Lead Opinion
This сase presents three issues for review: (1) whether a billiard center which derives substantial revenues from food and beverage sales is nevertheless a place of amusement, entertainment, or recreation within the meaning of Section 144.020.1(2), RSMo 1986, thus subjecting coin-operated amusement devices therein to sales tax; (2) whether Section 144.020.1(2) violates the Equal Protection Clause of the Fourteenth Amendment; and (3) whether billiard tables purchased for display and possible resale are exempt from use tax pursuant to Section 144.615(6), RSMo 1986. The Administrative Hearing Commission found all issues against the taxpayer. This case in-
I.
The facts are stipulated. Robert Spudich (“Spudich”) is the sole proprietor of Columbia Billiard Center and Spudich Supply Co., both located in Columbia, Missouri. Spu-dich maintains billiard tables upon which customers may play for a fee. The amount of the fee depends on the length of time a_ customer plays. In addition to sales of billiard table playing time, Spudich sells food and beverages to his customers, sells and repairs billiard tables and equipment and operates eight coin-operаted game devices. From these businesses Spudich realizes revenues as follows:
Percentage Activity Total Revenue
Food and Beverage Sales 50%
Equipment Sales and Repair 24%
Pool Playing Time Charges 23%
Coin-Operated Amusements 2%
Miscellaneous 1%
To further sales of billiard tables, Spu-dich purchased billiard tables out-of-state, but remitted no use tax. Spudich permitted no playing on these tables, which were intended for display. According to the stipulation “the tables аre used to solicit orders, but one may be sold if that particular table is the last of its kind in inventory, or the customer wants that specific table.” Spudich took both depreciation and an investment tax credit on these “display” tables on his federal income tax returns.
Spudich remitted sales tax on feеs paid for billiard table playing time; he paid no sales tax on fees paid to operate the coin-operated amusement devices contained in the billiard center. The Director assessed sales tax against the revenues generated by the coin-operated amusemеnt devices. In addition, the Director determined that Spudich owed use tax on the billiard tables held for display and possible sale.
II.
Section 144.020.1(2) provides in pertinent part:
A tax is hereby levied and imposed upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at rеtail in this state. The rate of tax shall be as follows:
******
(2) A tax equivalent to four percent of the amount paid for admission and seating accommodations, or fees paid to, or in any place of amusement, entertainment or recreation, games and athletic events;
[Emphasis added.]
The Director promulgated 12 C.S.R. 10-3.176, which provides in pertinent part:
(7) A place of amusement, entertainment, or recreation is defined as any place where any facilities are provided (not including coin-operated amusement devices, except as indicated in this rule) for entertainment, amusement, or sports.
(8) Examples of places of amusement, entertainment, or recreation include, but are not limited to ... billiard halls, ...
[Emphasis added.]
A trilogy of cases is important to our consideration. In L & R Distributing, Inc. v. Missouri Department of Revenue, 529 S.W.2d 375 (Mo.1975) (L & R Distributing I), this Court faced the question whether Section 144.020.1(2) imposed a sales tax on the gross receipts of coin-operated games placed in “ ‘restaurants, confection areas, bowling alleys, hotels, mоtels, bus stations, airports and other similar places.’ ” Id. at 376. The Court gave “defendants the benefit of the doubt” and considered the statute as though it were ambiguous as to the meaning of “a place of amusement, entertainment or recreation.” The Court held that such places are not, “within normal contemplation, a place of amusement or entertainment, and that [such places are] not converted into such by the installation of a pinball machine.” [Emphasis added.] Id. at 378. The Court found that Section 144.020.1(2) required that two elements be
In Blue Springs Bowl v. Spradling,
Finally, in L & R Distributing v. Missouri Department of Revenue,
This case presents a question not answered in prior cases. Here, we are required to considеr the meaning of the phrase “places of amusement, entertainment or recreation.” More precisely, the issue is whether a billiard center, which derives more than half its revenues from services and sales other than fees paid for the purchase of billiard playing time, is a placе of amusement, etc., within the meaning of Section 144.020.1(2).
There being no statutory definition for a place of amusement, we turn to familiar canons of construction for assistance. The purpose of statutory construction is to seek the intent of the legislature. Metro Auto Auction v. Director of Revenue,
“Amusement” is defined as a “pleasurable diversion: entertainment.” Webster’s Third New International Dictionary, 74 (1966). “Entertainment” means “something that diverts, amuses, or occupies the attention agreeably.” Id. at 757. “Recreation” is “a means of getting diversion or entertainment.” Id. at 1899.
12 C.S.R. 10-3.176(7) definеs a place of amusement as any place where “any facilities are provided (not including coin-operated amusement devices ... for entertainment, amusement or sports.” 12 C.S.R. 10-3.176(8) includes billiard halls within its examples of places of amusement.
Spudich argues that his business derives but twenty-three percent of its revenues from billiard playing time charges. It cannot be, he therefore argues, primarily a place of amusement, entertainment or recreation since, based on his revenues, the billiard center is primarily a restaurant. Spudich’s argument retains its persuasive force only tо the extent that Section 144.-020.1(2) permits taxation only of fees paid within locations which are primarily or exclusively places of amusement.
As previously described, this Court found that the installation of a pinball machine in a location not considered, “within normal contemplation,” a placе of amusement did not convert such location into a place of amusement. L & R Distributing I,
Within normal contemplation, it is beyond cavil that a billiard сenter is a place of amusement. Spudich holds his business out to the public as a billiard center; it is access to billiard playing equipment which attracts Spudich’s patrons. The provision of food and drink to those patrons and the sales and service of billiard equipment are both consistent with and inсidental to the operation of a billiard center. The fact that revenues from the sale of food and drink exceed revenues from the sale of billiard table playing time does not vitiate the billiard center’s character as a place of amusement.
Based on both the plain, ordinary meaning of the relevant statutory language and consistent with administrative interpretations of that language, we conclude that Spudich’s billiard center is a place of amusement within the meaning of Section 144.020.1(2). We thus hold that the proceeds of coin-operated amusement devices contained within Spudich’s Billiard Center are taxable under Section 144.020.1(2).
III.
Having found fees paid to operate Spudich’s coin-operated amusement devices taxable under Section 144.020.1(2), we now consider his equal protection challenge to the statute. Spudich argues that Section 144.020.1(2) disсriminates against places of amusement by taxing fees paid to operate coin-operated amusement devices in such places, while failing to tax coin-operated amusement devices not located in places of amusement. He claims that there is no rational basis for the distinction. Spudich’s equal protection argument is, we think, impotent.
“Where taxation is concerned and no specific federal right, apart from equal protection, is imperiled, the States have large leeway in making classifications and drawing lines which in their judgment produce reasonable systems of taxation.” Lehnhausen v. Lake Shore Auto Parts Co.,
Section 144.020.1(2), of course, makes no mention of coin-operated devices; nor does the statute define a place of amusement. As we have previously said, taxation under Section 144.040.1(2) is based on two elements: (1) the payment of fees (2) in or to a plаce of amusement, entertainment or recreation. The statute thus excludes from taxation only those coin-operated devices which are operated in places which are not places of amusement.
This case decides that a location need not be a place of amusement exclusively to subject fees paid for the operation of coin-operated amusement devices therein to sales tax. See discussion at II, supra. In L & R Distributing I,
Seen in this light, the distinction in taxation which Spudich decries is attributable to the legislature’s recognition that the burdens and expenses of collecting sales tax from locations in which the fees collected for coin-operated amusement devices are minimal, significantly outweigh the finаncial benefits to the state resulting from an across-the-board application of the sales tax to all coin-operated amusement devices. It is reasonable for the state to adopt a system of taxation which efficiently husbands its financial resources, even if that system allows sоme to escape taxation altogether.
Section 144.020.1(2) is thus analogous to statutes which base tax classifications on quantity. This Court has repeatedly sustained the constitutionality of such reasonable classifications against equal protection attacks. Bopp v. Spainhower,
The system of taxation impоsed in Section 144.020.1(2) is reasonable; no equal protection violation exists. The point is denied.
IV.
Finally, we consider Spudich’s use tax claim. Section 144.610, RSMo 1986, provides in pertinent part:
A tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property ... in аn amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.-020 ...
Section 144.615(6), RSMo 1986, exempts from the use tax
Tangible personal property held by processors, retailers, importers, manufacturers, wholesalers, or jobbers ! solelyÍ for resale in the regular course, of business,
[[Image here]]
[Emphasis added.]
The stipulation entered by the parties provided that “the tables are used tó solicit orders, but one may be sold if that particular table is the last of its kind in inventory, or the customer wants that specific table.”
Taxation is the rule; exemptions from taxation are the exception. Tax exemption statutes are, therefore, construed strictly against the taxрayer. Missouri Church of Scientology v. State Tax Commission,
We find the language of Section 144.615(6) clear and unambiguous. The exemption is available only for items purchased “solely for resale.” The stipulation indicates that the billiard tables in question were purchased primarily as display items to solicit orders for billiard tables; resale is incidental to this purpose and, according to the stipulation, occurs only under unusual circumstances. The Administrative Hearing Commission correctly decided that the Section 144.615(6) exemption is not available to Spudich under the stipulated facts. That decision is affirmed.
V.
The dеcision of the Administrative Hearing Commission is affirmed.
Notes
. We make no attempt in this case to draw a well-defined line of demarcation between places of amusement subject to sedes tax and those locations in which amusement activity is so insignificant as to escape tаxation. Each case must be considered on its own particular facts. Factors important for consideration in the inquiry whether a location in a place of amusement include the manner in which the location holds itself out to the public, the amount of revenue generated by amusemеnt activities, and the pervasiveness of the amusement activities conducted at the location. This list is not exhaustive. Other factors may, of course, be considered as circumstances dictate.
Dissenting Opinion
dissenting.
I respectfully dissent and adopt as my dissent in this case, my dissent filed in Bally’s Leman’s Family Fun Centers, Inc. v. Director of Revenue,