Taxation Law in Missouri

John P. Barrie, Esquire

Hancock Amendment – “stormwater user charge” implemented without voter approval violated Hancock Amendment; however, refund claims not allowed. Zweig, et al. v. Metropolitan St. Louis Sewer District, No. 92581 (Mo. banc, November 12, 2013), Wilson, J.

The Metropolitan St. Louis Sewer District (“MSD”) implemented a “stormwater user charge” without prior voter approval on the basis that it was a user fee and not a tax.  The plaintiff brought a class action to overturn the fee, obtain refunds and attorney fees.

: The adoption of a “stormwater user charge” without voter approval violated the Hancock Amendment.  The court found that no matter how MSD characterized its service, the stormwater fee was not “charged in exchange for, nor is it based on, each individual Ratepayer’s use of that service” and therefore the implementation of the charge without prior voter approval violated the Hancock Amendment.  However refunds were not granted because a refund was found not authorized by law.  Attorneys’ fees were awarded plaintiffs.

Use Tax – Trade-in exemption not available when a qualified intermediary is used to facilitate the exchange. Loren Cook Co. v. Director of Revenue, No. 93061 (Mo. banc, November 12, 2013), Russell, C.J.

Taxpayer exchanged an old aircraft for a new aircraft using an intermediary to facilitate the transaction in a manner that satisfied the Internal Revenue Code § 1031 requirements.  For use tax purposes, the taxpayer reported tax based on an allowance for a trade-in credit.  The director determined that the taxpayer was not entitled to a trade-in credit and the taxpayer appealed the director’s determination.

Director’s determination upheld.   The Court found that because the sale of the aircraft and subsequent purchase of another aircraft involved different entities, the requirements of the taken in trade exemption under § 144.025, RSMo, were not satisfied.  Even though the use of an intermediary satisfied the federal like-kind exchange rules, it did not transform the separate sale and purchase transactions into one “trade-in” transaction.