MIDWEST AERIALS & EQUIPMENT, INC., )
v. ) Appeal Number 00-20002
MARY KING, ASSESSOR, )
ST. LOUIS CITY, MISSOURI, )
DECISION AND ORDER
Decision of the St. Louis City Board of Equalization reducing the assessment made by the Assessor, AFFIRMED in part and SET ASIDE in part, Commission finds true value in money for the property which was not in dispute and therefore not contested for tax year 2000 to be $181,146, assessed value of $60,382; the Commission finds $357,370 of the disputed property to be inventory and exempt from assessment and taxation and the remaining $1,429,478, assessed value of $476,493, to be taxable personal property. Total assessed value of taxable personal property $536,875.
Complainant appeared by Counsel, Michael Gordon, Clayton, Missouri.
Respondent appeared by Counsel, Susan Phelps, Assistant City Counselor and Eugene J. Hanses, Jr., Associate City Counselor
Case heard by Chief Hearing Officer, W. B. Tichenor.
Case decided by the Commission.
The Commission takes this appeal to determine whether certain items of Complainant’s property are non-taxable as inventory and to determine the true value in money for such items as are determined to not be inventory and therefore taxable.
Complainant appeals the decision of the St. Louis City Board of Equalization which reduced the valuation of the subject property. The Assessor determined an appraised value of $2,362,740 (assessed value of $787,580, as personal property). The Board of Equalization reduced the value to $2,361,600 (assessed value of $787,200). A hearing was conducted on May 22, 2001, at the St. Louis City Hall, St. Louis, Missouri. Complainant and Respondent filed their Post-Hearing Briefs (July 9, 2001 & August 7, 2001) and Complainant filed a Post-Hearing Reply Brief (August 24, 2001).
The Commission, having considered all of the competent evidence upon the whole record and arguments of Counsel in Briefs filed, enters the following Decision and Order.
Complainant offered into evidence the following exhibits:
Exhibit A Copy of sign displayed at various locations on Complainant’s premises, reading: ALL EQUIPMENT IS FOR SALE – INQUIRE TODAY FOR PRICING.
Exhibit B Picture of sign (Exhibit A) displayed at Office of Complainant’s premises.
Exhibit C Lease utilized by Complainant for lease of inventory. Photocopy filed at time of evidentiary hearing, original copy filed, at request of Hearing Officer, on June 13, 2001.
Exhibit D Complainant’s Inventory Price List.
Exhibit E Original Business Tangible Personal Property 2000 – Tax Return.
Exhibit F Amended Business Tangible Personal Property 2000 – Tax Return.
Exhibit G List of Sales and Dispositions to date.
Exhibit H Written Direct Testimony of Kevin J. Morrell.
Mr. Morrell was submitted for cross-examination and testified in response to questions by Respondent’s Counsel and the Hearing Officer. Exhibits A through H were received into evidence.
Counsel for Complainant filed with his Brief two exhibits.
Brief Exhibit 1 Stipulation of Facts signed by Counsel for Complainant and Counsel for Respondent.
Brief Exhibit 2 Copy of Letter dated January 22, 1988, to the Cole County Assessor from the Administrative Secretary of the Commission setting forth recommended criteria for determining whether or not rental property is being held for sale.
Reply Brief Exhibit 1 Copy of Letter dated February 27, 1996, to the St. Louis County Assessor from the Chief Counsel of the Commission setting forth factors to assist in determining if property was inventory.
No objections were made to any of the Brief Exhibits. They are received as part of the record in this appeal. The Joint Stipulation of Facts signed by Counsel is approved.
Respondent offered into evidence the following exhibits:
Exhibit 1 Appraisal Report of Kimberly Simon.
Exhibit 2 Written Direct Testimony Kimberly Simon.
Counsel for Complainant had no cross-examination of Ms. Simon. Exhibits 1 and 2 were received into evidence.
Counsel for Respondent filed with her Brief four exhibits.
Brief Exhibit AA Copy of Internet article from bizjournals.com from the week of October 9, 2000, on Complainant’s business.
Brief Exhibit BB Copy of Empire Gas, Inc. v. Robert Raines, STC Appeal No. 91- 73004, 2/19/93 (1993 WL 49756 (Mo.St. Tax. Com.)).
Brief Exhibit CC Copy of Nixon’s Farm Equipment, Inc. v. Linda Harmon, STC Appeal No. 93-51000, 7/7/94 (1994 WL 362326 (Mo. St. Tax. Com.)).
Brief Exhibit DD Copy of Beagle’s Rental Center v. Shirley Quick, STC Appeals No. 85-32016 & 85-32017, 12/24/86, STC 41st Annual Report, p. 729, 1986.
No objections were made to the Brief Exhibits. They are received as part of the record in this appeal.
FINDINGS OF FACT
1. Jurisdiction over this appeal is proper. Complainant timely appealed to the State Tax Commission from the decision of the St. Louis City Board of Equalization.
2. Complainant’s property, for tax purposes, is located at 2231 Papain Street, St. Louis, Missouri. It is identified by Assessor’s Account Number 70061 0A.
3. The parties have stipulated to the following facts: Brief Exhibit 2.
1. The assessment of certain tangible personal property of the Complainant is not an issue in this appeal. This property consists of all the personal property that was identified in the May 31, 2001, Interlocutory Order and had an agreed market value of $181,146.00 and an assessed value of $60, 382.00.
2. The tangible personal property of the Complainant that is at issue in this appeal is the Complainant’s machinery and equipment which pursuant to the Respondent’s Appraisal Report (Exhibit 1) has a market value of $1,786,848.00 and an assessed value of $595,616.00.
3. The Complainant’s rental agreement (Exhibit C) contains language that the personal property at issue can be purchased.
4. At any point in time the twenty percent of the personal property at issue is idle at Complainant’s place of business.
4. The disputed property, which is under appeal on the issue of whether or not it constitutes inventory and is therefore not subject to assessment and taxation, consists of non- manufacturing machinery and equipment acquired in 1998 and 1999 consisting of various height Push Arounds, Scissor Lifts, Boom Lifts, Trailer Booms, Material Lifts and other machines and equipment leased and sold by Complainant. Exhibit D; Exhibit E, pp. 4-8.
6. Complainant’s business is the leasing and selling of machinery and equipment. Brief Exhibit AA; Exhibits A, B, D, G, & H, Q & A 4, 10, 12, 13, 23, 26, & 40.
7. Complainant’s Inventory Price List gives the sale price for each individual piece of machinery or equipment. Each item of property is identified by a unit number, a description, a serial number, direct cost, markup rate (percentage) and the total markup price or price to a customer purchasing the equipment. The purchase price for each piece of equipment is reasonable and is less than the manufacturer’s suggested retail price. Complainant has at least 15-20 identical or virtually identical pieces of equipment in each category of equipment that are available for sale. Complainant’s average length of the lease term is approximately five days. Exhibit D; Exhibit H, Q & A’s 12-25; Tr 4, Line 22 – Tr. 5, Line 4.
8. Complainant’s Lease/Rental Agreement, on its cover, states: INTERESTED IN PURCHASING A UNIT? ALL OF OUR EQUIPMENT IS FOR SALE – CALL TODAY FOR PRICING. Exhibit C.
9. From 4/29/98 through 12/31/99, Complainant sold: 18 scissor lifts, 1 trailer boom and 5 material lifts; during 2000, Complainant sold: 3 push arounds, 25 scissor lifts, 9 boom lifts, 1 trailer boom and 21 material lifts. Approximately 24% of Complainant’s gross revenue through the end of 2000 was from the sale of equipment. Exhibit G & H, Q & A 40.
10. Signs like Exhibit A are posted on Complainant’s premises on the front door, in the reception area and on the access door to the warehouse where the machinery and equipment is located. TR. 8, Lines 15-25.
11. Respondent admits that twenty (20%) percent of the property in dispute is immediately available for sale and exempt from taxation as it is inventory. Respondent’s Brief, p. 4, Proposed Finding of Fact 9 & p. 9.
12. At any one time twenty (20%) percent of the property on the Inventory Price List is immediately available for sale and is therefore inventory and exempt from taxation.
13. The value of the contested personal property that is available for sale at any one time is $357,370 ($1,786,848.00 x .20 = $357,370), this constitutes inventory and is therefore exempt from taxation. The remaining $1,429,478 of contested personal property is not inventory and is therefore taxable.
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 hearing officer 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.
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. STC, 564 S.W.2d 888, 895 (Mo. banc 1978); Chicago, Burlington & Quincy Railroad Co. v. STC, 436 S.W.2d 650, 656 (Mo. 1968); May Department Stores Co. v. STC, 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 disputed property is inventory. Hermel, supra, 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 Commission, 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).
Tax exemptions are not favored in law, and claims therefor must be strictly but reasonably construed against the party claiming exemption. Bader Realty & Investment Co. v. St. Louis Housing Authority, 217 S.W.2d 489 (Mo. banc 1949); Missouri United Methodist Retirement Homes v. State Tax Commission, 522 S.W.2d 745 (Mo. 1975); Home Builders Association of Greater St. Louis v. St. Louis County Board of Equalization, 803 S.W.2d 636, (Mo. App. E.D. 1991).
Inventory Exempt from Taxation
All personal property held as goods, wares, merchandise, stock in trade or inventory for resale by distributors, wholesalers, or retail merchants or establishments shall be exempt from taxation. Article X, section 6, Mo. Const. of 1945.
The issue presented in the present appeal is a straight foreword issue of law. If the subject machinery and equipment constitutes inventory, it is under the provision of the Constitution of Missouri exempt from taxation. If the subject property is not inventory it is subject to taxation. Respondent admits that twenty (20%) percent of the machinery and equipment in dispute is available for sale at any one time on Complainant’s lot and is therefore inventory and exempt from taxation.
Empire Gas Case
The present case come under the holding of the Commission in the Empire Gas case, supra. The items of property at issue, in that appeal, were 460 propane tanks owned by Empire Gas. Approximately 50 of the tanks were located at two bulk plants in Morgan County owned by the taxpayer. The remaining approximately 410 tanks were located on individuals’ properties and leased to the individuals. It was complainant’s policy that the individuals leasing any of the 410 tanks could purchase them at any time at Complainant’s posted price. The Commission determined that the 50 tanks at the bulk plants were immediately available for sale (inventory) and therefore exempt.
The 410 tanks were not deemed as being available for sale simply because Complainant was always willing to sell a leased item. The ability to sell the leased tanks was limited by the fact that the lessees were entitled to retain the equipment as long as they paid the rent and otherwise met the lease terms. The lease tanks were not salable to the general public. The Commission relied upon a Florida case (Adams Construction Equipment Company v. Hausman, 472 So.2d 467 (Fla. 1985), citing to Olson Equipment Co. v. City of Minneapolis, 171 N.W.2d 717 (1969)) in defining inventory to denote an availability for sale in the ordinary course of business.
In Empire Gas the 50 propane tanks at the Complainant’s bulk plant were found to be inventory. They were available for sale or lease. These units are comparable to the twenty percent of Complainants machines and equipment that on average are idle on the premises ready for sale or lease. The lease tanks were not readily available for sale just like Complainant’s machinery that is out on lease. A leased piece of Complainant’s equipment is not available for immediate sale.
The holding in the Empire Gas case is controlling in the present appeal. Property cannot be held for resale while simultaneously being rented or leased. The owner cannot hold property for sale in the ordinary course of business when possession has been lost due to the item of property being leased. Complainant’s leased equipment is not immediately available for sale and is therefore not inventory. Accordingly it is taxable as personal property. The twenty percent available for immediate sale, valued at $356,370, is exempt as inventory.
The assessed valuation for the subject property as determined by the Assessor and reduced by the Board of Equalization for St. Louis City for the subject tax day is SET ASIDE in part and AFFIRMED in part.
The assessed value for the portion of the property which is not inventory for tax year 2000 is set at $536,875.
A party may file with the Commission an application for review of this decision within thirty (30) days of the mailing of such decision. The application shall contain specific grounds upon which it is claimed the decision is erroneous. Failure to state specific facts or law upon which the appeal is based will result in summary denial. Section 138.432, RSMo 1994.
If an application for review of this decision is made to the Commission, any protested taxes presently in an escrow account in accordance with this appeal shall be held pending the final decision of the Commission. If no application for review is received by the Commission within thirty (30) days, this decision and order is deemed final and the Collector of St. Louis City, as well as the collectors of all affected political subdivisions therein, shall disburse the protested taxes presently in an escrow account in accord with the decision on the underlying assessment in this appeal. If any or all protested taxes have been disbursed pursuant to Section 139.031(8), RSMo, either party may apply to the circuit court having jurisdiction of the cause for disposition of the protested taxes held by the taxing authority.
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 18, 2001.
STATE TAX COMMISSION OF MISSOURI
Sam D. Leake, Chairman
Bruce E. Davis, Commissioner
Jennifer Tidwell, Commissioner