Missouri ~ Sales and Use Tax: Tax on Sale of Food Items Discussed, Case Remanded

For purposes of determining the rate of Missouri sales tax to be applied to a corporation’s sales of food items at its doughnut stores, the Missouri Supreme Court has interpreted the phrase “food prepared … for immediate consumption on or off the premises” to mean all food that is eaten at the place of preparation and purchase, or while traveling to, or immediately upon arrival at another location without any further preparation. The court then determined that the Administrative Hearing Commission (AHC) erred in granting summary judgment in favor of the Director of Revenue on the corporation’s claim that it was entitled to a partial sales tax refund and remanded the case for further proceedings. According to the court, neither party was entitled to a summary decision because neither demonstrated that it was entitled to a favorable decision based on a correct understanding of the law. That is, while the parties agreed on many facts, none of the facts upon which they agreed were conclusive to the outcome of the case.

 The Department of Revenue claimed that it was entitled to summary judgment based on the theory that all food prepared by the corporation’s stores that was capable of being immediately consumed had to be counted toward the applicable 80/20 test. If more than 80% of the stores’ gross receipts were derived from the sale of foods prepared for immediate consumption, then the sales at those stores would not qualify for the reduced tax rate for qualified sales of food. However, if it had been the Legislature’s intent for the statute to be read as the department suggested, the Legislature could have simply used the language “food capable of being consumed immediately.” Instead, the Legislature used the more extensive language “prepared by such establishment for immediate consumption on or off the premises.”

 The corporation contended that the language used by the Legislature should be interpreted in relation to the actual buying and consumption practices of its customers. It proposed that doughnuts purchased by the dozen were not consumed immediately and also offered evidence that time passed between the preparation of some doughnuts and their sale, so the food should not be considered sold for immediate consumption. It also presented the theory that doughnuts consumed after the purchaser reached his or her destination were not consumed immediately. The court rejected each of these interpretations as being too limited in relation to the language used by the Legislature. Doughnuts may be consumed immediately by the dozen if enough people are able to share the doughnuts at home, at work, at meetings, or even at the store. Doughnuts may be consumed immediately upon purchase regardless of whether they were prepared more than or less than an hour before purchase. Also, doughnuts that survive past the doorway of the store and arrive intact at a home or meeting place still can be consumed immediately upon reaching that destination.

Krispy Kreme Doughnut Corp. v. Director of Revenue, Missouri Supreme Court, No. SC91471, December 20, 2011

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