Shell Oil Co. v. Director of Revenue

DONNELLY, Judge,

dissenting.

As a general rule, St. Louis County is permitted to impose a sales tax and a transportation sales tax within the parameters of the state sales tax law. See, Sections 66.605 and 94.605.2, RSMo 1986. Implicit in these provisions is a requirement that there be a sale at retail. In addition, it is presumed that all such retail sales will “be consummated at the place of business of the retailer.” Sections 66.615.5 and 94.-620.5, RSMo 1986. The statutes are silent as to the meaning of the term “place of business.” For purposes of determining the situs of the taxable sale, the question then is whether Shell Oil Company’s “place of business” is in Houston, Texas, or at the meter site located at Lambert Airport.

The Director of Revenue urges that Shell Oil Company’s “place of business” is at the location of the meter site where fuel passes from the pipeline into storage facilities at Lambert Airport. This assertion is based primarily on the stipulated fact that title to the fuel passes at this meter site.

I must disagree. This Court has held that the point of delivery or point of passage of title is irrelevant in determining where a “place of business” is located. Fabick & Co. v. Schaffher, 492 S.W.2d 737 (Mo.1973). In Fabick, a seller of heavy equipment sought a declaratory judgment that sought to preclude imposition of the *184Jefferson City municipal sales tax to its business transactions. Pabick’s salesmen solicited sales of the equipment from customers both within and outside Jefferson City. The sales purchase orders were then accepted by Fabick at its office in Jefferson City. Upon approval of the sales, the equipment was delivered to its customers by Fabick: (1) from its office in Jefferson City to another point in Missouri; or (2) from a point outside of Jefferson City to another point in Missouri; or (3) from outside of Missouri to a point in Missouri, either within or beyond the limits of Jefferson City. Id. at 739.

In upholding the assessment of the sales tax to all of the transactions, with the exception of those to out-of-state customers, this Court explained that:

The obvious purpose of [the “place of business”] provision was to fix the taxable situs of transactions which might have a nexus with more than one municipality. A staggering administrative problem would be created if each sale were subjected to scrutiny as to the exact point of passage of title. The General Assembly intended to avoid such difficulty by determining in advance the situs of the taxable event.

Id. at 745. Although Fabick is factually distinguishable from the present case, the concept that the location of passage of title is irrelevant remains a viable principle. It serves to ease administration of both intrastate and mierstate state commerce transactions.

Further support for this interpretation is found in the Director’s own regulations. See, 12 CSR 10-5.050 and 10-5.545. It is stated therein that for purposes of both the sales tax and transportation sales tax, “all retail sales are conclusively presumed to have been consummated at the place of business of the seller/retailer without regard to the location or point of passage of title.... The sale is consummated at the seller’s location, not at the point of delivery.”

An example of the rule’s application is regard to deliveries from outside of the State of Missouri is found in 12 CSR 10-5.-070(1)(B). It reads as follows:

Example: Ms. Stone, a Mo. purchaser located in Sun City, has a mail order catalog from Rock Company, a vendor located outside the state of Mo., with no office, property or salesmen in Mo. Ms. Stone sends an order in the mail to Rock Company for merchandise to be delivered to her place of business by common carrier. Ms. Stone is subject to the Mo. use tax if the merchandise is for storage, use or consumption. The sale is not subject to city sales tax.1

Here, the airlines have contracted to purchase fuel from Shell Oil Company, a supplier located in Houston, Texas with no office, property or salesmen in Missouri. The purchase arrangement includes an estimated annual gallonage to be sold. As a part of an “exchange agreement” between Shell Oil Company and Amoco Oil Company, the fuel is delivered via a pipeline and metering equipment owned and/or operated by Amoco Oil Company from an Illinois refinery to the purchasers at their places of business in St. Louis. In my view, the sale is not subject either to a local sales tax or to a transportation sales tax.

These facts also give rise to a legitimate claim that imposition of such taxes creates an unconstitutional burden upon interstate commerce. Under the Complete Auto Transit2 test, a tax can only be sustained against a Commerce Clause challenge if the tax is assessed on an activity with a “substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State.” Id. at 276, 97 S.Ct. at 1079.

The parties have stipulated that:

Shell maintains no sales office, administrative office, store, warehouse or other similar facility at the Airport, or anywhere else in the State of Missouri, which in any way participates in the sale *185or delivery of the aviation fuel in question to the respective airlines at the Airport.

In addition, the fuel orders are placed by the airlines through their agent, Allied Aviation, directly to the Amoco refinery in Illinois pursuant to the sales contracts entered into between Shell and the airlines in Houston, Texas. The fuel is then delivered by means of a pipeline between two meter sites which are located in different states. The fuel is thus measured when it enters the pipeline at Wood River, Illinois, and when it leaves the pipeline for storage in tanks at Lambert Airport. None of the described equipment or facilities are owned or operated by Shell Oil Company.

There is an apparent lack of a substantial connection with Missouri on the facts in this case. They fail to satisfy the nexus test of Complete Auto Transit. See, e.g., National Bellas Hess, Inc. v. Dept. of Revenue, 386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed.2d 505 (1967) (cannot impose state use tax on out-of-state seller when only connection with customers in taxing jurisdiction is delivery of the goods by common carrier or the United States mail); Miller Bros. Co. v. State of Maryland, 347 U.S. 340, 74 S.Ct. 535, 98 L.Ed. 744 (1954) (Delaware corporation cannot be burdened with Maryland use tax where its only connection with Maryland customers was delivery of the goods and general advertising in Maryland); and Norton Co. v. Dept. of Revenue, 340 U.S. 534, 71 S.Ct. 377, 95 L.Ed. 517 (1951) (Illinois gross receipts tax sustained on Massachusetts corporation with office in Illinois as to all sales to Illinois customers except on those orders sent directly to and delivered from the head office in Massachusetts).

The Administrative Hearing Commission’s decision is not supported by competent and substantial evidence of a taxable event, and consequently creates an unconstitutional burden on interstate commerce.

I respectfully dissent.

. An identical example is found in 12 CSR 10-5.-560(1)(B) for applying the transportation sales tax. It concludes that "[t]he sale is not subject to transportation sales tax."

. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977).