Bi Go Markets, Inc. v. Morton

843 S.W.2d 916, 1992 Mo. LEXIS 145, 1992 WL 372254

• Court: Supreme Court of Missouri
• Decided: December 18, 1992
• Docket: No. 74711
• Status: Published

Opinions

COVINGTON, Judge.

Kenneth Morton, assessor for St. Louis County, and others, appeal from the trial court’s grant of a summary judgment in favor of Bi Go Markets, Inc., and Wetter-au, Incorporated. At issue is whether Bi Go and Wetterau owe 1991 ad valorem personal property tax in St. Louis County on an aircraft owned by Bi Go and leased by it to Wetterau. The judgment is reversed.

Bi Go, a New Hampshire corporation and subsidiary of Wetterau, having its principal place of business in New Hampshire, is the owner and lessor of an Avions Marcel Des-sault Falcon 900 jet aircraft. Bi Go leases the aircraft to Wetterau. The aircraft is regularly kept, hangared, and serviced at Lambert Field in St. Louis County. The flight logs show that from July of 1990, to May of 1991, the aircraft spent two hundred fifty-five of three hundred nine nights at the St. Louis airport, with the remainder of time being spent in fourteen other states. The aircraft made thirteen stops in New Hampshire, of a total of over six hundred stops, and was present overnight in that state three times. On April 1, 1991, Bi Go registered the aircraft with the State of New Hampshire, as required by New Hampshire law, and paid an annual fee in the sum of $57,230.

On May 16, 1991, Bi Go and Wetterau received notice of assessment of the aircraft for 1991 ad valorem personal property tax in St. Louis County. Bi Go and Wetterau appealed to the Board of Equalization of St. Louis County contending the aircraft was not subject to taxation in St. Louis County. The Board denied the appeal after which Bi Go and Wetterau appealed to the Circuit Court of St. Louis County.

Appellants and respondents filed motions for summary judgment. Bi Go and Wetter-au contended that St. Louis County is constitutionally prohibited from assessing an unapportioned ad valorem personal property tax against the aircraft. Bi Go and Wetterau acknowledged that St. Louis County may have the right to assess an apportioned ad valorem personal property tax against the aircraft; they contended, however, that the absence of statutory authority for the county to apportion prohibits it from doing so. The trial court granted Bi Go and Wetterau’s motion and ordered the assessor to exempt the aircraft from St. Louis County tax rolls. Bi Go and Wetterau then paid the tax under protest.

Appellants contend the circuit court erred in granting summary judgment because the tax situs of the aircraft is St. Louis County and, therefore, §§ 137.075, 137.095, RSMo 1986, require Bi Go and Wetterau to account for property taxes on the aircraft in this state. Appellants further contend that Missouri is the sole taxable situs for the aircraft; therefore, apportionment is not required. Even if apportionment is constitutionally required, appellants further assert, the fact that there is no statutory procedure by which an apportionment may be made does not defeat St. Louis County’s ability to impose an apportioned tax.

The present case involves principles of interstate commerce and the due process clause of the Fourteenth Amendment. If two or more states or subdivisions of the states have the power to tax the aircraft, the commerce clause requires the taxing authorities to apportion taxes in a nondiscriminatory manner. Central R.R. v. Pennsylvania, 370 U.S. 607, 613, 82 S.Ct. 1297, 1302, 8 L.Ed.2d 720 (1962); Braniff Airways, Inc. v. Nebraska State Board of Equalization and Assessment, 347 U.S. 590, 598, 74 S.Ct. 757, 762, 98 L.Ed. 967 (1954); Complete Auto Transit v. Brady, 430 U.S. 274, 278, 287, 97 S.Ct. 1076, 1078, 1083, 51 L.Ed.2d 326 (1977); Quill Corp. v. North Dakota, - U.S. -, -, 112 S.Ct. 1904, 1912, 119 L.Ed.2d 91 (1992). The taxpayer has the burden of establishing multiple jurisdictions having the ability to tax. Central R.R., 370 U.S. at 613, 82 S.Ct. at 1302.

St. Louis County has a right to levy an ad valorem property tax on the aircraft. § 137.095; Buchanan County v. State Tax Comm’n, 407 S.W.2d 910, 914 (Mo.1966). The question is whether the County’s tax must be apportioned. Determination of whether the County can levy an unappor-tioned tax on the aircraft is first dependent upon whether New Hampshire is constitutionally able to levy a property tax on the aircraft.¹

The law of authority to tax mobile property used in interstate commerce has developed without clear direction and guidance. By the ancient fiction of mobilia sequun-tur personam only the domicile of the owner could properly levy personal property taxes. 71 Am.Jur.2d State and Local Taxation, § 655 (1973); see also State ex rel. American Automobile Ins. Co. v. Gehner, 320 Mo. 702, 712, 8 S.W.2d 1057, 1059-60 (1928). As personal property became more mobile, the ancient fiction gave way to the rule that tangible personal property is to be taxed only where the property has a physical situs. 71 Am.Jur.2d State and Local Taxation, § 659 (1973).

With the gradual decline of the mo-bilia sequuntur personam doctrine in the beginning of the twentieth century, the United States Supreme Court began to restrict the power of states to tax mobile goods used in interstate commerce. A review of the United States Supreme Court decisions indicates that constitutional concerns of interstate commerce and due process limit the extent to which any state may tax tangible personal property. In Union Refrigerator Transit v. Kentucky, 199 U.S. 194, 26 S.Ct. 36, 50 L.Ed. 150 (1905), the state of Kentucky, the domicile of the property owner, assessed box cars leased to others permanently situated in other states. The Court held that taxation by the domicile violated the due process clause when the property was permanently located in a nondomiciliary state because the taxpayer was required to pay for state services it was never afforded, taxation by the domicile under the circumstances partook “rather of the nature of an extortion than a tax.” Id. at 202, 26 S.Ct. at 37.

In Johnson Oil Refining Co. v. Oklahoma, 290 U.S. 158, 54 S.Ct. 152, 78 L.Ed. 238 (1933), the Court further defined the ability of domiciliary and nondomiciliary states to tax property used in interstate commerce. In Johnson Oil, an Illinois corporation operated an oil refinery in Oklahoma. Id. at 159, 54 S.Ct. at 152. The refinery had several railroad tankers used almost exclusively in interstate commerce but which where loaded out of and returned to Oklahoma on a routine basis. Id. at 160, 54 S.Ct. at 153. The tankers visited Illinois only on a very infrequent basis. Id. The Court found the domiciliary state, Illinois, had lost its jurisdiction to tax the property because the property had an actual situs elsewhere. Id. at 161, 54 S.Ct. at 153. To determine whether the tankers had a tax situs in Oklahoma the Court looked to whether the property was habitually or continuously employed within the state. Id. at 162, 54 S.Ct. at 153. Although the Court found that Oklahoma was a tax situs, it allowed the state to tax only on an apportioned basis because the tankers were habitually and continuously employed in other states as well. Id. at 163, 54 S.Ct. at 154.

In Northwest Airlines, Inc. v. Minnesota, 322 U.S. 292, 64 S.Ct. 950, 88 L.Ed. 1283 (1944), the Court refused to extend the Johnson Oil test for determining tax situs to commercial airlines. Northwest Airlines was domiciled in and had its principal place of business in Minnesota. Id. at 293, 64 S.Ct. at 951. The airlines operated aircraft in Illinois, Minnesota, North Dakota, Montana, Oregon, Wisconsin, and Washington. Id. The Court refused to consider factors such as stopovers, runs, location of flying crew bases, and the location of flight facilities in determining whether the aircraft had established tax situs elsewhere. Id. Rather, the Court held that no nondomicili-ary state had provided continuous protection or benefits throughout the year to the airlines so that Minnesota, the domiciliary state, retained full power to tax. Id. at 297, 300, 64 S.Ct. at 953, 954.

In Braniff Airways, Inc. v. Nebraska State Board of Equalization and Assessment, 347 U.S. 590, 74 S.Ct. 757, 98 L.Ed. 967 (1954), the Court assessed the plurality holding in Northwest Airlines and found a nondomiciliary state could establish a tax situs if the airline made regularly scheduled flights into the state. The Court rejected the argument that the commerce clause immunized interstate instrumentalities from all state taxation, but found that commerce may be required to pay a nondiscriminatory or apportioned share of the tax burden. Id. at 597-98, 74 S.Ct. at 761-62. The Court also rejected the argument that the due process clause prohibited the airline from paying tax in the nondomiciliary state. Id. at 598-602, 74 S.Ct. at 762-765. Under due process considerations the only concern is “whether the tax in practical operation has relation to the opportunities, benefits or protection conferred by or afforded by the taxing state.” Id. at 600, 74 S.Ct. at 763.

In Central Railroad Co. v. Pennsylvania, 370 U.S. 607, 82 S.Ct. 1297, 8 L.Ed.2d 720 (1962), the Court again addressed the question of whether taxation by a nondomi-ciliary state violated the commerce clause. The Court held that it is only multiple unapportioned taxation of interstate operations that offends the commerce clause. Id. at 612, 82 S.Ct. at 1301.

In sum, the United States Supreme Court decisions reflect that the due process clause is satisfied when tangible personal property is taxed according to its “tax si-tus,” i.e., the place the property is located, and commerce clause concerns are satisfied if the property tax is apportioned when multiple states have a táx situs. See Standard Oil v. Peck, 342 U.S. 382, 384-85, 72 S.Ct. 309, 309-11, 96 L.Ed. 427 (1952).

Respondents argue that St. Louis County must apportion its tax because New Hampshire, as domicile, retains the power to tax the aircraft. Respondents’ argument rests on the premise that the aircraft is not “permanently located” outside of New Hampshire. Union Refrigerator Transit Co. v. Kentucky, 199 U.S. at 206, 26 S.Ct. at 38. Respondents read “permanently located” to mean “continuously throughout the year, not a fraction thereof, whether weeks or days,” relying on Northwest Airlines, Inc. v. Minnesota, 322 U.S. at 298, 64 S.Ct. at 953.

Respondents read Northwest Airlines too narrowly. Northwest Airlines does not authorize a domicile to levy an ad valo-rem property tax if the property enters the domicile for a period of time, no matter how brief. Furthermore, the inquiry does not end with Northwest Airlines. Northwest Airlines, a plurality opinion, is followed by cases interpreting Northwest Airlines to stand for the proposition that the domiciliary retains the right to tax personal property not located in the state only when it has not been shown that the property acquired a tax situs elsewhere. Braniff Airways, 347 U.S. at 601, 74 S.Ct. at 764. The domicile retains the power to tax when the property does not have a physical situs elsewhere because the property would otherwise escape taxation altogether. If the property has insufficient contacts with any other state to establish a tax situs, it is “appropriate to assume the domicile is the only State affording the opportunities, benefits, or protection which due process demands.” Central R.R., 370 U.S. at 612, 82 S.Ct. at 1302. See Pullman’s Palace-Car Co. v. Pennsylvania, 141 U.S. 18, 29, 11 S.Ct. 876, 880, 35 L.Ed. 613 (1891). When personal property has acquired a tax situs elsewhere, the domicile loses its jurisdiction to tax unless the domicile can establish the property is deriving substantial “opportunities, benefits, and protections” from the state by habitual or continuous use within the state.² Northwest Airlines, 322 U.S. at 312, 313, 64 S.Ct. at 960, 961 (Stone, J., dissenting).

This Court returns to the specific question presented here—whether St. Louis County can levy an unapportioned tax on the aircraft. This question, in turn, depends upon whether New Hampshire is authorized to levy a property tax on the aircraft. Being the domicile, without more, does not establish New Hampshire as a tax situs. Resolution of the question is made by determining whether the property is deriving substantial “opportunities, benefits and protections” from New Hampshire by habitual or continuous use within New Hampshire. Thus, the situs issue as to New Hampshire devolves into the question of whether the aircraft’s thirteen stops in New Hampshire, of over six hundred flights, and being present three of three hundred nine nights within the state are sufficient to establish New Hampshire’s power to tax. The basis of the jurisdiction is the use or enjoyment of the property within the state.

While there is no clear demarcation of “habitual or continuous” nature of the use, the facts of other cases give guidance. Operating on fixed and regular routes may establish the power to tax. Central R.R., 370 U.S. at 614-15, 82 S.Ct. at 1302-03. Regular contact is sufficient to establish a state’s power to tax commercial aircraft. In Braniff Airways, 347 U.S. at 600-01, 74 S.Ct. at 763-64, the State of Nebraska was permitted to levy an apportioned ad valo-rem tax on the fleet of an interstate air carrier, which operated eighteen daily scheduled flights to and from points in Nebraska and made on average eighteen stops per day in Nebraska. Although the present case does not involve an aircraft operated by a common carrier, Central R.R. and Braniff Airways are nevertheless instructive for the due process analysis.

This Court’s decision in Peabody Coal Co. v. State Tax Comm’n, 731 S.W.2d 837 (Mo. banc), cert. denied, 484 U.S. 960, 108 S.Ct. 446, 98 L.Ed.2d 386 (1987), is also instructive. The taxpayer in Peabody was a Delaware corporation with its principal office and place of business in the City of St. Louis. Id. at 838. It owned two aircraft used in the course of its business to transport persons and property as the needs of the business required. Id. The taxing authority of St. Louis County, where the aircraft were hangared and spent approximately seventy-five percent of their ground time, sought to impose ad valorem taxes on the full assessed valuation of both aircraft. Id. This Court found that an aircraft situated in Missouri failed to establish a tax situs in Indiana, where it made 31.8% of its landings. Id. at 839. The taxpayer failed to meet its burden of showing a continuous presence or “actual situs” in Indiana so as to limit the exclusive taxing authority of Missouri. Id.

In the present case the taxpayers’ burden is not met. Under the undisputed facts, the aircraft made only thirteen stops in New Hampshire during the relevant period and the aircraft was present in New Hampshire overnight on only three occasions. The record is devoid of any other facts to show that the aircraft maintained a habitual presence or continuous use or enjoyment of the property within New Hampshire. The judgment must be reversed.

There is an additional basis for decision, also requiring reversal as to Wetterau. In this case, a Missouri corporation, Wetterau, is leasing an airplane from a New Hampshire corporation. The airplane is based in Missouri.

By strict stare decisis, there is no need to apportion a personal property tax on a Missouri corporation, regarding property not permanently outside the state. Peabody Coal Co. v. State Tax Comm’n, 731 S.W.2d 837 (Mo. banc), cert. denied, 484 U.S. 960, 108 S.Ct. 446, 98 L.Ed.2d 386 (1987).

In Missouri, every corporation “owning” or “holding” tangible personal property is liable for tax, which may be assessed against either or both. §§ 137.075, 137.-095, RSMo 1986; State ex rel. Rudder v. Haphe, 326 Mo. 460, 31 S.W.2d 788, 791 (1930); William A. Straub, Inc. v. City of St. Louis, 506 S.W.2d 377, 379 (Mo.1974).

In this case, Missouri is taxing the holder of the property, a Missouri corporation, which actually pays the tax. For all the record shows, the Missouri taxpayer used the plane to travel to New Hampshire “without any regularity and solely in accordance with the requirement of its business.” Peabody Coal Co., 731 S.W.2d at 839. “Property does not become subject to multiple taxation simply because it is often taken across a state line.” Id. “To acquire an actual situs in another state [New Hampshire] so as to limit the exclusive taxing authority of the home state [Missouri] there must be continuous presence in another state [New Hampshire] which thereby supplants the home state [Missouri] and acquires the taxing power over personalty that has become a permanent part of the foreign state [New Hampshire].” Id. citing Northwest Airlines, Inc. v. Minnesota, 322 U.S. 292, 296, 64 S.Ct. 950, 952, 88 L.Ed. 1283 (1944) (brackets added).

The taxpayer Wetterau has not met its burden of showing a “continuous presence” or “actual situs” in New Hampshire. Peabody Coal Co., 731 S.W.2d at 839.

For the reasons above stated, the judgment is reversed.

PRICE and LIMBAUGH, JJ., concur. BENTON, J., concurs in separate opinion filed. HOLSTEIN, J., concurs in opinion of BENTON, J. ROBERTSON, C.J., dissents in separate opinion filed. THOMAS, J., concurs in opinion of ROBERTSON, C.J.

1 . Appellants contend the annual fee paid by Bi Go to New Hampshire is not an ad valorem property tax and, because no other state currently imposes an ad valorem tax on the aircraft, Missouri is not required to apportion its tax. Respondent contends that the New Hampshire tax is in the nature of a property tax. The nature of the tax is of no consequence in the present case. The question for the purpose of this case is simply whether another state has the constitutional authority to tax, irrespective of whether a property tax has actually been imposed. See Peabody Coal Co. v. State Tax Comm’n, 731 S.W.2d 837, 838 (Mo. banc), cert. denied, 484 U.S. 960, 108 S.Ct. 446, 98 L.Ed.2d 386 (1987).

2 . "[E]xcept in the case of tangibles which have nowhere acquired a tax situs based upon physical presence, and for that reason remain taxable at the domicile even if never present there, the state’s power to tax chattels depends on their physical presence and is neither added to nor subtracted from because the taxing state may or may not happen to be the state of the owner’s domicile.” Northwest Airlines, 322 U.S. at 312, 313, 64 S.Ct. at 960, 961.