PETITIONS FOR REVIEW OF DECISIONS OF THE ADMINISTRATIVE HEARING COMMISSION. The Honorable Sreenivasa Rao Dandamudi, Commissioner.
In both cases, the director was represented by Solicitor General James R. Layton of the attorney general's office in Jefferson City.
In both cases, Circuit City and Dillard's both were represented by Brian R. Harris of Akerman LLP in Tampa, Florida and Charles W. Hatfield and Khristine A. Heisinger of Stinson Leonard Street LLP in Jefferson City.
LAURA DENVIR STITH, JUDGE. All concur.
LAURA DENVIR STITH,
Circuit City and Dillard's offered customers the opportunity to finance their purchases through private label credit cards. The cards were issued by banks with which each retailer had negotiated agreements. The bank immediately paid to the retailer the full amount of the purchase,
including sales tax, for each transaction made using the private label credit card. The retailer then remitted the applicable sales tax to the State. A customer's payments on the credit card went to the issuing bank. If a customer failed to pay his or her credit card debt, the issuing bank took any tax write off, as the retailer had been paid fully at the time of sale. Although neither Circuit City nor Dillard's suffered any loss on these purchases or on the payment of sales tax based on these purchases, both retailers nonetheless applied for refunds of the sales tax that the banks had written off. The Administrative Hearing Commission (AHC) held that the Director of Revenue erred in denying these refund claims.
The Director petitions for review. This Court reverses and remands. The retailers are incorrect in arguing that section 144.190.2, RSMo Supp. 2013, considered alone or in conjunction with 12 CSR 10-102.100, permitted them to be treated solely for sales tax refund purposes as a single organizational entity with the banks. The retailers and the banks are separate entities for sales tax refund purposes just as they concede they are separate entities for other purposes such as paying the sales tax, writing off the bad debt, or otherwise. Because, at the time of the initial transaction, the banks fully paid the retailers for both the amount of the sales tax and the amount of the purchase on which that tax was based, the retailers are not entitled to seek a refund of taxes the banks later wrote off.
I. STATEMENT OF FACTS
Both Circuit City and Dillard's sold retail goods and were registered with the Missouri Department of Revenue. Both entered into contracts with banks to issue private label credit cards. Private label credit cards generally can be used only at the retail store named on the card or at one of its affiliates. In other words, Circuit City customers who obtained a Circuit City private label credit card could use it to charge purchases made at Circuit City and affiliated stores; Dillard's customers who obtained a Dillard's private label credit card could use it to charge purchases made at Dillard's and affiliated stores.
Circuit City partnered with JPMorgan Chase Bank NA to operate and service its private label credit card accounts under a jointly negotiated program agreement. Under this agreement, Chase received and reviewed Circuit City customer credit card applications and decided whether to approve and issue a card. Chase also owned all Circuit City card accounts. Both Chase and Circuit City participated in developing and reviewing the card's marketing plan, and both provided training to staff members from the other company.
Dillard's partnered with GE Capital Consumer Card Co. Like Chase, GE Capital owned, authorized, and issued all Dillard's credit cards. The program agreement between Dillard's and GE Capital included a predetermined approval rate and an income sharing agreement settled monthly based on program revenues and bad debts incurred. Fifteen GE Capital staff members ...