Vehicle License Fee

February 27, 2008

Dear Applicant:

This is a letter ruling issued by the Director of Revenue pursuant to Section 536.021.10, RSMo, and Missouri Code of State Regulation 12 CSR 10-1.020 in response to your correspondence dated on January 2, 2008.

The facts as presented in your letter ruling request are summarized as follows.

Applicant is a qualified motor vehicle leasing company with the state of Missouri pursuant to Section 144.070.5, RSMo, and collects and remits sales taxes on the amounts charged for each motor vehicle rental agreement.  Applicant charges a fee on motor vehicle rental contracts in order to recoup its costs for the original titling fee, annual license plate fee, inspection fee, registration fees, and personal property taxes on rental vehicles (“Vehicle License Fee”).  Applicant’s motor vehicle rentals are for daily or weekly periods of time.


Is the Vehicle License Fee charged by Applicant subject to sales tax?


Yes, the Vehicle License Fee charged by Applicant is subject to sales tax.

Section 144.020.1(8), RSMo, provides that “the purchase, rental or lease of motor vehicles, trailers, motorcycles, mopeds, motortricycles, boats, and outboard motors shall be taxed and the tax paid as provided in this section and Section 144.070.”

Section 144.070.5 provides that a leasing company may pay sales tax due on any motor vehicle, trailer, boat, or outboard motor as required in Section 144.020, at the time of registration or in lieu thereof, may pay sales tax on the amount charged for each rental or lease agreement while the motor vehicle, trailer, boat, or outboard motor is domiciled in this state.

InMoore Leasing, Inc. v. Director of Revenue, 869 S.W.2d 760 (Mo. banc 1994), the lease contracts provided that the customer, or the lessee, make monthly rental or lease payments on long term lease agreements and that the lessee be billed for personal property tax on an annual basis.  The lessee had the option of paying the annual personal property tax assessment on the vehicles directly to the county collector or to the leasing company, or the lessor, which would then pay the tax to the collector.  On this basis, the personal property tax payments made by the lessee was not subject to sales tax because the personal property tax payments were not part of the amount charged under the lease agreements pursuant to Section 144.070.5.

In Moore Leasing, customers leased vehicles on a multi-year, long-term basis and had the option of paying the property tax as it became due on an annual basis to the county collector or to the leasing company.  Applicant is not leasing vehicles to its customers on a multi-year, long-term basis but instead is renting vehicles to its customers on a short-term basis nor is Applicant billing its customers annually for personal property tax.  Instead, Applicant is recouping costs of doing business from its customers in the form of a mandatory fee charged by Applicant under the lease agreement.  The customer is required to pay a Vehicle License Fee and the rental fee in order to obtain a rental vehicle.

Applicant chose to remit sales tax on the amount charged for its short-term motor vehicle rentals instead of remitting sales tax on those vehicles at the time the Applicant purchased them.  The sales tax is due on the gross receipts of the rental agreements and includes all mandatory fees.  Because the Vehicle License Fee and vehicle rental fee are mandatory to rent a motor vehicle, the combined fees constitute Applicant’s gross receipts and are subject to sales tax.

This letter ruling is binding upon the Department of Revenue with respect to Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Senior Counsel Gary Barnhart, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (Phone 573-751-0961), or me.


Omar D. Davis