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Tatson, LLC v. Director of Revenue

Supreme Court of Missouri

February 24, 2015

TATSON, LLC, d/b/a POWERHOUSE GYM OF JOPLIN, Respondent,
v.
DIRECTOR OF REVENUE, Appellant

PETITION FOR REVIEW OF A DECISION OF THE ADMINISTRATIVE HEARING COMMISSION. The Honorable Sreenivasa Rao Dandamudi, Commissioner.

The director was represented by Evan J. Buchheim of the attorney general's office in Jefferson City.

Powerhouse was represented by Paul A. Boudreau of Brydon, Swearengen & England PC in Jefferson City.

Mary R. Russell, Chief Justice. All concur.

OPINION

Page 44

Mary R. Russell, Chief Justice.

The Department of Revenue (DOR) seeks review of the Administrative Hearing Commission's (AHC) determination that Tatson, LLC, d/b/a Powerhouse Gym of Joplin (Powerhouse) did not owe sales tax on rental fees it collected from a personal training company, Atlanta Fitness, d/b/a Custom Built (Custom Built). The rental fees covered the lease of office space and the opportunity to market and sell personal training services to Powerhouse members. DOR contends that the rental fees were subject to sales tax as a fee paid to a place of recreation under section 144.020.1(2).[1]

This Court finds that the monthly rental fees were not subject to sales tax because Powerhouse did not render a taxable service to Custom Built. Section 144.020.1. The AHC's decision is affirmed.

Factual Background

At all times relevant to this case, Powerhouse was a fitness facility where members were required to pay a fee to join. In return for the fee, it offered members various services, such as the use of fitness classes, weights and exercise machines. It did not directly offer personal training services. Instead, Custom Built paid Powerhouse $6,000 per month for office space,[2] the ability to market personal training services to Powerhouse's members, and the use of Powerhouse's facilities to conduct personal training sessions for Powerhouse members. Custom Built employed the personal trainers, who were not able to use Powerhouse's facilities for personal use by virtue of the rental fees.

Powerhouse reported and paid income tax on the rental fees it received. DOR subsequently issued an assessment against Powerhouse in the amount of $12,207 for unpaid sales tax on the rental fees. Powerhouse challenged the assessment, and the AHC determined that Powerhouse was not liable for the sales tax assessment. DOR has petitioned this Court to review the AHC's decision.

Jurisdiction and Standard of Review

This Court has exclusive jurisdiction in all cases involving the construction of state revenue laws. Mo. Const. art. V, sec. 3. The AHC's decision will be affirmed if: (1) it is authorized by law; (2) it is supported by competent and substantial evidence on the whole record; (3) it does not violate mandatory procedural safeguards; and (4) it is not clearly contrary to the reasonable expectations of the General Assembly. Section 621.193, RSMo 2000; see Lor ...


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