cannot contradict statute)
- Greenbriar Hills Country Club v. Director of Revenue, 47 S.W.3d 346 (Mo. banc 2001) (discusses application and limits of regulatory examples in tax context)
- Bridge Data Co. v. Director of Revenue, 794 S.W.2d 204 (Mo. banc 1990) (agency may not add to or modify revenue statutes by regulation)