Goldberg v. State Tax Commission , 1982 Mo. LEXIS 405 ( 1982 )

HIGGINS, Judge,

dissenting.

I dissent because I believe the majority opinion misconstrues and fails to apply this Court’s decision in M.V. Marine Co. v. State Tax Commission, 606 S.W.2d 644 (Mo. banc 1980)¹ in resolution of this case.

Paul Mueller Company, in support of this appeal, contends the trial court erred in its reversal of the ruling of the State Tax Commission. It asserts: (1) the Commission’s finding that Mueller’s sales to out-of-state customers constituted transactions partly in and partly outside Missouri is supported by substantial and competent evidence; (2) the court’s finding that Mueller’s sales to out-of-state customers constituted transactions wholly within Missouri and taxable one hundred percent in Missouri is contrary to § 143.451, RSMo 1978, the terms of which are to be strictly construed against the taxing authority; (3) such finding and decision is contrary to the legislative intent of § 143.451, RSMo 1978, and its predecessors, evidence of which is to be found in legislative language, re-enactment after judicial construction and failure of proposed legislation to the contrary; (4) such finding and decision is contrary to this Court’s previous interpretation of § 143.-451, RSMo 1978, with the exception of M.V. Marine Co. v. State Tax Commission, supra, which should be distinguished or overruled.

Dispositive of this case is whether the decision in M.V. Marine controls the present case. In that case this Court recognized that “the advent of the [Interstate Tax] Compact has simplified the process of determining entitlement to apportion taxes by changing the focus of the inquiry from a search for the ‘source’ of income to a simple showing of ‘tax liability in another state.’ ” Id. at 649, quoting from § 32.200 art. IV, 2., RSMo 1978. Application of this rule in the present case means that unless and until Paul Mueller Company shows that a state other than Missouri has jurisdiction to subject it to tax on its business activities outside this state, it cannot elect to apportion income pursuant to § 143.451, or § 32.200, art. IV, RSMo 1978.

Mueller would distinguish M.V. Marine as factually unique and inapplicable to the present case; however, the ruling in that case is one of statutory interpretation and not a factual determination. The legal issue of a taxpayer’s eligibility to apportion income pursuant to § 143.451, RSMo 1978, is involved in the present case the same as in M.V. Marine.²

Mueller, in recognition that its tendered distinction might prove unacceptable, urges alternatively that this Court should reconsider and overrule M.V. Marine, asserting it to be contrary to prior decisions of this Court as well as the plain meaning and legislative intent of sections 32.200, art. III.1, 143.431, and 143.451, RSMo 1978.³ The arguments are for a return to the rule first recognized in Artophone Corporation v. Coale, 345 Mo. 344, 133 S.W.2d 343 (1939), and most recently in International Travel Advisors, Inc., v. State Tax Commission, 567 S.W.2d 650 (Mo. banc 1978). Pursuant to these cases, and others, it is asserted that Mueller is permitted to use the single factor apportionment formula of § 143.451.2(2)(b), RSMo 1978, and include in the numerator thereof one-half of its income from out-of-state customers because a) this income is not exclusively “derived from sources within this state” § 143.451.1, RSMo 1978, and b) this income is from “... sales which are transactions partially within this state and partly without this state ...” Sec. 143.-451.2(2)(b), RSMo 1978. Mueller further asserts that a corporate taxpayer may elect to use this method of apportionment found in Chapter 143, RSMo 1978, or alternatively elect to use the three factor apportionment formula of the Compact. Sec. 32.200, art. IV, 3, RSMo 1978. It is argued that Chapter 143, RSMo 1978, and the Compact operate independently and that the corporate .taxpayer’s choice determines which shall apply; that if § 143.451.2(2)(b), RSMo 1978, apportionment is sought, only § 143.451.1 must be satisfied. In support of this view, Mueller relies on the following language from Article III of the Compact:

1. Any taxpayer subject to an income tax whose income is subject to apportionment and allocation for tax purposes pursuant to the laws of a party state or pursuant to the laws of subdivisions in two or more party states may elect to apportion and allocate his income in the manner provided by the laws of such state or by the laws of such states and subdivisions without reference to this compact, or may elect to apportion and allocate in accordance with article IV. This election for any tax year may be made in any party states or subdivisions thereof or in any one or more of the party states or subdivisions thereof without reference to the election made in the others....

Sec. 32.200, art. III.l., RSMo 1978. M.V. Marine is said to be contrary to this provision because this Court held a taxpayer must show it is entitled to apportion income by proving it is subject to tax in another state thereby providing a limitation on the taxpayer’s choice by requiring that a provision of the Compact be satisfied before § 143.451, RSMo 1978, apportionment may be used. It is argued that the “subject to tax” requirement of the Compact, § 32.200, art. IV, 2., 3.(1), RSMo 1978, only applies to one who elects to use the Compact’s three factor apportionment formula, and that the issue with regard to § 143.451, RSMo 1978, apportionment is the “source of income,” citing sections 143.431 and 143.451.1, RSMo 1978.

I

Whether the interpretation of the Compact and § 143.451, RSMo 1978, made in M.V. Marine should be overruled depends upon how these laws are to be construed, considering the applicable rules of construction. As stated in the Artophone case, 133 S.W.2d at 347:

We need not here discuss or consider the question whether or not the Legislature could tax the entire net income from all sources of a domestic corporation. The question is does the present law do so? Generally it may be said that taxing statutes are to be strictly construed in favor of the taxpayer and the fact that a particular subject of taxation, claimed to be taxed, is within the purview and in-tendment of the taxing statute must clearly appear from the statute so to be. “It is well established that the right of the taxing authority to levy a particular tax must be clearly authorized by statute, and that all such laws are to be construed strictly against such taxing authority.” State ex rel. Ford Motor Co. v. Gehner, 325 Mo. 24, 29, 27 S.W.2d 1, 3, and cases cited. Of course “The primary rule of construction of statutes is to ascertain the lawmakers’ intent, from the words used if possible; and to put upon the language of the Legislature, honestly and faithfully, its plain and rational meaning and to promote its object and ‘the manifest purpose of the statute, considered historically,’ is properly given consideration.” Cummins v. Kansas City Public Service Co., 334 Mo. 672, 684, 66 S.W.2d 920, 925.

These rules are equally applicable in the present case. Additional rules are applicable in this case because the Compact is considered as it relates to Chapter 143, RSMo 1978. When more than one statutory provision is involved, the Court must consider that the law does not favor a repeal by implication, but instead the provision relating to the same subject matter must if possible be construed so as to maintain the integrity of each. 2A C. Sands, Sutherland Statutory Construction, §§ 51.01, 51.02, at 287-291 (4th ed. 1973); See, e.g., City of Raytown v. Danforth, 560 S.W.2d 846, 848 (Mo. banc 1977). Statutes must be read in para materia, giving effect to each word, clause and provision, State ex rel. Fort Zumwalt School Dist. v. Dickherber, 576 S.W.2d 532, 536 (Mo. banc 1979); Blue Springs Bowl v. Spradling, 551 S.W.2d 596 (Mo.1977); a chronologically later statute, which functions in a particular way will prevail over an earlier statute of a more general nature, Laughlin v. Forgrave, 432 S.W.2d 308 (Mo. banc 1968); and the latter statute will be regarded as an exception to or qualification of the earlier general statute, City of Flat River v. Mackley, 212 S.W.2d 462 (Mo.App.1948). See generally Sutherland Statutory Construction, supra, § 51.02.

II

Article III.l of section 32.200, RSMo 1978, upon which Mueller and Amici rely begins with the proviso: “Any taxpayer subject to an income tax whose income is subject to apportionment and allocation for tax purposes pursuant to the laws of a party state.... ” This phrase qualifies the taxpayer’s right to “elect to apportion and allocate his income in the manner provided by the laws of such state....” Id. The question is when is one’s income subject to apportionment and allocation for tax purposes? Mueller argues that Chapter 143 is the party state law which is meant to satisfy the proviso of Article III.l. It is argued that the provisions of § 143.451 determine eligibility to apportion or allocate pursuant thereto. To the contrary, the Director asserts and M.V. Marine held that § 32.210, RSMo 1978, mandates reference to the Compact art. IV.2 to determine entitlement to allocate or apportion. Section 32.210 states:

Compact to apply to all state and local taxes. — The provisions of the compact shall apply to any tax levied by the state of Missouri or its political subdivisions.

This section is not part of the Multistate Tax Compact as adopted by other party states; it is unique to Missouri. Therefore, although it is among the statutory sections which comprise the Compact as adopted in Missouri, it is the “law of a party state” because it is specifically Missouri law and not part of the uniform provisions as adopted by all compact states. Section 32.210, RSMo 1978, clearly expresses the requirement that the Compact apply “to any tax levied by the state.” This must include whether “a taxpayer is subject to apportionment and allocation.” The decision in M.V. Marine made this interpretation originally, wherein it held:

With this legislative declaration in mind, we conclude that although taxpayers still are given an option on the method of allocation they may use, all other questions reference apportionment of income are to be resolved by reference to the Compact. We reach this conclusion by virtue of the mandatory language of § 32.210, the provisions of § 32.200, art. III. § 1 providing for the choice of methods of allocation and the continued existence of § 143.451 which sets out some of those choices.

Id. 606 S.W.2d at 649.

Amicus on behalf of Mueller and the majority opinion assert that § 32.210, RSMo 1978, is not entitled to an interpretation of this importance because it is “merely a procedural vehicle” and such a reading is negated by the subsequent enactment of the “new” income tax provision, § 143.451, in 1972; five years after the enactment of the Compact and § 32.210 in 1967. See Laws of Mo.1967, p. 102,113; Laws of Mo.1972, p. 698. It is admitted that § 32.210, RSMo 1978, was amended to its current form in 1974, but it is argued that this modification did not change the relationship of the Compact and Chapter 143, RSMo 1978, as fixed in 1972. This is not so. Section 32.210, RSMo 1978, as amended in 1974 is more inclusive than the original 1967 version. It declares “any tax levied” to be within the purview of the Compact. The original included only “state income tax.” Laws of Mo.1974, p. 712; compare Laws of Mo.1967, p. 113. The current § 32.210, RSMo 1978, is the most recent legislative enactment in the area and continues to include income tax. It has the same effect upon the use of the Compact and Chapter 143, RSMo 1978, as the original version. The procedural versus substantive distinction is not pursuasive because the effect of the statute is the same. The taxpayer when deciding how to proceed in determining taxable income must apply the terms of the Compact first and then “proceed” to elect which formula to use once entitlement to do so is shown.⁴

Ill

Next it is argued that if M.V. Marine is correct and the right to apportion is determined by reference to article IV.2 then the provision of 143.451, RSMo 1978, will be rendered meaningless because the former provides that where the income “is taxable both within and without this state ... [taxpayer] shall allocate and apportion his net income as provided in this article.” Id. Thus it is argued that “shall” requires taxpayers to use the three factor formula of the Compact; excluding the election of § 143.451, RSMo 1978, which M.V. Marine purports to permit. This same argument can be made in reverse. That is, if the interpretation tendered by Mueller be accepted then numerous situations would exist where the Compact would not in any way be applied, contrary to the requirement that it “shall apply to any tax levied by the State of Missouri.” Read in para materia the provisions may appear in some conflict; however, the clear expression in article III that one may elect to apportion or allocate pursuant to the laws of a party state, overrides the ordinarily mandatory effect of the single word “shall” as it appears in article IV.2.⁵

The foregoing interpretation is supported by the manifest intent and purpose of the Compact as expressed in article I. This is particularly true when it is recognized that the purpose of the Compact and that of Chapter 143, RSMo 1978, may be harmonized only when read as in M.V. Marine. In demonstrating this point, this Court turns to Mueller’s argument that the M.V. Marine decision contradicts legislative intent as consistently recognized by this Court in previous cases: International Travel Advisors, Inc., v. State Tax Commission, 567 S.W.2d 650 (Mo. banc 1978); State ex rel. River Corp. v. State Tax Commission, 492 S.W.2d 821 (Mo.1973), overruled in International Travel Advisors, Inc. v. State Tax Commission, supra; A.P. Green Fire Brick Co. v. State Tax Commission, 365 Mo. 1163, 277 S.W.2d 544 (1955); In re Union Electric Co. of Missouri, 349 Mo. 73, 161 S.W.2d 968 (banc 1942); Union Electric Co. v. Coale, 347 Mo. 175, 146 S.W.2d 631 (1940); In re Kansas City Star, Co., 346 Mo. 658, 142 S.W.2d 1029 (1940); F. Burkhart Mfg. Co. v. Coale, 345 Mo. 1131, 139 S.W.2d 502 (1940); and Artophone Corp. v. Coale, 345 Mo. 344, 133 S.W.2d 343 (1939). Mueller argues , that legislative approval of the intent which this Court has imputed to the statute’s “source of income” language is indicated by the history of § 143.451, RSMo 1978. The basic provisions of that section were re-enacted by the general revisions of 1969 and 1978, and specifically re-enacted in the income tax revision of 1972, Laws of Mo.1972, p. 698, all of this since the Compact was originally adopted in 1967. Laws of Mo.1967, p. 102. Mueller notes that a number of attempted revisions to § 143.451, RSMo 1978, have not passed, and it is suggested from this that no change in the section is desired by the legislature, thus constituting full approval of its pre M.V. Marine construction by this Court.

No case other than M.V. Marine has addressed what effect adoption of the Compact has had on a taxpayer’s entitlement to elect to allocate or apportion. Although in other cases the single factor formula has been referred to as “the elective alternative formula,” this is in regard to a taxpayer’s right to use the apportionment formula as opposed to the allocation method. See, e.g., International Travel Advisors, Inc. v. State Tax Commission, 567 S.W.2d at 653. The right to elect one versus the other is distinct from the entitlement to use either. The right to the former is not affected by M. V. Marine. Notwithstanding their limited precedential value, examination of cases decided prior to M.V. Marine is useful to illustrate that the Compact may in part have been adopted to remedy the problems presented by these cases.

In Artophone Corporation v. Coale, supra, this Court determined that § 10115, RSMo 1929, (the statutory predecessor to sections 143.040, RSMo 1969, and 143.451, RSMo 1978) was enacted to impose a tax upon the net income of every corporation “from all sources in this state,” quoting from the statute, including that which represents the Missouri portion of transactions done partly in and partly out of this state. Id. 133 S.W.2d at 346. In that case and a number of subsequent cases, this Court has attempted to determine what constitutes the “source of income.” The tests used to determine the “source of income” appear to vary among the cases depending on whether allocation § 143.451.2(1), RSMo 1978, or apportionment (single factor formula), § 143.451.2(2)(b), RSMo 1978, is used by the taxpayer.

In the “allocation” or “source of income” cases, the “source of income” has been determined by locating the place where it was earned or produced, if by labor, where the labor is performed — if by capital, the place where the capital is employed. A.P. Green Fire Brick Co. v. State Tax Commission, 277 S.W.2d at 548; In re Union Electric Co. of Missouri, 161 S.W.2d at 971; Union Electric Co. v. Coale, 146 S.W.2d at 635; see also In re Kansas City Star Co., 142 S.W.2d at 1037. The cases involving use of the apportionment formula of § 143.451.2(2)(b), RSMo 1978, have been resolved by a completely different test: Whether the “sale which is a transaction” occurred partly within and without this state, and thereby included in the formula numerator at one-half. International Travel Advisors, Inc. v. State Tax Commission, 567 S.W.2d at 653; State ex rel. River Corp., 492 S.W.2d at 824-26; F. Burkhart Mfg. Co. v. Coale, 139 S.W.2d at 503; Artophone Corp. v. Coale, 133 S.W.2d at 349; see also In re Kansas City Star Co., 142 S.W.2d at 1037. Thus two distinct tests have been developed and used to determine whether specific income is from a Missouri source, non-Missouri source, or partly from each. The statutory language of subdivisions (1) (allocation) and (2)(b) (apportionment) of 143.451.2, RSMo 1978, and the statutory predecessors thereto are ambiguously worded but arguably warrant the use of different computation and analysis to determine taxable income. See Note, The Single Factor Method of Interstate Allocation of Corporate Net Income In Missouri: The Worst Of All Possible Worlds?, 22 St.L. U.L.J. 614 (1978); Note, State Income Taxation-Apportionment-Missouri’s Single Factor Formula Is Based On Sales, 18 St.L.U. L.J. 474 (1974). The right to exclude certain income from the amount which is taxable in Missouri is, however, still at issue in all cases.

Notwithstanding this common theme, the statutory language has caused difficulty and the cases conflict in their constructions of it. This confusion is demonstrated by the cases of Artophone Corp. v. Coale, supra; F. Burkhart Mfg. Co. v. Coale, supra; In re Kansas City Star Co., supra; River Corp. v. State Tax Commission, supra; and International Travel Advisors, Inc. v. State Tax Commission, supra. In four of these cases the single factor apportionment formula was in issue and each time the Court was faced with how to construe the phrase “sales which are transactions partially within and partially without” § 143.451, RSMo 1978.

In Artophone Corp. v. Coale, supra, the Court broadly construed “transactions” to permit the taxpayer to apportion its income by use of the formula and include one-half of its sales income to out-of-state customers. The “out-of-state portion” of Arto-phone’s “transactions” was the sending of traveling salesmen to other states. In F. Burkhart Mfg. Co. v. Coale, supra, (decided less than a year after Artophone) the Court narrowly construed “transactions” to exclude all income which the taxpayer made from sale of products manufactured out of state to out-of-state customers. The Court ruled that the directory control by this Missouri company’s executives at the Missouri home office was not sufficient to make any part of the contested sales transaction within this state. This ruling was made contrary to Coale’s contention that if traveling salesmen’s solicitation was enough to take part of the transaction out of Missouri (as in Artophone) then directory control was sufficient to bring part of the transaction within Missouri.

In In re Kansas City Star Co., supra, the Court considered the propriety of the taxpayer’s use of a special formula which included as taxable income in Missouri that percentage of its total newspaper circulation which was distributed in this state. Id. 142 S.W.2d at 1036; see 143.461.2, RSMo 1978. Although the single factor formula was not involved, the Court ruled that “income must be allocated when produced by transactions done partly within and partly without the state.” Id. 142 S.W.2d at 1038. It recognized that to the extent “ ‘directory control’ by executive officers in Missouri over foreign plants was labor performed” the decision in F. Burkhart Mfg. Co. v. Coale, supra, decided just 10 months previously was inconsistent with its present broad definition of “income from transactions done partly within and partly without.” Id. 142 S.W.2d at 1039. This was because the capital and labor utilized by Burkhart was actually sufficient to include within taxable Missouri income some of that amount which the Court had so recently completely excluded.

In State ex rel. River Corp. v. State Tax Commission, supra, the taxpayer had its principal office and plant in Missouri. From this Missouri plant cement was manufactured and shipped to non-Missouri terminals where it was stored and sold. The Court ruled that the place where the sale was completed was determinative of the “source of the income,” thus yet another construction of “sales which are transaction” was made. The result in River Corp. was that none of the company’s income was considered to be even partially from within this state even though the cement sold out of state was manufactured here. One hundred percent of that taxpayer’s out-of-state sales income was excluded from Missouri taxable income. This ruling is clearly contrary to Artophone, supra, and Kansas City Star, supra.

The problematic effect of the River Corp. “sales” test was made apparent in International Travel Advisors, Inc. v. State Tax Commission, supra, wherein taxpayer was a travel agency which solicited tour business from professional and social organizations throughout the country from its Missouri office. The taxpayer’s business procedures enabled it to argue based on River Corp. that most of its “sales” were made completely out of state, although most of its activities in the transaction of sales were in Missouri. The Court overruled the “location where the sale was completed” test of River Corp., and focused upon the entire transaction to determine income source.

This decisional inconsistency refutes the majority’s assertion that any certain construction by this Court has existed for the legislature to approve by re-enactment of the statute. Therefore the deference normally given to statutory interpretation decisions which are subsequently approved by re-enactment is not pursuasive in considering the decision made prior to M.V. Marine.

The conflicting results in these cases demonstrate the confusion which surrounds the question when one may apportion. This confusion is caused by the wording of § 143.451, RSMo 1978 (and its precursors). In considering this problem, the Court has repeated the rule that tax statutes are to be strictly construed against the tax authority and in favor of the taxpayer. State ex rel. River Corp. v. State Tax Commission, 492 S.W.2d at 824; In re Kansas City Star Co., 142 S.W.2d at 1039. F. Burkhart Mfg. Co. v. Coale, 139 S.W.2d at 503; Artophone Corp. v. Coale, 133 S.W.2d at 347. The policy behind this rule is that a tax cannot be imposed unless enacted and levied by the legislature and the courts should find a tax only when the intent to levy is clearly expressed. Because the terms “source of income” and “sales which are transactions” are ambiguous this Court has been hard pressed to find therefrom what clearly appears to be “within the purview and intendment of the taxing statute.” Artophone Corp. v. Coale, 133 S.W.2d at 347. The result has been that income which has its “source” at least in part within Missouri has been excluded from Missouri taxable income. See e.g. F. Burkhart Mfg. Co. v. Coale, supra; State ex rel. River Corp. v. State Tax Commission, supra. In this way the cases show an overzealous application of the strict construction rule resulting in an exclusion of income from that portion taxable in Missouri in more instances than would be dictated by any consistent legislative intent which motivates the taxation of income only from sources in Missouri. All of the foregoing led this Court to observe in M.V. Marine that the “determination of whether a particular taxpayer was entitled to apportion involved a tortured process of discerning the ‘source’ of the taxpayer’s income.” M.V. Marine, 606 S.W.2d at 649⁶. Fortunately this ambiguity has been remedied by the adoption of the Compact. The legislature has expressed its intention to permit allocation or apportionment only when the “subject to tax” test is met. Id.

IV

Next, Mueller argues that adoption of the M.V. Marine interpretation of the Multi-state Tax Compact returns Missouri to the discriminatory situation which existed prior to 1927 by “taxing domestic corporations on a greater portion of their income and upon a different basis than foreign corporations, who would again be in a favored position.” That is if a corporation pays a franchise tax or corporate stock tax in another jurisdiction, it may apportion as it chooses because it is subject to tax as defined in § 32.200, art. IV.3. The result, it is asserted, is the favoring of foreign corporations by decreasing their taxable income in Missouri. This argument assumes that no unfair differentiation occurred between corporate taxpayers, foreign or domestic, between 1927 and the M. V. Marine decision. As demonstrated by the above case analysis, different domestic companies (much less foreign companies) have been held to have different amounts of taxable income despite the use of the “non-discriminatoJy” source rule. See International Travel Advisors, Inc. v. State Tax Commission, supra; compare River Corp. v. State Tax Commission, supra; and F. Burkhart Mfg. Co. v. Coale, supra. Recognizing these conflicts as this Court must, Mueller’s argument is that regardless of whether prior cases properly interpreted the wording of § 143.431 and § 143.451, RSMo 1978, the legislative purpose of those statutes has been properly recognized and is presently controlling. In Artophone Corp. v. Coale, 133 S.W.2d at 346-348, without committing itself, the Court suggested:

It is plain, we think, that the original income tax law, that of 1917, did impose a tax upon the entire net income of domestic corporations from all sources, intrastate or interstate. By subsequent legislation, as pointed out above, the Legislature apparently recognized that the original law contained or permitted certain discriminations, which it sought to remove by the amendment or change of 1927, continued in principle, with clarifying provisions on this point, by later amendments. ... In rewriting or amending the law in 1927 the Legislature evidently had in mind that the then existing law made “certain discriminations between residents and non-residents, and between individuals and corporations.” What were those discriminations which the Legislature obviously sought to eliminate? Learned counsel for Amici Curiae, in a brief filed with us, thus illustrate:

“As stated before, the 1917 and 1919 Acts discriminated against Missouri corporations. Take, for instance, two large nationwide shoe manufacturing concerns located in St. Louis. Each is competing in the same territory in Missouri and in Missouri’s vast trade area in many other states, for the same business, from the same customers. Company A has paid its charter fees we will say, to the State of New Jersey, and it is a citizen of that state. Company B has paid its charter and incorporating fees to the State of Missouri, and is a citizen of this state. Let us assume that each corporation did 90% of its business outside the State of Missouri. Corporation A then paid to the State of Missouri a tax upon only 10% of its net income, while Corporation B paid to its own government, of which it was a citizen, a tax upon 100% of its net income. It thus paid, assuming the business is equal, nine times as much tax to its own mother government as the stranger, equally protected by its laws. The discrimination is visible to the naked eye. It gave foreign corporations a tremendous competitive advantage.”

Id. Mueller suggests and the majority determines that the Artophone tax policy interpretation should be retained.

The remedial intent accredited to the legislature should be that which is directly related to the nature of the discrimination. The above hypothetical case has been accepted as indicative of the discrimination which the legislature was thought to be alleviating. The discrimination was said to be in requiring domestic corporations to pay more income tax to Missouri than was required of foreign corporations when both did the same amount of business here. This was accepted as the explanation for the adoption of the “source of income” rule because that rule put all corporations upon equal footing; using the amount of income earned in Missouri to decide the amount of income taxable in this state.

This illustration is defective, however, because it fails to consider the tax consequences of the taxpayers’ operation in other states. This contradicts the Court’s view that: “In the field of income taxation in particular it is important to penetrate beyond legal fictions and academic jurisprudence to the economic realities of the cases.” In re Union Electric Company of Missouri, 161 S.W.2d at 971. Interstate tax consequences are an economic reality and consideration of this demonstrates an alternative discrimination which equally could have been of legislative concern in the past and clearly is of present concern. See § 32.200, art. I, 2., 4., RSMo 1978; see generally W. Dexter, The Unitary Concept in State Income Taxation of Multistate-Multi-national Businesses, 10 Urban Lawyer 181 (1978). If in the Artophone example, supra, the New Jersey Company had to pay to its home state on one hundred percent of its income then both companies would have an equal percent of income taxable. In this way any “discrimination” in Missouri against the Missouri company could be offset and evened in New Jersey relative to the New Jersey Company. This chart based upon the Artophone hypothetical demonstrates the point.

A Company B Company of New Jersey of Missouri

Business in Missouri 10% 10%

Business in New Jersey 10% 10%

Business elsewhere 80%

Income taxable in Missouri 10% 100%

Income taxable in New Jersey 100% 10%

Income taxable elsewhere 80%

Total taxable income 190% 190%

Consider in the alternative, other states including New Jersey tax only that portion of a company’s income earned within that state regardless of whether it is a domestic or foreign company; that is, the other states used the source rule.⁷

A Company B Company of New Jersey of Missouri

Business in Missouri 10%

Business elsewhere 90%

Income taxable in Missouri 10% 100%

Income taxable elsewhere 90%

Total taxable income 100% 190%

The result of Missouri’s taxation on one hundred percent of the Missouri B Company’s income results in the double taxation of 90% of its income. All of this demonstrates that it is equally possible that the discrimination which the legislature sought to alleviate by use of the “source of income” rule was the double taxation of Missouri companies’ “out-of-state” income; once in the state in which it is earned and twice by Missouri.

The use of “source” as the method of testing what income this state can tax its domestic corporation without fear of taxation by another state is effective because this same taxpayer is a foreign corporation in other states and may be taxed only upon income earned in that state. This is true because a state’s jurisdiction to tax a foreign company’s income depends upon the “nexus” requirements of the Fourteenth Amendment of the United States Constitution: “[A] ‘minimal connection’ between the interstate activities and the taxing State, and a rational relationship between the income attributed to the State and the intrastate values of the enterprise.” (Citing earlier cases) Mobil Oil Corporation v. Commissioner of Taxes, 445 U.S. 425, 436-437, 100 S.Ct. 1223, 1231-1232, 63 L.Ed.2d 510 (1980); see Northwestern States Portland Cement Co. v. Minn., 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421 (1959).

All of this demonstrates that this Court in Artophone may have misinterpreted the legislative intent underlying the “source of income” language. Notwithstanding this, the issue of present concern is the legislature’s current intent in enacting the Compact and whether this may be harmonized with the purpose of the “source” rule, Chapter 145, RSMo 1978.

The four purposes of the Compact are expressed in § 32.200, art. I, RSMo 1978. One of them is the avoidance of “duplica-tive taxation.” Id. The purposes of § 143.-451.1, RSMo 1978, and the Compact may only be reconciled if the policy of the former is as suggested herein. They are harmonious only if both are viewed as aimed at preventing the discriminatory effect of the double taxation.

If the view Mueller asserts is accepted, as does the majority, then the policies of the Compact and Chapter 143, RSMo 1978, become entirely different though both concern the same subject. The present case' exemplifies the conflict between such distinct purposes. Mueller conceded that it paid no income tax to any other state during the years in question. Therefore the “subject to tax” requirement of the Compact appear unsatisfied while the very same income is accredited to an out-of-Missouri source. If Mueller is permitted to apportion such income, this state loses the opportunity to tax income which it would have if the “subject to tax” test were applied. Mueller and some amicus urge that the legislature has not expressed an intention to tax all income of Missouri corporations, citing Artophone. This is no longer correct since the adoption of the Compact. Article IV of the Compact is a rescript of the provisions of the Uniform Division of Income for Tax Purposes Act, 7A Uniform Laws Annotated 93, Master ed. 1978. The Uniform Act is based upon the principle of one hundred percent taxability.

The Act addressed the problem of how to divide the income of a multistate business for tax purposes among those states possessing power to tax some portion of that income. In place of the ‘exceedingly diverse’ methods developed by the states over the years, UDITPA proposed uniform principles of allocation and apportionment of a multistate firm’s income designed to simplify the task of tax collection and reporting and to ensure that 100 percent of a multistate firm’s income — neither more nor less — is taxable by the states.

* * * * * *

It is important at the outset to understand that UDITPA does not attempt to ensure that 100 percent of a multistate firm’s income is actually taxed by the states; it seeks only to ensure that 100 percent of such income is taxable by them.

W. Hellerstein, Construing the Uniform Division of Income for Tax Purposes Act: Reflections on the Illinois Supreme Court’s Reading of the “Throwback” Rule, 45 Univ. Chicago L.Rev. 768, 769-70 (1978); see United States Steel Corp. v. Multistate Tax Commission, 434 U.S. 452, 98 S.Ct. 799, 54 L.Ed.2d 682 (1978). Therefore, to the extent that the Compact adopts a policy of full accountability and seeks to ensure one hundred percent taxability of a corporation’s income, the “source of income” policy urged by Mueller, concededly accepted in earlier cases and now by the majority, works contrary to the policy of the Compact. Furthermore, the decision as to which of these policies would be implemented in any particular case would be left, not to the legislature, but to the taxpayer. Therefore, by Mueller’s position and the majority’s opinion, the decision as to which taxing policy will be advanced will be determined by which results in the least taxability of any particular taxpayer.⁸ Such a result is clearly contrary to the Compact’s full taxability policy and it is not reasonable to attribute it to the legislature.

The formerly accepted “discrimination policy” would also defeat a second purpose of the Compact expressed in article I to “facilitate taxpayer convenience and compliance in filing of tax returns and in other phases of tax administration.” Id. The “subject to tax” test is easier to satisfy in the sense of proving one’s entitlement to allocate or apportion. The earlier cases examined, supra, demonstrate the difficulty and inconsistency in administering the former “source” rule of entitlement.⁹ As recognized in M.V. Marine the “subject to tax” test is superior to the “source” test because: “The advent of the Compact has simplified the process of determining entitlement to apportion taxes by changing the focus of the inquiry from a search for the ‘source’ of income to a simple showing of jurisdictional ‘tax liability’ in another state.” Id. 606 S.W.2d at 649.

In response to the majority’s concept of legislative approval of Mueller’s position by its failure to adopt alternative legislation, the answer is twofold. First, as noted in 3 Sutherland Statutory Construction, supra, § 49.10, p. 291, “legislative inaction has been called a ‘weak reed upon which to lean’ and a ‘poor beacon’ to follow in construing a statute.” Id. Second, although legislative intent may be gleaned from failure of proposed legislation, the noted Senate and House Bills which have not been enacted are aimed at completely eliminating or substantially modifying the single factor apportionment formula. See, e.g., Senate Bills 471 and 481, 79th General Assembly, First Regular Session; House Bill 507, 80th General Assembly, First Regular Session. This is not the effect of the Compact or of the M.V. Marine decision. A taxpayer may use that formula if he has shown that he is entitled to do so by establishing his jurisdictional tax liability elsewhere § 32.200, art. IV, 2., 3., RSMo 1978. Therefore, these legislative proposals have been aimed at the elimination of a formula which M.V. Marine recognized certain taxpayer’s are entitled to use at their election. For this reason they are inapposite, and the construction concept is not persuasive.

Y

Finally, it is asserted that of the other compact states, four¹⁰ permit “taxpayers to determine entitlement to allocate and apportion income using tests other than the ‘jurisdictional tax’ liability test in article IV of the Multistate Compact” and “In no state or the District of Columbia has there been a decision involving the issue of entitlement as determined by the Court in M.V. Marine; nor has the issue apparently ever been raised.” It is asserted that no other jurisdictions’ “statutes, cases, regulations or instructions to the income tax returns direct an interpretation similar to the one suggested in M.V. Marine.” From this amicus asserts that Mueller’s position is correct. This argument falls of its own weight. The lack of activity in other states does not establish the error in one action versus another in Missouri. Additionally, even if prohibitive, the statutes cited by amicus are substantially different and as such are not analogous.

The argument that the “Suggested State Legislative and Enabling Act,” circulated by the Multistate Tax Commission, indicates the drafters of the Compact intended the opposite of that found in M.V. Marine also fails. The Interstate Tax Commission has filed a memorandum stating its position in this litigation and clearly supports af-firmance of M.V. Marine.

All briefs and arguments considered in their entirety, the decision, originally made in M.V. Marine that the analysis used in earlier cases is no longer applicable and that the right to allocate and apportion is determined by use of the Compact, should be reaffirmed.

Because the decision in M.V. Marine is an appropriate interpretation of legislation, neither it, nor this dissent which follows and applies it, is subject to the majority’s charge of dictum and judicial legislation in imposition of taxes.

VI

The question would remain whether Mueller is subject to the tax in another state. The Tax Commission made its findings of fact prior to the M.V. Marine decision. The record reflects that the Commission’s attention was focused on whether any part of Mueller’s income was derived from “transactions .. . partly outside the state,” § 143.451.2(2)(b), RSMo 1978. In M.V. Marine, the cause was remanded to provide the taxpayers “an opportunity to show their entitlement, if any, to allocate their income pursuant to the requirement of § 32.200.” M.V. Marine, 606 S.W.2d at 653.

The activities of Mueller’s salespersons and repair-service personnel are the only contacts which the company has with its out-of-state customers. The facts show and both the commission and the Court found that the salespersons are authorized only to solicit sales; all other aspects of the sales are performed only in Missouri. Mueller argues that frequently negotiations occur after the original solicitation and this is more than “mere solicitation” of orders. Such negotiations, however, do not rise to the level of Mueller’s presence in other states. It is difficult to imagine a solicitation without some discussion of terms. As a matter of course, some discussion is always included in solicitation, and the results of these negotiations are meaningless until approved by the Missouri office. In 1959, Congress passed Public Law 86-272, 73 Stat. 555, 15 U.S.C. § 381. It provides:

(a) No State, or political subdivision thereof, shall have power to impose, for any taxable year ending after September 14, 1959, a net income tax on the income derived within such State by any person from interstate commerce if the only business activities within such State by or on behalf of such person during such taxable year are either, or both, of the following:

(1) the solicitation of orders by such person, or his representative, in such State for sales of tangible personal property, which orders are sent outside the State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside the State; and

(2) the solicitation of orders by such person, or his representative, in such State in the name of or for the benefit of a prospective customer of such person, if orders by such customer to such person to enable such customer to fill orders resulting from such solicitation are orders described in paragraph (1).

As a matter of federal law other states are prohibited from taxing mere solicitation by one in interstate commerce. See generally 1959 U.S.Code Cong, and Ad.News, p. 2549; United States Steel Corp. v. Multistate Tax Commission, 434 U.S. 452, 455-56, 98 S.Ct. 799, 803-04, 54 L.Ed.2d 682 (1978); U.S. Tobacco Co. v. Comm’n, 478 Pa. 125, 386 A.2d 471, cert. denied, 439 U.S. 880, 99 S.Ct. 217, 58 L.Ed.2d 193 (1978). This provision was discussed by this Court in State ex rel. Ciba Pharmaceutical Products, Inc. v. State Tax Commission, 382 S.W.2d 645 (Mo. banc 1964), where the Court set aside certain income tax assessments against the taxpayer, a foreign corporation, because its contacts in this state were insufficient to constitute the requisite business activity necessary for imposition of state income tax. The activities of Mueller in other states are similar but certainly are not greater than the activities of the Ciba corporation in the State of Missouri. Thus it appears Mueller is not entitled to apportion its income from out-of-state customer solicitations because they are not subject to any tax elsewhere.

Mueller’s fact stipulation classifies all income involved as derived from “sales to out-of-state purchasers.” Although not conclusive,¹¹ Mueller admits no income taxes paid to any other state during the years involved. It has never suggested it is subject to tax in another state. Upon such record assessment of tax on 100 percent of Mueller’s income is proper because Mueller is not subject to any tax in another state and thus it should not be permitted to apportion as though it was.

The judgment should be affirmed.

1 . Unanimous opinion by Morgan, J.; Bardgett, C.J., Donnelly, Rendlen, Seiler and Welliver, JJ., and Welbom, Sp.J., concurring.

2 . Although conceding “[t]he result in M.V. Marine was eminently correct,” the majority dismisses application to this case by an assertion that “[t]he discussion of the Compact was unnecessary to the decision”; and that in “preoccupation with a result so obviously correct we failed to foresee the possible ramifications of the dictum’s use.”

3 . Paul Mueller Company is joined in arguments aimed at distinguishing or overruling M.V. Marine by Amicus Curiae Associated Industries of Missouri, Continental Disc Corporation, Mid-Western Machinery Co., Inc., Russell Stovers Candies, Inc., Rival Manufacturing Co., Checker Food Products Co., and Swing-A-Way Manufacturing Co. The Director’s position is supported by the Multistate Tax Commission filing as amicus curiae. Article VI of the Compact creates the Commission, the purpose of which is set out in art. VI, § 3.

4 . It is noted that the Multistate Tax Commission, appearing as an amicus curiae supports the interpretation of the Compact and § 32.210 originally decided in M.V. Marine and herein accepted.

5 . This was recognized in Kentucky. Clinton Shirt Corp. v. Kentucky Bd. of Tax Appeals, 583 S.W.2d 84, 87 (Ky.App.1978). The legislature of that state had adopted the Uniform Division of Income for Tax Purposes Act, which constitutes only art. IV of the Compact, while keeping intact another corporate income tax law. Compare Ky.Rev.Stat. § 141.-010(14)(a) (1970) with Ky.Rev.Stat. § 141.-120(2)-(3) (1970). The legislature of Kentucky resolved the conflict by deleting § 141.120(2)-(3) and incorporating the new definition of taxable net income into § 142.120. See Ky.Rev. Stat. § 141.120(2) (Cum.Supp.1980).

6 . And in this context it is not surprising that this Court held International Travel Advisors, Inc. v. State Tax Commission, 567 S.W.2d 650 (Mo. banc 1978); State ex rel. River Corp. v. State Tax Comm’n, 492 S.W.2d 821 (Mo.1973), overruled in International Travel Advisors, Inc. v. State Tax Commission, supra; A.P. Green Fire Brick Co. v. Missouri State Tax Commission, 277 S.W.2d 544 (Mo.1955); Union Electric Co. v. Missouri, 349 Mo. 73, 161 S.W.2d 968 (banc 1942); Union Electric v. Coale, 347 Mo. 175, 146 S.W.2d 631 (1940); F. Burkhart Mfg. Co. v. Coale, 345 Mo. 1131, 139 S.W.2d 502 (1940); and Artophone Corp. v. Coale, 345 Mo. 344, 133 S.W.2d 343 (1939), “no longer applicable in light of the adoption of the Multistate Tax Compact and § 32.210.” M.V. Marine, supra, 606 S.W.2d at 648-49.

7 . It is not unlikely that the “source” rule was used by many states to tax foreign companies in the first part of this century. Fo¡ example, Connecticut used a “source” system beginning in 1915. See Underwood Typewriter Co. v. Chaimberlain, 254 U.S. 113, 41 S.Ct. 45, 65 L.Ed. 165 (1920), wherein Connecticut’s taxation system is examined.

8 . Of course taxpayers are permitted to choose various ways of reducing tax liability; selecting depreciation methods is an obvious example. However, that choice is analogous to the election of allocation versus apportionment. That is distinct from the issue here. Using the depreciation example the analogous situation would be permitting taxpayers to decide for themselves whether they are entitled to a depreciation allowance regardless of whether any occurred or whether taxpayer had any ownership interest in the depreciated property.

9 . The difficulty of “source” determinations remains to the extent that one who has shown entitlement to apportion is faced with the confusion created by the ambiguity of the “transaction” phraseology in § 143.451.2 RSMo 1978. To some extent this may be alleviated by the definitions supplied in § 144.010(7) RSMo Supp.1982, which will aid in deciding when “a transaction involving the sale of tangible property is: ‘wholly in this state’ [or] ‘partly within this state and partly without this state.’ ” as used in § 143.451.2, RSMo 1978. It is argued that § 144.010(7), RSMo Supp.1982, demonstrates the legislature’s intent to reaffirm the pre M.V. Marine construction of § 143.451, RSMo 1978. Section 144.010(7), RSMo Supp. 1982 serves only to define the “transaction-sales” terms used in § 143.451.2, RSMo 1978, (perhaps in response to the confusion in the past). It does not affect the issue of entitlement to allocate or apportion as defined in § 143.451.1, RSMo 1978, and therefore is inap-posite.

10 . Amicus cites Colo.Rev.Stat. § 39-22-310 et seq.; D.C.Code Ann. § 47-1810.1 et seq. and Reg. § 309.5; Hawaii Rev.Stat. § 235-5; Montana Code Ann. § 15-31-301 et seq.

11 . Article IV, § 3(a) of the Compact provides the right to allocate and apportion if another state “has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not.”