DOMINION HOSPITALITY, )
v. ) Appeal Number 00-33019
EUGENE ZIMMERMAN, ASSESSOR, )
ST. CHARLES COUNTY, MISSOURI, )
DECISION AND ORDER
Decision of the St. Charles County Board of Equalization sustaining the assessment made by the Assessor, SET ASIDE, Commission finds classification to be part residential and part commercial for tax year 2000 with an assessed value of $416,810, as residential property and $468,000 as commercial property.
Complainant represented by Counsel, James P. Gamble, St. Louis, Missouri.
Respondent represented by Counsel, Lisa Leslie, Assistant County Counselor.
Case heard by Chief Hearing Officer, W. B. Tichenor.
Decision and Order rendered by Commissioners Sam D. Leake, Bruce E. Davis and Jennifer Tidwell.
The Commission takes this appeal to determine the classification for the subject property on January 1, 2000, specifically, this is a case of first impression for the Commission interpreting and applying Section 137.016.1(2) relating to transient housing and whether the subject property is real property improved by a structure which is used or intended to be used for residential living by human occupants and is not used primarily for transient housing.
Complainant appeals the decision of the St. Charles County Board of Equalization which sustained the classification of the subject property as commercial property. Complainant proposed a classification of 60 percent as residential and 40 as commercial property, based upon Complainant’s claim that the subject property was used for both transient and non-transient housing.
An evidentiary hearing was held on July 2, 2002, at the St. Charles County Administration Building, St. Charles, Missouri. The parties were given until and including August 5, 2002, to file Proposed Findings of Fact, Proposed Conclusions of Law and Briefs. Counsel for both parties so filed.
The Commission, having considered all of the competent evidence upon the whole record, the Proposed Findings of Fact, Proposed Conclusions of Law and Briefs of both parties, enters the following Decision and Order.
FINDINGS OF FACT
1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Charles County Board of Equalization.
2. Valuation is not at issue. The fair market value of the subject property is $3,656,226, as determined by Respondent and affirmed by the Board of Equalization. Exhibit Z, Q & A 9; Complaint for Review of Assessment.
3. After Complainant filed and served its exhibits and prefiled testimony, Respondent moved for summary judgment, asserting that there was no genuine issue of material fact. Respondent chose not to proffer any evidence.
4. The following exhibits have been received into evidence and constitute the record of evidence in this appeal:
Exhibit A Affidavit of Bruce Cockerill, custodian of records for Marriott International, Inc., with 131 pages of records of arrivals and departures of guests at TownePlace Suites (subject property).
Exhibit B Recompilation of long-term stay arrivals during 2000.
Exhibit C Recompilation of long-term stay arrivals during 2000.
Exhibit D Copies of 138 registration cards and one residence ledger.
Exhibit E FLASH Report, January 31, 2000.
Exhibit F FLASH Report, February 29, 2000.
Exhibit G FLASH Report, March 31, 2000.
Exhibit H FLASH Report, April 30, 2000.
Exhibit I FLASH Report, May 31, 2000.
Exhibit J FLASH Report, June 30, 2000.
Exhibit K FLASH Report, July 31, 2000.
Exhibit L FLASH Report, August 31, 2000.
Exhibit M FLASH Report, September 30, 2000.
Exhibit N FLASH Report, October 31, 2000.
Exhibit O FLASH Report, November 30, 2000.
Exhibit P FLASH Report, December 31, 2000.
Exhibit Q Advertising brochure.
Exhibit R Rate Sheet for November 1, 2000, to March 31, 2001.
Exhibit S Photograph of subject property.
Exhibit T Photograph of subject property.
Exhibit U Photograph of subject property.
Exhibit V Web page of TownePlace Suites.
Exhibit W Web page of TownePlace Suites.
Exhibit X Web page of TownePlace Suites.
Exhibit Y Written Direct Testimony of Christopher M. Stabile, Hospitality Accountant of Mullenix Companies.
Exhibit Z Written Direct Testimony of Mark A. Krug, owner of Marquette Tax Associates.
Exhibit AA Amended Written Direct Testimony of Christopher Stabile.
Exhibit BB Written Direct Testimony of Sharon Hill.
5. The subject property is located at 1800 Zumbehl Road, St. Charles, Missouri, known as the TownePlace Suites. The property is identified by parcel number 6-0013-7944-00-20B. The property is improved by two three-story brick veneer and vinyl-sided structures containing a total of 95 dwelling units. The structures are intended for use and are used for residential living by human occupants. Exhibit Z, Q & A 6, 8, 12-13; Exhibit AA, Q & A 11-12, 14-15; Complaint for Review of Assessment.
6. Complainant uses the subject land and buildings as a TownePlace Suites facility. In appearance, the facility resembles an apartment complex. Each unit has a full kitchen. There are laundry facilities for the residents’ use. Complainant furnishes housekeeping to each unit three times per week. Each unit has its individual telephone line, with voice mail. There is no gift shop or restaurant. The facility is marketed toward persons needing temporary residences for stays of 30 consecutive days or more; residents are accepted for shorter stays. Exhibits Q through X; Exhibit Z, Q & A 16; Exhibit AA, Q & A 15, 27, 29, 35.
7. Upon arrival, residents sign registration cards. Exhibit D; Exhibit AA, Q & A 23, 26; Exhibit BB, Q & A 5. There are a few registration cards that are unsigned by residents, but the number is not material. Exhibit D. By signing a registration card, each resident agrees to stay for the time shown on the registration card. Exhibit R; Exhibit AA, Q & A 31; Exhibit BB, Q & A 6. By accepting the favorable rate for a stay of 30 consecutive days or more without signing a registration card, a resident agrees to stay for 30 days or more.
8. Complainant’s practice is to charge each resident state sales tax from the first day of occupancy. Beginning with the thirty-first consecutive day of his or her stay, each resident who has stayed for 30 consecutive days or more is not charged state sales tax for the remainder of his or her stay. In addition, each such resident should be credited for state sales tax previously charged. Until recently, that was not occurring because of an internal error. However, Complainant is issuing the proper credits to the residents affected. Exhibit AA, Q & A 20; Tr. at 30.
9. Complainant presented three computations of the percentage of use of the property by residents for long-term stays – that is, stays of 30 or more consecutive days. Exhibits B, C, E through P. All three compared the number of days of all long-term stays to the number of days of all stays.
10. The subject property is not used primarily for transient housing. The property is used for more than one purpose and such uses result in different classifications – residential and commercial.
11. The percentage of use of the property by residents for long-term stays for the years at issue is 60 percent.
12. Complainant rebutted any presumption that the Board of Equalization properly classified the subject property. The classification for the property for tax year 2000 is 60 percent residential and 40 percent commercial. The assessed value of the residential portion of the property is $416,810 ($3,656,226 x .60 x .19 = $416,810), and the assessed value of the commercial portion of the property is $468,000 ($3,656,226 x .40 x .32 = $468,000).
CONCLUSIONS OF LAW
The Commission has jurisdiction to hear this appeal and correct any assessment which is shown to be unlawful, unfair, arbitrary or capricious. Article X, section 14, Mo. Const. of 1945; Sections 138.430, 138.431, RSMo. The Commission shall issue a decision and order affirming, modifying or reversing the determination of the board of equalization, and correcting any assessment which is unlawful, unfair, improper, arbitrary, or capricious. Section 138.431.4, RSMo.
Construction of Tax Statutes
Ambiguities in taxing statutes are resolved against the taxing authority and in favor of the taxpayer. Morton v. Brenner, 842 S.W.2d 538, 542 (Mo. banc 1992).
Board of Equalization Presumption
There is a presumption of validity, good faith and correctness of assessment by the County Board of Equalization. Hermel, Inc. v. State Tax Com’n, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. State Tax Com’n, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. State Tax Com’n, 308 S.W.2d 748, 759 (Mo. 1958).
Complainant’s Burden of Proof
In order to prevail, Complainant must present substantial and persuasive evidence that the subject property as of January 1, 2000, met the statutory definition of residential property. Hermel, Inc. v. State Tax Com’n, 564 S.W.2d at 897. Substantial evidence can be defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. See, Cupples-Hesse Corporation v. State Tax Com’n, 329 S.W.2d 696, 702 (Mo. 1959). Persuasive evidence is that evidence which has sufficient weight and probative value to convince the trier of fact. The persuasiveness of evidence does not depend on the quantity or amount thereof but on its effect in inducing belief. Brooks v. General Motors Assembly Division, 527 S.W.2d 50, 53 (Mo. App. 1975).
Residential and Commercial Property
For purposes of ad valorem taxation, real property is classified as residential if the property is improved by a structure which is used or intended to be used for residential living by human occupants and is not used primarily for transient housing. Commercial property is all other property not included in either the residential or agricultural classification. Section 137.016.1, RSMo.
The subject property has been classified by the Assessor and the Board of Equalization as commercial property under subsections (1) and (3) of Section 137.016.1, RSMo. It is undisputed that the property is improved by structures that are used for residential living by human occupants.
The exclusion from residential classification for property used primarily for transient housing refers to the sales tax law, Section 144.020.1(6), RSMo, and through it to the Department of Revenue’s regulation at 12 CSR 10-110.220. In substance, the regulation provides that a permanent resident is not subject to sales tax on his or her lease or rental payments. A permanent resident is defined as a person who contracts in advance for a period of 30 consecutive days or more and actually remains for 30 consecutive days or more.
A substantial percentage of residents at the subject property receive a favorable rate for stays of 30 days or more. With a few exceptions, they sign registration cards showing beginning and ending dates of their stays and a rate. By signing, they acknowledge that the rate is determined by length of stay. If a resident leaves early, his or her rate is adjusted up to the appropriate rate for the length of his or her actual stay. Alternative sanctions for leaving early would equally support the conclusion that there is mutuality of obligation and therefore a contract. Only a contract is required, not a highly formal or long contract. In the few cases where a resident accepts the favorable rate for a stay of 30 consecutive days or more without signing a registration card, there is an implied contract, which is sufficient. There are sufficient contracts here.
It is not material that residents may arrange for employers or other third parties to pay for their rent, as long as the resident agrees to stay, and actually stays, for 30 consecutive days or more. Under the Department of Revenue’s regulation, businesses do not qualify as permanent residents. That disqualification applies to businesses reserving rooms or apartments for successive use by more than one person. There is no evidence that such activity is taking place at the subject property.
Likewise, it is not material that a permanent resident may go elsewhere for short periods of time, as long as the resident’s use of the property continues-that is, as long as the resident does not remove his or her property and check out. Landlords at traditional apartment complexes generally do not keep track of the comings and goings of residents, nor do operators of hotels. Complainant should not be required to do that here.
As long as use by permanent residents makes up a substantial percentage of use of a property, Section 137.016.4, RSMo should apply to allocate the assessment between residential and commercial. The exclusion from residential classification in Section 137.016.1(1), RSMo for facilities that are used primarily for transient housing should apply only if use by permanent residents is not a substantial percentage of use. That exclusion does not apply here.
For the purposes of allocating the assessment between residential and commercial, use by permanent and non-permanent residents should be determined according to the actual use of the property. The Commission cannot assume that an unused unit would be used by a permanent resident or by a non-permanent resident, since each unit is suitable for use by either type of resident. Rather, use by permanent residents must be compared to use by non-permanent residents. Furthermore, the measurement of use must take into account the time that each resident uses his or her unit. On the evidence before the Commission here, simply counting the two types of residents and comparing those numbers without factoring in the length of stay of each resident would understate the use of the subject property by permanent residents. Complainant has properly accounted for the two uses of the subject property.
The primary use of the subject property based upon the actual use of rooms occupied by permanent and transient residents is for use by permanent residents. Sixty percent of occupied rooms were occupied by permanent residents. Accordingly, a residential classification must be given to sixty percent of the value of the subject property, with the remaining forty percent being classified as commercial property.
The facts in this appeal were actually undisputed. Only the interpretation of law as applied to the facts was really contested. Complainant’s evidence was substantial and persuasive to established that sixty percent of the rooms occupied during 2000 were rented by or for individuals who stayed thirty days or longer at a time. These facts were sufficient and persuasive to rebut the presumption of correct assessment by the Board of Equalization and/or the Assessor. The presumption in favor of the Board is not evidence. Assuming that there does still exist a presumption that the Assessor correctly classified the subject property, that presumption, likewise, is not evidence. A presumption simply accepts something as true without any proof to the contrary. In an evidentiary hearing before the Commission, the classification determined by the Assessor and the Board is accepted as true only until and so long as there is no proof to the contrary. In a case such as the present appeal, when the Complainant comes forward with facts which establish a residential use of the property under appeal, the Assessor/Board presumption is rebutted.
The classification for the subject property as determined by the Assessor and sustained by the Board of Equalization for St. Charles County for the subject tax day is SET ASIDE.
The classification for the subject property for tax year 2000 is 60 percent residential and 40 percent commercial.
The assessed value for the subject property for tax year 2000 is set at $416,810 residential and $468,000 commercial.
Judicial review of this Order may be had in the manner provided in Sections 138.470 and 536.100 to 536.140, RSMo within thirty days of the date of the mailing of this Order.
Any Finding of Fact which is a Conclusion of Law or Decision shall be so deemed. Any Decision which is a Finding of Fact or Conclusion of Law shall be so deemed.
SO ORDERED September 10, 2002.
STATE TAX COMMISSION OF MISSOURI
Sam D. Leake, Chairman
Bruce E. Davis, Commissioner
Jennifer Tidwell, Commissioner