Fees Paid in or to Places of Amusement, Entertainment or Recreation (Rescinded December 30, 2003)

AUTHORITY: section 144.270, RSMo 1994. This rule was previously filed as rule no. 49 April 20, 1974, effective April 30, 1974. S.T. regulation 010-82 was last filed Dec. 31, 1975, effective Jan. 10, 1976. Refiled March 30, 1976. Amended: Filed Aug. 13, 1980, effective Jan. 1, 1981. Rescinded and readopted: Filed March 11, 1983, effective Sept. 11, 1983. Amended: Filed May 10, 1984, effective Nov. 11, 1984. Amended: Filed Dec. 11, 1984, effective May 25, 1985. Emergency amendment filed Nov. 15, 1990, effective Nov. 25, 1990, expired March 24, 1991. Emergency rescission and rule filed Jan. 3, 1991, effective Jan. 13, 1991, expired May 13, 1991. Emergency rescission and rule filed May 3, 1991, effective May 13, 1991, expired Sept. 9, 1991. Rescinded and readopted: Filed Jan. 3, 1991, effective June 10, 1991. Rescinded: Filed June 30, 2003, effective Dec. 30, 2003. L & R Distributing, Inc. v. Missouri Department of Revenue, 529 SW2d 375 (Mo. banc 1975). Places such as hotel lobbies, restaurants, motels, bus stations do not constitute a place of amusement or entertainment within meaning of statute imposing sales tax on fees paid to or in any place of amusement or entertainment and are not converted into such by the installation of coin-operated devices such as pinball machines. Blue Springs Bowl v. Spradling, 551 SW2d 596 (Mo. banc 1977). Commercial bowling establishment was place of amusement, entertainment or recreation mentioned in statute which provides for sales tax on receipts from amounts paid for admission to places of amusement, entertainment or recreation, as well as to games and athletic events, which imposes tax on receipts from fees paid to or in these places. Chase Resorts, Inc. v. Director of Revenue, Case No. RS-79251 (A.H.C. 09/30/82). Taxpayer owns and operates the Lodge of the Four Seasons which provides certain activities and services including room rental, meal and bar service, convention facilities, golf, tennis, horseback riding, bowling and motion pictures. The Administrative Hearing Com-mission held the lodge to be a place of recreation, amusement and entertainment with section 144.020.1(2), RSMo. The commission noted that “each activity, in and of itself, represents a separate amusement or recreation, but each is related to and inseparable from the overall conduct of petitioner’s resort.” The moneys paid for the rentals in question such as rental of bowling shoes, horse and riding equipment, water skis and equipment, etc. also were held to constitute “fees paid to or in, any place of amusement, entertainment or recreation” as to be subject to sales tax pursuant to section 144.020.1(2), RSMo. L & R Distributing Co., Inc. v. Missouri Department of Revenue, 648 SW2d 91 (Mo. banc 1983). The department appealed from the judgement of the Circuit Court of the City of St. Louis finding the director in civil contempt for violating a 1974 injunction prohibiting the taxation of gross receipts of coinoperated amusement devices. The 1974 injunction was affirmed in L & R Distributing Co., Inc. v. Missouri Department of Revenue, 529 SW2d 375 (Mo. banc 1975). Subsequent to the decision in that case, the department had enacted sales tax rule 12 CSR 10-3.176 which provided that sales tax could be charged on the gross receipts of coin-operated amusement devices so long as they were located in places of amusement. The department relied on section 144.020.1(2), RSMo which imposed a sales tax upon the gross receipts of places of amusement. The court reversed the circuit court agreeing that the decision in L & R Distributing did not prohibit the taxation of gross receipts of places of amusement. The court found that section 144.020.1(2), RSMo placed a tax on all fees paid to or in places of amusement, including those paid for the use of coin-operated devices. Because the department was found to be correct on the merits, the court did not determine whether civil contempt was an appropriate remedy. St. Louis Country Club v. Administrative Hearing Commission, 657 SW2d 614 (Mo. banc 1983). The issue in this case was whether private country clubs which are not open to the public must pay sales tax on fees charged to members who bring guests to enjoy certain club facilities. The organization in question was an IRC Section 501(C)(7) notfor-profit tax-exempt corporation. Attendance at the club by nonmembers was strictly limited. Fees for golf and tennis were charged. Before discussing the merits of the matter the court held that a) the director of revenue does not have to personally sign and issue each deficiency assessment; b) an opinion letter, which is not directed towards the taxpayer, written by an earlier director of revenue and which erroneously states the law does not stop an assessment by a later director of revenue; and c) the waiver of the statute of limitations entered into by the taxpayer was a valid contractual agreement supported by consideration and, therefore, it would be recognized. With respect to the merits of the case, the taxpayer asserted that it should not be assessed tax because it is a private not-for-profit social organization which is not engaged in business and the guest fees are not paid to or in any place of amusement or recreation. Therefore, they did not fall within section 144.010.1(8), RSMo nor were they a business as defined in section 144.010.1(2), RSMo. The court found without comment that the country club was a place of entertainment. With respect to whether it was a place of business, the court said that the definition of business contained in section 144.010.1(2), RSMo is special. The definition “any activity engaged in by any person, or caused to be engaged in by him, with the object of gain, benefit or advantage either direct or indirect” was found by the court to be broad enough to include the activity of allowing guests to use facilities for a fee. Allowing guests to use the facilities benefits the club by attracting members. City of Springfield v. Director of Revenue, 659 SW2d 782 (Mo. banc 1983). The issue in this case was whether or not the director of revenue could legally assess sales tax on concession, admission and use fees charged by the city park board. The Supreme Court found first that Mo. Const. Art. III, Section 39(10), which prohibits a tax upon the “use, purchase or acquisition of property paid for out of the funds” of the city did not prohibit the imposition of tax upon the fees in question. There was no tax on the use, purchase or acquisition of property paid for from city funds. Secondly, the court found that section 144.020.1(2), RSMo brought the sale of recreational activities and concessions within the purview of the sales tax statute. The operation of the park and its facilities and services did constitute a business by a person making sales at retail and the park board did constitute a seller within the various definitions contained in section 144.010, RSMo. National Land Management, Inc. v. Director of Revenue, Case No. RS-81-0639 (A.H.C. 6/6/84). The issue in this case was whether time sharing arrangements at resorts are subject to sales tax. The commission initially found that the receipts in question were not taxable pursuant to section 144.020.1.(2), which provides for imposition of tax on a) sums paid for admission to places of amusement, b) sums paid for seating accommodations therein and c) all fees paid to or in place of amusement. Regarding the first provision, the commission found that the sums in question were not paid for “admission” as that term is commonly understood. The commission also found that accommodations were not the subject for which the sums were paid. With respect to the third provision, the commission found that the assessments did not apply to any separate “fees” charged for the use of petitioner’s amenities but were based on charges for the time share occupancies. Next, the commission found that section 144.020.1(6) was inapplicable, because the payments in question did not constitute charges for rooms furnished in any hotel, motel, inn, tourist camp or tourist cabin. Arriving at this conclusion the commission held, “If the relationship is that of innkeeper and guest, then petitioner is providing a taxable service; if not, then petitioner’s time share activities are not taxable under section 144.020.1.” Looking at the law from various states, the commission held that the agreements in question constituted vacation leases creating an assignable interest in real property. Because of the thirty-year lease, the occupants are not transitory in the sense that travelers or tourists are. Rooms in petitioner’s resort are not regularly rented because they are only open to the general public when they are not already reserved pursuant to one of the previously mentioned agreements. Thus, the director of revenue failed to meet his burden of proof by establishing that the agreements in question constituted taxable service in the form of a room furnished at a hotel, motel, tourist camp or tourist cabin by an innkeeper. Fostaire Harbor, Inc. v. Missouri Director of Revenue, 679 SW2d 272 (Mo. banc 1984). Taxpayer first challenged the commission’s finding that fees paid for helicopter flights around the City of St. Louis were taxable fees paid to or in a place of amusement, entertainment or recreation, rather than fees paid for a taxexempt educational service. Secondly, taxpayer asserted that even if tax liability existed, the finding of the commission that there was not neglect or refusal to file sales tax returns relieved it of any duty to pay interest on the amounts due. With respect to the first issue, the court held that the tax applies generally to fees paid in or to a place of amusement despite the fact that some educational benefit is derived at that place of amusement. That some educational value might be derived from the expenditure of a particular fee does not make it exempt from tax. With respect to the second issue, the court held that interest is not a penalty and therefore a finding of neglect or refusal was not required before interest could be imposed. While interest might be a penalty under some circumstances, and thus could only be imposed upon a finding of neglect or refusal, such is not the case under Missouri’s sales tax law. Richard Lynn, d/b/a Kansas City Excursion v. Director of Revenue, 689 SW2d 45 (Mo. banc 1985). The issues in this case were whether 1) the taxpayer’s receipts from its Missouri River boat excursions were exempt from sales tax under section 144.030.1, RSMo as receipts from activities in interstate commerce; 2) the director was estopped from assessing sales tax and penalties because of certain prior actions and statements by the director’s agent; 3) the taxpayer was shielded from penalties by the exercise of good faith; and 4) the two-year statute of limitations applied to limit assessment prior to 1978. The court resolved the interstate commerce issue by citing the decision in Fostaire Harbor, Inc. v. Missouri Director of Revenue, 679 SW2d 272 (Mo. banc 1984). Fostaire held that fees paid for admission to helicopter rides for sightseeing purposes are fees paid in or to a place of amusement and thus are taxable. The fees paid to the taxpayer in Kansas City Excursion were intended to provide a sightseeing tour, not transportation to a point outside the territorial waters of the state of Missouri; the interstate commerce provision of section 144.030.1, RSMo was therefore inapplicable to these local transactions. Regarding the estoppel issue, the court noted the long-standing rule that the director of revenue and his subordinates have no power to vary the force of statutes. Therefore, the actions of prior directors and their subordinates will not estop subsequent directors from collecting taxes due and owing the state except in situations where manifest injustice would otherwise occur. In determining the issue of good-faith, the court found that the taxpayer had received an earlier assessment on the same issue and had been advised by counsel of a possible collection action. As the taxpayer was clearly on notice of a possible tax liability, failure to file in years subsequent to that assessment did not constitute good-faith, imposition of the penalty under section 144.250.1, RSMo for neglect to file a tax return was therefore appropriate. In addition, neglect or refusal to file returns tolls the statute of limitations in section 144.220, RSMo thereby permitting the assessment of sales tax in this case beyond the statutory period. Keeley’s Park Rink, Inc. et al. v. Director of Revenue, Case Nos. RS-84-2729, RS-84-2730 and RS-84-2731 (A.H.C. 02/26/87). The Administrative Hearing Commission held that the receipts from the rental of roller skates and coin-operated machines were subject to sales tax. Bally’s LeMan’s Family Fun Centers, Inc. v. Director of Revenue, 745 SW2d 683 (Mo. banc 1988). The court found that section 144.020.1(2), RSMo was clear and unambiguous in this case. The statute plainly provides for a sales tax to be imposed on all fees paid to or in places of amusement and the like. Since Bally’s fun centers are places of amusement, moneys paid to Bally to operate coin-operated devices are fees paid to or in places of amusement. Robert Philip Spudich, d/b/a Columbia Billiard Center v. Director of Revenue, 745 SW2d 677 (Mo. banc 1988). The Supreme Court found that billiard halls are commonly thought of as places of amusement. The fact that revenues from the sale of food and drink exceed revenue from the sale of billiard table playing time does not reduce the billiard center’s character as a place of amusement. The billiard table receipts were subject to sales tax. The court found that there was no equal protection violation. The state has a large leeway in making classifications and drawing lines which in its judgement produce reasonable systems of taxation. The taxation of coin-operated video machines in places of amusement but not in other nonamusement locations is reasonable in that the burdens and expenses of collecting sales tax from locations in which the fees collected for coin-operated amusement devices are minimal. The financial benefits to the state offset the minimal burden placed upon the coin-operated amusement devices located in places of amusement. Capitol Automated Ticket Services, Inc. v. Director of Revenue, Case Nos. RS-84-1813 and RS-85-1778 (A.H.C. 09/12/88). The issue in this case considered whether sales tax could be imposed on “service charges” levied by the petitioner as a fee on the purchase of tickets to various events. The Administrative Hearing Commission determined that the “service charges” were a nontaxable service and not a fee charged for admission to a place of amusement. Soccer World West, Inc. v. Director of Revenue, Case No. 90001797RS (A.H.C. 09/14/90). The issue in this case was whether fees paid by teams to participate in soccer league play were subject to sales tax as “fees paid to or in a place of amusement” or were exempt from the imposition of sales tax as “membership dues”? The Administrative Hearing Commission found that soccer clubs are places of amusement, membership dues are fees paid in or to a place of amusement and that there is no statutory exemption from sales taxes for “membership dues.”