            SUPREME COURT OF MISSOURI
                                      en banc
MYRON GREEN CORPORATION,                  )             Opinion issued January 15, 2019
                                          )
                    Appellant,            )
                                          )
v.                                        )            No. SC96903
                                          )
DIRECTOR OF REVENUE,                      )
                                          )
                    Respondent.           )


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

      Myron Green Corporation petitions for review of the administrative hearing

commission’s decision finding Myron Green liable for sales tax on food sold to employees

of the Federal Reserve Bank of Kansas City in the bank’s on-site cafeteria. Because Myron

Green regularly sold food in the on-site cafeteria “to the public” as this term is used in

Missouri’s revenue code, and the bank’s sales tax exemption does not extend to its

individual employees, the commission’s decision is affirmed.

                          I. Factual and Procedural History

      Myron Green Corporation operates corporate cafeterias in various businesses

throughout the Kansas City metropolitan area. The Federal Reserve Bank of Kansas City
contracted with Myron Green to operate the bank’s on-site cafeteria. The bank is a secure

facility. As a result, public access to the cafeteria is restricted. However, anyone can

purchase food from the cafeteria upon entry and access to the bank.

       Myron Green entered into a “cost-plus” contract with the bank. Pursuant to the

contract, the bank pays Myron Green its actual costs and expenses, plus an additional fee

to compensate Myron Green for its services. Under the contract, Myron Green handles

nearly all aspects of the cafeteria’s operation. Myron Green purchases food from wholesale

distributors and arranges for its transport to the bank. Myron Green employees stock the

cafeteria, cook the food, and operate the point-of-sale system. The bank does not buy any

food from Myron Green before the food is sold to the cafeteria customers, and the bank’s

influence is limited to setting the price customers pay for food, determining the cafeteria’s

hours of operation, and screening the Myron Green employees who work in the cafeteria.

Customers purchase items in the bank’s cafeteria similarly to any other cafeteria.

Customers select the food and drink products they wish to buy then pay a cashier for those

items. Customers can pay with cash or, if the customer is a bank employee, via payroll

deduction. The cafeteria does not accept credit or debit cards. Approximately 80 percent

of customers at the cafeteria pay via payroll deduction.

       Cash payments from customers go directly to Myron Green’s bank account, and the

bank does not interact with those funds. The payroll deduction option allows employees

to swipe their identification badges at checkout. This instructs the bank to withhold the

payment amount from the employee’s next paycheck. The withholding is held in a separate

account at the bank. Myron Green tracks payroll deduction sales and transmits a list of all

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such sales to the bank twice per month, aligning with the bank’s pay period. At the end of

each two-week pay period, the bank uses its corporate credit card to pay Myron Green the

total amount deducted from employee paychecks. The bank then uses the funds in the

payroll deduction holding account to reimburse itself. The cash and two payroll deduction

payments do not cover the contracted monthly price the bank agreed to pay Myron Green

because the cafeteria sells food below market value. Therefore, at the beginning of each

month, the bank makes a third “shortfall” payment to Myron Green, which covers the

remainder of the contract price for the previous month. In this way, the bank subsidizes

the cost of food in the cafeteria.

       The bank’s purchases are exempt from Missouri sales and use tax. See 12 U.S.C. §

531. Believing this exemption applied to all sales transactions at the bank’s cafeteria,

Myron Green did not charge or collect sales tax on any products sold in the cafeteria.

Following an audit, however, the director of revenue determined the cafeteria’s cash sales

and payroll deduction sales were taxable, finding individual customers made those

purchases, not the bank. The director concluded Myron Green owed sales tax to the state

of Missouri for all products sold in the cafeteria. Myron Green appealed the director’s

decision to the administrative hearing commission.         The commission affirmed the

director’s tax audit findings in a published decision. Myron Green petitioned this Court

directly for review.

                                     II. Jurisdiction

       This Court has exclusive appellate jurisdiction over cases involving the construction

of Missouri’s revenue laws. MO. CONST. art. V, § 3. “A ‘revenue law’ is one that imposes,

                                             3
amends, or abolishes a tax or fee.” Armstrong-Trotwood, LLC v. State Tax Comm’n, 516

S.W.3d 830, 834 (Mo. banc 2017). This case presents questions requiring the interpretation

of § 144.020, 1 which sets the statewide sales tax. Accordingly, this Court has exclusive

appellate jurisdiction.

                                III. Standard of Review

         This Court reviews the commission’s legal decisions de novo. Shelter Mut. Ins. Co.

v. Dir. of Revenue, 107 S.W.3d 919, 920 (Mo. banc 2003). This Court will affirm a

commission decision if it is supported by competent and substantial evidence on the record

as a whole and is not “arbitrary, capricious, unreasonable, unlawful, or in excess of

jurisdiction.” J.B. Vending Co., Inc. v. Dir. of Revenue, 54 S.W.3d 183, 185 (Mo. banc

2001); see also MO. CONST. art. V, § 18.

                                        IV. Analysis

         The primary issue before this Court is whether a third-party operator of a company

cafeteria is liable for sales tax on food purchased by employees of a tax-exempt

organization in that cafeteria when the organization influences pricing, sets the cafeteria’s

hours, and subsidizes the cost of food in the cafeteria. Myron Green argues the commission

erred by upholding the director’s decision to impose sales tax on sales made in the bank’s

on-site cafeteria. In affirming the director, the commission reached three legal conclusions:

(1) the bank cafeteria regularly served meals and drinks to the public within the context of

§ 144.020.1(6); (2) the bank’s sales tax exemption did not extend to individual employees;


1
    All statutory references are to RSMo 2000, as amended.

                                              4
and (3) the commission’s decision was not unexpected within the context of § 143.903.

Myron Green contests each finding in its three points relied on. The Court addresses each

in turn and affirms the commission’s findings on each of the three separate issues.

A. The bank cafeteria regularly served meals and drinks to the public.

       Section 144.020.1 imposes a tax on sellers of tangible personal property for the

privilege of engaging in that business. Any place where “meals or drinks are regularly

served to the public” is subject to the tax. § 144.020.1(6). Myron Green argues the bank’s

highly secured nature means its cafeteria does not serve food to the public. In finding the

bank’s cafeteria served meals and drinks to the public, the commission relied on this

Court’s decision in J.B. Vending, Co., Inc. v. Director of Revenue, 54 S.W.3d 183 (2001).

       In J.B. Vending, this Court rejected the argument that a company cafeteria does not

serve food to the public solely because the company limits access to the cafeteria.

J.B. Vending was a commercial cafeteria operator, which operated company cafeterias for

13 businesses in the St. Louis and Cape Girardeau areas. Id. at 184. This included tracking

inventory, preparing and cooking food, and operating the point-of-sale system. Id. All 13

locations in which J.B. Vending operated a cafeteria restricted access to their buildings,

and only those persons with a legitimate business purpose could enter. Id. Once inside,

however, anyone could buy food from and eat in the cafeterias. Id. at 185. J.B. Vending

argued it was exempt from the taxing provisions of § 144.020 because the secure nature of

its clients buildings precluded it from selling food and drink to the public. Id. This Court

disagreed, holding cafeterias do not become non-public for the purposes of § 144.020.1(6)

merely because a third party restricts access to them. Id. at 187. Accordingly, J.B. Vending

                                             5
was subject to the taxing provisions of § 144.020 because it regularly sold food and drink

to the public. Myron Green is similarly situated.

       Myron Green tries to distinguish this case by comparing it to Shelter Mutual

Insurance Co., v. Director of Revenue, 107 S.W.3d 919 (Mo. banc 2003). In Shelter, this

Court held items sold in a company cafeteria were not subject to sales tax because there

was no sale “to the public” within the context of § 144.020. Id. at 922. There, Shelter’s

company headquarters had an on-site cafeteria. This Court held Shelter’s cafeteria did not

sell meals and drinks to the public because, inter alia, Shelter’s main business was not

operating company cafeterias. Id. at 922. Rather, Shelter’s primary business was selling

insurance. Id. Shelter did not “provide its dining services as ‘separate and independent’

of its primary business.” Id. (internal citation omitted). Instead, “Shelter offered meals

and drinks to its employees ‘as an incidental but necessary undertaking’ of its insurance

business.” Id. (internal citation omitted). Moreover, different from the present case and

J.B. Vending, Shelter operated the cafeteria itself; it did not hire a commercial vendor.

       Here, operating on-site cafeterias for corporate clients is Myron Green’s primary

business. Holding oneself out as “ready to contract for cafeteria services with any company

that hires its services” means that company’s cafeterias regularly serve the public

regardless of whether the cafeteria is in a restricted-access building. J.B. Vending, 54

S.W.3d at 189. Similar to J.B. Vending, Myron Green was willing to provide its cafeteria

services to any client willing to contract with it. Although the bank restricts access to the

cafeteria, this was the bank’s choice, not Myron Green’s. Myron Green “does not limit

sales to only its own employees, or even to only building employees.” Id. Rather, Myron

                                             6
Green stands ready “to serve those who present themselves at its cafeteria lines and serves

all who appear at its cafeterias. … Any member of the public who can gain access to the

building can eat in the cafeteria.” Id. The bank’s cafeteria, therefore, remains public for

purposes of § 144.020 even though the bank restricts entry and access to the cafeteria. Id.

at 187.

          Finally, this Court in both Shelter and J.B. Vending highlighted the importance of a

special relationship between a cafeteria operator and its customers when deciding whether

that establishment serves the public. An operator’s special relationship with its customers

can establish the cafeteria does not regularly serve meals and drinks to the public. Shelter,

107 S.W.3d at 922-23. In finding Shelter’s cafeteria did not regularly serve the public, this

Court considered how most of the cafeteria’s customers were also Shelter employees. Id.

at 922. This special employer-employee relationship showed the cafeteria did not regularly

serve the public. Id. at 922-23. In contrast, there is no special relationship between Myron

Green and the cafeteria customers. True, most of the cafeteria’s customers are bank

employees, but the special relationship discussed in Shelter exists between employer and

employee, not customer and seller. The special relationship between the bank and its

employees does not extend to Myron Green and the bank employees. See § II(B), infra.

          Myron Green is in the business of operating corporate cafeterias, and it has no

special relationship with its customers in the bank cafeteria. Accordingly, there was

competent and substantial evidence supporting the commission’s finding that Myron

Green’s sales in the bank’s cafeteria are taxable because the cafeteria regularly serves

meals and drinks to the public as defined by § 144.020.1(6).

                                               7
B. The bank’s sales tax exemption did not extend to individual employees.

       State law exempts from sales tax “any retail sale which the state of Missouri is

prohibited from taxing pursuant to the Constitution or laws of the United States.”

§ 144.030.1. Federal law generally exempts federal reserve banks from state taxation. See

12 U.S.C. § 531. Further, a 2002 letter from the director of revenue advised the bank its

purchases were exempt from Missouri sales tax so long as it made purchases within the

bank’s exempt functions. Myron Green argues this authority renders its cafeteria sales

non-taxable because the food and drink items were sold to the bank and, therefore, qualify

as a “retail sale which the state of Missouri is prohibited from taxing” under federal law.

§ 144.030.1.

       Whether Myron Green’s food sales are exempt from sales tax in this case turns on

the identity of the purchaser. Myron Green argues the bank purchased food and drink

products from Myron Green, while the director argues the individual customers purchased

food directly from Myron Green. A purchaser of goods is the one who exercises dominion

and control over the thing purchased. Becker Elec. Co., Inc. v. Dir. of Revenue, 749 S.W.2d

403, 407 (Mo. banc 1988). Myron Green argues the bank exercised dominion and control

over the food because the bank stores the food, influences pricing, and sets the cafeteria’s

hours. The commission correctly rejected this view, however, because the bank’s overall

transaction structure and payment schedule with Myron Green is not compatible with the

bank exercising dominion over the food.

       A party exercises dominion over property by determining the “utilization of the

purchased property, including how, where, and when the property was to be used.” Olin

                                             8
Corp. v. Dir. of Revenue, 945 S.W.2d 442, 444 (Mo. banc 1997). To the extent the bank

exercised any control over the food, it was limited to establishing prices and the cafeteria’s

hours of operation. The bank had little influence over “how, where, and when” the

purchased food was used. 2 Id. Rather, cafeteria customers made these decisions. Cafeteria

customers decided which food products to purchase and when and where the food products

would be used and consumed.         It was cafeteria customers, therefore, not the bank,

exercising dominion over the food products and purchasing the goods sold by Myron

Green.

         Myron Green also attempts, but fails, to analogize this case to Canteen Corp. v.

Goldberg, 592 S.W.2d 754 (Mo. banc 1980). In Canteen, a commercial food service

provider sold food to a retirement home, which resold the food to its residents. This Court

deemed the retirement home to be the purchaser in that scenario. Id. at 756. Myron Green

argues the bank is no different from the retirement home. The distinction, however, lies in

the fact the retirement home bought and paid for the food before serving it to its residents.

Id. In contrast, the bank did not pay Myron Green in advance for any food stocked in its

cafeteria. Rather, Myron Green bought the food from wholesale distributors and arranged

for the wholesaler to transport, deliver, and store all supplies at the bank until Myron Green

employees prepared and served it to the cafeteria’s customers. Further, Myron Green

maintained control over the inventory after the wholesaler delivered the food to Myron



2
  Prior to sale to cafeteria customers, Myron Green - not the bank - exercised dominion
over the food products. Myron Green’s employees devised the cafeteria’s menus, prepared
all the food, filled orders, and operated the cash register.
                                              9
Green at the bank. Myron Green controlled the bank cafeteria’s inventory to such an extent

it could transfer supplies between the bank’s cafeteria and other Myron Green facilities.

       Cafeteria customers paid for their meals either with cash or by deducting the

purchase price from their bank paycheck. The cash payments went directly to Myron

Green, and evidence adduced at the hearing showed Myron Green tracked all payroll

deduction charges and submitted a list of swipe-card transactions to the bank twice per

month. Although the bank paid the contract price to Myron Green with its corporate credit

card and reimbursed itself by deducting funds from its employees’ paychecks, the bank

effectively remitted all payroll deductions to Myron Green. In this sense, the bank merely

provided an avenue through which bank employees could pay Myron Green directly by

deducting funds from their bank paychecks. This payment system is incompatible with

Myron Green’s theory that the bank purchased food from Myron Green and resold it to

cafeteria customers. Accordingly, the bank did not purchase any food from Myron Green

because Myron Green exercised exclusive dominion and control over the food until the

customer selected and paid for it. Becker, 749 S.W.2d at 407. There was competent and

substantial evidence, therefore, supporting the commission’s finding that Myron Green

sold food to individual customers instead of to the bank.




                                            10
C. The commission’s decision was not unexpected.

       In its final point, Myron Green argues, if this Court affirms the commission’s

decision, then Myron Green should be liable for sales tax only going forward because the

commission’s decision was unexpected. “[A]n unexpected decision by or order of a court

of competent jurisdiction or the administrative hearing commission shall only apply after

the most recently ended tax period ….” § 143.903.1. A decision is unexpected when a

“reasonable person would not have expected the decision or order based on prior law,

previous policy or regulation of the department of revenue.” Sneary v. Dir. of Revenue,

865 S.W.2d 342, 348 (Mo. banc 1993); § 143.903.2. A decision is not unexpected merely

because a court or the commission construes a statute less favorably than a taxpayer would

like. Gate Gourmet, Inc. v. Dir. of Revenue, 504 S.W.3d 59, 65 (Mo. banc 2016). Rather,

to show a decision was unexpected, “the taxpayer must show that the result in its case

‘overrules a prior case or invalidates a previous statute, regulation or policy of the director

of revenue and the decision was not reasonably foreseeable.’” First Nat. Bank of Callaway

Cty. v. Dir. of Revenue, 931 S.W.2d 471, 473 (Mo. banc 1996) (quoting Lloyd v. Dir. of

Revenue, 851 S.W.2d 519, 523 (Mo. banc 1993)) (emphasis added). This case is almost

directly on point with J.B. Vending. Accordingly, a reasonable person could have expected

the decision by the commission and this Court. Sneary, 865 S.W.2d at 348. Although this

Court interprets “served to the public” within the context of § 144.020.1(6) differently than

Myron Green would prefer, such interpretation is consistent with this Court’s precedent.

In addition, this Court does not overrule precedent in deciding this case today. Indeed,



                                              11
today’s decision adheres to it. Therefore, Myron Green’s sales tax liability is retroactive

because the decision of the commission and this Court was not unexpected.

                                     V. Conclusion

       For these reasons, the commission’s decision is affirmed.



                                                     ____________________
                                                     W. Brent Powell, Judge


All concur.




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