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Bakery tax dispute heads to Missouri high court

By CHRIS BLANK

Associated Press

JEFFERSON CITY, Mo. (AP) — The Missouri Supreme Court is set to consider a grocery chain’s attempt to claim a tax refund for the energy costs of baking doughnuts, cakes and cookies.

Missouri has a tax exemption for electricity and gas used in manufacturing, processing, compounding, mining or producing, and a Department of Revenue regulation lists examples of what it considers “processing” with a reference to bakeries.

Ameren Missouri sought a refund on behalf of Schnuck Markets Inc. for energy used by several store bakeries to turn “hard, frozen chunks of raw dough that clank when they hit a table” into finished products consumable by the public. The Missouri Supreme Court scheduled oral arguments for Wednesday.

“The key issue in this sales tax dispute is whether the Department of Revenue is required to provide a refund to a taxpayer in accordance with a department regulation,” attorneys wrote in an argument to the Supreme Court. Schnucks has stores in Missouri and other states, and Ameren Missouri is based in St. Louis.

The Department of Revenue rejected the refund request. The state’s Administrative Hearing Commission said part of the stores are bakeries but upheld the denial last December and noted an earlier Supreme Court ruling. The state high court said in a March 2012 decision food preparation for retail consumption is not “processing” and ruled a convenience store could not claim a tax exemption for energy used to prepare food.

Deputy Solicitor General Jeremiah Morgan said in a written argument that the sales tax exemption is limited to industrial-type food preparation and that Schnucks is not an “industrial-type” bakery. He said a regulation cannot expand a law.

Morgan said the interpretation of the company would mean “apparently every citizen in of Missouri who bakes or prepares food, cookies and bread is ‘processing,’ and therefore exempt on purchases of electricity, materials and equipment used in preparing meals. Likewise, heating up a soft pretzel at a ballgame would be manufacturing or processing.”

The company contends denying the refund effectively repeals the bakery regulation.

The Missouri Grocers Association said it is monitoring the case. Dan Shaul, the association’s state director, estimated three-quarters or more of Missouri grocery stores have some kind of bakery capability.

“Our goal all the time is to make sure our retailers are able to put as much money back into the store and also to keep prices as low as possible,” he said. “So if there was some legislation or a decision in a lawsuit that was handed down that would enable our retailers to reduce overhead, we would be certainly in favor of that.”

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