BUSINESS AVIATION, LLC AND VAUGHN C. ZIMMERMAN, ET AL., Appellants,
DIRECTOR OF REVENUE, Respondent.
PETITION FOR REVIEW OF A DECISION OF THE ADMINISTRATIVE
HEARING COMMISSION The Honorable Audrey Hanson McIntosh,
R. RUSSELL, JUDGE
Aviation LLC and its members (collectively,
"Appellants") appeal the Administrative Hearing
Commission's ("AHC") decision assessing use
tax, additions to tax, and interest against Appellants as a
result of Business Aviation's purchase of an aircraft.
The aircraft was purchased in Kansas and then leased by
Business Aviation to Burgess Aircraft Management LLC,
common carrier in Missouri. Although the AHC found that the
right to use the aircraft was transferred from Business
Aviation to Burgess, it found it was not fully
transferred for valuable consideration. As a result, the AHC
determined Appellants owed the use tax.
argue they qualify for the resale use tax exemption through
the interplay of sections 144.018.1(4), 144.615(3), and
144.030.2(20). In particular, section 144.030.2(20)
provides an exemption for sales of aircraft to common
carriers. Further, to constitute a "sale," the
right to use the aircraft must be transferred for valuable
consideration paid or to be paid. See section
144.605(7), RSMo 2000 (use tax definition of
"sale"); section 144.010.1(9) (sales tax definition
of "sale"). Because Business Aviation transferred
the right to use the aircraft to a common carrier for
valuable consideration paid or to be paid, the lease
agreement constituted a sale pursuant to both the use and
sales tax definitions. Accordingly, Appellants qualify for
the resale exemption. The AHC's decision is reversed, and
the matter is remanded.
Aviation purchased an aircraft from Cessna Finance
Corporation in Kansas. That same day, Business Aviation
entered into an aircraft lease agreement with Burgess, a
common carrier that provides Part 135 air charter
transportation services to third parties.  Burgess
transported the aircraft from Cessna to Burgess' site of
operations in Missouri.
to the lease agreement, Burgess was granted "the
exclusive care, custody and control of the Aircraft during
the term of [the Lease] and at all times during any Part 135
charter operations conducted by [Burgess]." Further,
Burgess was required to perform all maintenance pursuant to
Part 91. Burgess was also to manage the aircraft,
maintain necessary records, and provide pilots and supplies
necessary for the aircraft to operate in accordance with
Federal Aviation Act regulations. Business Aviation was to
pay all costs for maintenance, insurance, management,
cleaning, and repairs, as well as the hangar fees.
The lease further provided in section three:
(c) As consideration for this Lease and use of the Aircraft,
[Burgess] shall pay [Business Aviation] the sum of $900.00
per hour based on the Hobbs meter (lift off to touch down)
(the "Hourly Rate"), payable on the fifteenth
(15th) day of the month immediately following the
month in which such hours were operated (the "Lease
Payments"), payable in advance on the first Business Day
of each month thereafter during the Term.
(d) All lease payments and other amounts payable by [Burgess]
hereunder shall be net to [Business Aviation], and free and
clear of all deductions, taxes and withholdings of any nature
whatsoever, except any amounts due [Burgess] from [Business
Aviation] as provided herein.
the lease also provided Business Aviation was required to pay
all costs and expenses related to its operation of the
aircraft if it chartered or used it, Business Aviation never
operated or chartered the aircraft.
prepared and provided to Business Aviation monthly financial
summaries, which included charges billed to Business Aviation
as well as income credited to Business Aviation for
Burgess' use of the aircraft. When parties other than
Zimmerman Properties and Foster chartered the aircraft,
Burgess paid Business Aviation $900 per flight hour. When
Zimmerman Properties or Foster chartered the aircraft, they
paid Burgess only $434.77 per flight hour, and Burgess then
paid that same amount to Business Aviation.
director determined Business Aviation owed use tax of $75,
674.41 and issued this assessment to Business Aviation,
Foster, and Zimmerman Properties as well as to each of
Zimmerman Properties' members. Business Aviation appealed
the director's assessment of the use tax to the
found that although Burgess was a common carrier, Business
Aviation was not entitled to the use tax exemption because
Business Aviation's lease agreement was not a sale for
purposes of that exemption. Specifically, the AHC found that
although the right to use the aircraft was transferred from
Business Aviation to Burgess, it was not fully
transferred for valuable consideration. Business Aviation
petitioned this Court for review of the AHC's
Court will affirm a decision of the AHC if it: (1) is
authorized by law; (2) is supported by competent and
substantial evidence on the whole record; (3) does not
violate mandatory procedural safeguards; and (4) is not
clearly contrary to the General Assembly's reasonable
expectations. Brinker Mo., Inc. v. Dir. of Revenue,
319 S.W.3d 433, 435 (Mo. banc 2010) (citing section 621.193).
The AHC's interpretation of revenue statutes receives
de novo review. Union Elec. Co. v. Dir. of
Revenue, 425 S.W.3d 118, 121 (Mo. banc 2014).
are "strictly construed against the taxpayer," and
any doubt is resolved in favor of assessing the tax.
Bartlett Int'l, Inc. v. Dir. of Revenue, 487
S.W.3d 470, 472 (Mo. banc 2016). The taxpayer must
demonstrate by "clear and unequivocal proof" that
an exemption applies. TracFone ...