STATE OF MISSOURI, аt the Relation of R. O. DE WEESE, Appellant, v. M. E. MORRIS, Director of Revenue, Respondent
No. 40938
Supreme Court of Missouri, Division Two
May 9, 1949
Opinion Modified on Court‘s own Motion and Motion for Rehearing or to Transfer to Banc Overruled, June 13, 1949.
221 S.W.2d 206
The judgmеnt is reversed, and the cause remanded with directions to enter judgment for plaintiff as prayed. All concur.
Relator was in the restaurant business from January 1, 1945, to September 24, 1946, operating the Farmers Cafe, at Charleston, Missouri, daily, except Sunday.
On April 24, 1947, relator was notified of an additional sales tax assessment of $669.76 ($416 additional tax, $41.60 penalty, and $212.16 interest), which was based upon estimated unreported gross receipts at the rate of $1,000 a month for the time he was in business.
Relator filed “a petition for reassessment” (
Relator timely filed his petition for a writ of certiorari (
Norman Johns, Field Representative of the Director of Revenue, notified relator on August 16, 1945, to keep records of his daily gross sales as required by
Relator testified that he made proper sales tax returns and paid all sales taxes due; that the returns were correct “to the best of my knowledge. They were taken off my daily reports“; that he did not owe the $416 additional sales tax; that he kept a record of his daily gross sales after being requested to dо so but had lost his record book in Wichita, Kansas, or Kentucky. Relator bought the business from Mr. White and sold it to Mr. E. B. Walker and another person.
Mr. Johns, the sole witness for the Director of Revenue, testified that following his notifying relator to keep a daily reсord of sales, he again contacted relator March 21 and 22, 1947; that relator did not have any records showing the business done; and that witness asked the Director of Revenue to assess an additional tax; that he based his conclusions upon whаt relator‘s predecessor and successor did; that he secured figures from Mr. White and copies of his reports and figures from Mr. Walker; that, over the objection this evidence was incompetent, hearsay and guess, the following figures were given for Mr. White‘s sales: “July, 1943, $1,868.52; October, 1943, $2,075.20, September, 1943, $2,125.58, October, 1943, $2,728.92“; “July, 1944, $1,744“; and for relator‘s successor in the business: “Five days of September, 1945, to February, 1947. September, $275.00; October, $801.00; November, $974.00; December, $1,049.00; January, $1,675.00; and February, $1,529.60.”
Mr. Johns based the “reassessment” on this information and the fact that relator [REDACTED] had no records. “Q. You had no information directly about Mr. De Weese‘s business? A. I did not think I needed it.”
Witness also stated, over objection that the answer was a mere conclusion, that his “idea” was relator did as much business as either Mr. White or Mr. Walker. He stated he was in Charleston every week or two; that he did not patronize relator‘s cafe, never had eaten there, and never stood around or counted the customers; that his conclusion was based on infоrmation “given to me by George Marable and other persons as the best place in town to eat.”
This hearing resulted in findings that relator made monthly tax remittances aggregating $212.41, representing $10,620.50 of sales subject to tax; that relator‘s predecessor and successor did a larger business than relator reported doing; that relator‘s successor reported $270 “for the last six days of September, 1947,” for one-fifth of the month, whereas relator reported only $540 in sales for the first twenty-
The Sales Tax act of 1945 became effective July 1, 1946 (Laws 1945, p. 1881, § 2), and, so far as here involved, continued (Id.,
The Director of Revenue, if not satisfied with the return and рayment of the tax by any person, is authorized “to make an additional assessment of tax due from such person, based upon the facts contained in the return or upon any information within his possession or that shall come into his possession.”
Thе Director of Revenue is directed to “make an estimate based upon any information in his possession or that may come into his possession, of the amount of the gross receipts” for the period involved and assess the tax, together with a penalty of ten percent, thereon, if any person subject to the act neglects or refuses to make a return and payment of the tax as required by the act.
One subject to the Sales Tax act is required to keep records “of his gross daily sales” et cetera, which records et cetera are to be preserved for two years and are subject to inspection by the Director of Revenue or his authorized employees.
The Director of Revenue or any employee of that department, when authorized in writing by said Director, “may hold investigations and hearings” concerning any matter within the act, “may require the attendance” of any person having knowledge of sales subject to the act by the person under investigation, may administer оaths, “and may take testimony and require proof for his information.” The conduct of such investigations or hearings is not “bound by the technical rules of evidence.”
The 1945 Missouri constitution,
The Director of Revenue mentions the rebuttable presumption of right action on the part of public officials. Consult Wymore v. Markway, 338 Mo. 46, 89 S. W. 2d 9, 14[12]. However, the instant writ of certiorari called for the certification of the [REDACTED] record upon which the Director of Revenue based his action. From it we have before us the facts upon which he acted and the presumption takes flight. State ex rel. United Mut. Ins. Ass‘n v. Shain, 349 Mo. 460, 162 S. W. 2d 255, 263 [11]; Brannock v. Jaynes, 197 Mo. App. 150, 193 S. W. 51, 55[7].
Relator‘s objections to the evidence offered by witness Johns to the effect its material portions were incompetent, hearsay, speculation and conjecture were well taken. The provisions of the Sales Tax act relaxing the technical rules of evidence yield to the constitutional provisions, and statutory enactments implementing the same, that determinations of administrative officers and bodies of contested issues are to be “supported by competent and substantial evidence upon the whole record,” if the provisions of the Sales Tax act ever authorized the imposition of the tax on evidence that was not competеnt and substantial.
We shall not analyze the figures hereinbefore set out and stated into the record by Field Representative Johns. There is nothing in this record to establish that they are true and correct. Any determination of issues involving a comparison of sales of relator with his predecessor or successor should take into consideration relator‘s failure to operate on Sunday. Whether his predecessor or successor operated seven days a week is not disсlosed of record. There is no evidence of probative value that relator‘s sales approximated those of his predecessor or successor.
Witness Johns, upon whose testimony the reassessment depends, thought he did not nеed any direct information about relator‘s business. He disclosed his lack of testimonial qualifications upon which to base his “idea” relator did as much business as his predecessor or successor. He had never eaten at relator‘s cafe, and he never undertook to observe and count relator‘s customers. No one ever told him how much business relator did and he did not know the testimonial qualifications, if any, of the persons upon whose statements he based his testimony. Unsworn statеments of “George Marble and other persons” as to the best place in town to eat do not establish the constitutive elements involved in a sales tax assessment. Compare this with the testimonial qualifications of the witness and the competency and substantiveness of the testimony upon which the holding is based in Van Hoose v. Smith, 355 Mo. 799, 198 S. W. 2d 23, 25, 26.
It stands adjudged that hearsay evidence and conclusions based upon hearsay do not qualify as “competent and substantial evidence
Probative circumstantial evidence is sufficient to establish facts, but mere hearsay is insufficient to impose taxes and penalties.
What we have said disposes of this review and incidentally eliminates some of the constitutional issues mentioned by relator. Courts generally do not pass upon constitutional issues if the case may be disposed of properly оn other points. Skinner v. St. Louis, I. M. & So. Ry. Co., 254 Mo. 228, 230, 162 S. W. 237; State ex rel. Volker v. Kirby, 345 Mo. 801, 808, 136 S. W. 2d 319, 322, and authorities cited.
Accordingly, the judgment is reversed and the cause is remanded with directions to quash the record made and to remand the cause to the Director of Revenue for such further action as he may be advised to take in conformity herewith. Westhues and Barrett, CC., concur.
PER CURIAM:—The foregoing opinion by BOHLING, C., is adopted as the opinion of the court. Leedy, J., and Tipton, PJ., concur; Ellison, J., dissents.