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Cass County v. Director of Revenue

Supreme Court of Missouri, En Banc

May 22, 2018

CASS COUNTY, MISSOURI, Appellant,
v.
DIRECTOR OF REVENUE, Respondent, CITY OF LEE'S SUMMIT, MISSOURI, Intervenor-Respondent.

          PETITION FOR REVIEW OF A DECISION OF THE ADMINISTRATIVE HEARING COMMISSION The Honorable Audrey Hanson McIntosh, Commissioner

          W. BRENT POWELL, JUDGE

         Cass County seeks review of an administrative hearing commission decision allowing the director of revenue to redistribute tax revenue owed to the city of Lee's Summit but erroneously paid to Cass County. Cass County argues the commission's decision is not authorized by law because this is a refund matter and no application for a refund was filed. Because this is not a refund matter, Cass County fails to demonstrate the commission's decision is not authorized by law, and the commission's decision is affirmed.

         I. Factual and Procedural History

         The city of Lee's Summit is split between two counties, Cass County and Jackson County. Both Lee's Summit and Cass County impose a sales tax on utility service for domestic use, as allowed by § 144.032.[1] Jackson County does not impose such a tax. Consequently, sales tax revenue from utility service collected from Lee's Summit residents in Cass County is distributed by the department of revenue to Lee's Summit and Cass County, while sales tax revenue from utility service collected from Lee's Summit residents in Jackson County is payable only to Lee's Summit.

         Kansas City Power & Light ("KCP&L") sold electricity and gas services to Lee's Summit residents located in both Cass and Jackson counties. These residents paid sales taxes to KCP&L and, in turn, KCP&L remitted the taxes along with monthly tax returns to the department of revenue. KCP&L's tax returns from December 2008 through November 2011 mistakenly coded all sales taxes received from Lee's Summit residents as Lee's Summit/Cass County and failed to code any sales taxes received as Lee's Summit/Jackson County. As a result, revenue from sales taxes received for utility services from Lee's Summit residents in Jackson County during that period was mistakenly distributed to Lee's Summit and Cass County rather than paid only to Lee's Summit.

         The director of revenue discovered this mistake and notified Cass County that, because of KCP&L's erroneous tax returns, Cass County had been paid approximately $966, 692 in tax revenue that should have been paid to Lee's Summit. The director further informed Cass County this erroneous distribution of tax revenue would be corrected over a three-year period via monthly amended tax returns filed by KCP&L. Based on these amended tax returns, the director would withhold a certain amount of monthly sales tax revenue from KCP&L utility service normally owed to Cass County and distribute this revenue to Lee's Summit. This would occur each month until the total amount of tax revenue erroneously distributed to Cass County was redistributed to Lee's Summit.

         Cass County responded by seeking a writ prohibiting the director from withholding the tax revenue and redistributing it to Lee's Summit The Cole County circuit court granted the requested writ relief, and the director appealed. The court of appeals reversed and directed the circuit court to quash its writ of prohibition, holding a writ was inappropriate because Cass County had an adequate remedy by appeal to the administrative hearing commission. State ex rel. Cass Cty. Mo. v. Mollenkamp, 481 S.W.3d 26, 31 (Mo. App. 2015).

         In accordance with the court of appeals' decision, Cass County appealed to the commission, arguing the director lacked legal authority to withhold tax revenue owed to Cass County and redistribute it to Lee's Summit. The commission disagreed, and Cass County filed a petition for review in this Court. This Court has jurisdiction pursuant to article V, § 10 of the Missouri Constitution.[2]

         II. Cass County's Argument

         "This Court will uphold the Commission's decision when it is authorized by law and supported by competent and substantial evidence upon the record as a whole unless clearly contrary to the reasonable expectations of the General Assembly." New Garden Rest., Inc. v. Dir. of Revenue, 471 S.W.3d 314, 317 (Mo. banc 2015) (internal quotations omitted); see also § 621.193. Cass County argues the commission's decision is not authorized by law in that the director has no legal authority to withhold tax revenue owed to Cass County and redistribute the revenue to Lee's Summit. According to Cass County, the only remedy to correct the improper distribution of tax revenue required KCP&L to file a refund with the department of revenue and distribute the refunded tax revenue to Lee's Summit. Cass County argues, because KCP&L did not seek a refund, the $966, 692 in tax revenue improperly distributed to Cass County cannot be redistributed to Lee's Summit.[3]

         Cass County argues the director has only two options pursuant to § 67.525- pay the tax revenue to Cass County; or authorize a refund. Because the director is not paying the tax revenue to Cass County, Cass County concludes a refund is the only option. This argument ignores § 67.525, which specifically applies to "county sales taxes collected by the director of revenue under sections 67.500 to 67.545." Section 67.525.1 (emphasis added). This case concerns taxes collected pursuant to § 144.032, not §§ 67.500 to 67.545.[4]

         Nevertheless, Cass County argues this is a refund matter and, as such, KCP&L is required to apply for a refund pursuant to § 144.100.4, which it has not done. Cass County specifically relies on § 144.190.2 to conclude this is a refund matter. Section 144.190.2 states in relevant part:

If any tax, penalty or interest has been paid more than once, or has been erroneously or illegally collected, or has been erroneously or illegally computed, such sum shall be credited on any taxes then due from the person legally obligated to remit the tax pursuant to sections 144.010 to 144.525, and the balance, with interest as determined by section ...

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