American Airlines in Missouri: What Makes a Sale a Sale?
- Sales Tax News
- Nov 1, 2012 | Gail Cole
American Airlines is seeking a hefty sales tax refund from the Missouri Department of Revenue. At the heart of the case is whether or not fuel sold by American Airlines to two AmericanConnection carriers was in fact a retail sale that should be subject to sales tax.
In February 2008, American Airlines "sought a refund of nearly $518 million for sales tax collected and remitted to the director of revenue for sales of jet fuel to Chautauqua and Trans-States," which runs AmericanConnection flights in and out of St. Louis. American argued that a sale at retail did not occur between American Airlines and the AmericanConnection carriers "because there was no transfer of title or ownership to the fuel."
The director of revenue denied American Airline's request, as did the administrative commission when the airline sought a review. American Airlines is appealing.
What makes a sale a sale?
Pursuant to Missouri Law , a "sale at retail" occurs when there is "any transfer…of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale… for a valuable consideration." (§ 144.010.1(10) RSMo). American Airlines argued that it "did not transfer either title to, or ownership of, the fuel to AmericanConnection carriers" and therefore the transactions were not "sales at retails."
The Director of Revenue argued that "[a] sale at retail took place when the independent airlines purchased the fuel… ." The argument is based in part on the following:
- "American disclaimed any responsibility for providing fuel for AmericanConnection planes…"
- "Chautauqua and Trans-States could purchase their fuel from any source;"
- "Chautauqua and Trans-States… exerted sole control over the fuel" once they obtained the fuel; and
- "The independent airlines…controlled the pilots in charge of flying the planes…[and] also controlled the use of the fuel for maintenance purposes when the planes were not flying AmericanConnection routes."
Pursuant to Missouri law, American bears the "burden of proving that a sale of tangible personal property… was not a sale at retail… ." (§ 144.210.1. MRS).
The case is currently before the Supreme Court of Missouri, which heard oral arguments for the case on October 30, 2012.