Sales Tax Taxability and Exemptions
The lessor has the option of either paying the tax up front on the item to be leased or charging the tax on the lease receipts. Only one of these options may be chosen.
If the lessor chooses to charge the tax on the lease receipts on items other than motor vehicles, the tax due is based on the place of business of the lessor. If the lessor has more than one place of business, the taxable sale is based on the location where the initial order is taken.
Any motor vehicle, which is leased or rented, as the result of a contract, shall be taxable at the lessee's location at the time the lease is executed.
Domestic use means the portion of metered water service, electricity, electrical current, natural, artificial or propane gas, wood, coal or home heating oil that is used for non-business, non-commercial or non-industrial purposes. All of these items are exempt from sales and use tax under Section 144.030, RSMo.
Section 144.032 allows cities and counties to reimpose the sales tax on the above exempt utilities when imposing a local sales tax. A city or county submits an ordinance to the department requesting to reimpose the sales tax on the sale of domestic utilities and the department notifies the businesses in the affected areas.
Canned software is taxable. Custom software is not taxable. Program installation, maintenance of software, upgrades and training services are taxable when the purchase of these services is mandatory under the terms of the agreement to purchase the software.
Fees paid for Internet access is not taxable. Sales over the Internet are subject to sales tax, if the sales transaction's shipping and delivery point is within the state of Missouri.
Export sales are sales made to customers located outside the state of Missouri. Export salesare not subject to Missouri sales tax if the title to the property passes outside the state of Missouri. If the title to the goods transfers in Missouri, the sale is subject to sales tax.
A place of amusement is any location in which amusement activities make up more than a minimal portion of the business activities of the location. Fees or admissions paid “in” or “to” a place of amusement are taxable.
Repair labor, if separately stated, is not taxable. Fabrication or production labors are subject to sales tax, even when separately stated.
The non-reusable items of tangible personal property furnished in hotels and motels are not subject to sales tax. Non-reusable items include (but are not limited to) soap, shampoo, tissue, other toiletries, food, or confectionery items. The non-reusable items must be furnished to guests in their rooms without charge.
Any drug or sample that may be legally dispensed, only by a licensed pharmacist upon written authority from a practitioner licensed to administer the prescription, is exempt from sales tax.
Also exempt are sales of insulin, hearing aids and hearing aid supplies.
Section 144.030.19, RSMo, exempts from sales tax, the sale of any over-the-counter medication that is purchased by an individual with a disability.
The purchase of prosthetic devices is exempt from sales tax. Prosthetic devices are defined by the Federal Medicare Program under Title XVIII of the Social Security Act of 1965, as devices (other than dental) which replace all or part of the function of a permanently inoperative or malfunctioning internal body organ and include cardiac pacemakers; prosthetic lenses which replace the lens of an eye; breast prosthetics, including surgical brassieres for postmastectomy patients, maxillofacial devices, devices which replace all or part of the ear or nose, urinary collection systems, including Foley catheters, when replacing bladder function in cases of permanent urinary incontinence; hemodialysis equipment, colostomy and other ostomy bags as well as the necessary equipment required for attachment; and electronic speech aids, if the patient has had a laryngectomy or his/her larynx is permanently inoperative, are exempt from the sales tax.
Eyeglasses, contact lenses, bedpans, and incontinent pants are not considered prosthetic devices and are subject to tax.
All sales, rentals, repairs and parts of durable medical equipment, orthopedic devices, as defined by the same Act listed above, include rigid or semirigid leg, arm, neck, back braces, and casting materials which are directly used for the purpose of supporting a weak or deformed body member or restricting or eliminating motion in a diseased or injured part of the body; trusses; artificial legs, arms and eyes including terminal devices such as artificial hands, hoods and space shoes which replace part of a foot, stump stockings and harnesses when they are essential to the effective use of an artificial limb; and orthotics are exempt from the sales tax. Elastic braces, elastic stockings, arm slings, elastic wraps, and garter belts are not considered orthopedic devices and are subject to tax. A recent amendment to the law, however, exempts ambulatory aids, such as wheelchairs including parts, scooters including parts, stairway lifts, hospital beds, walkers, canes, and crutches.
Also exempt from tax are items specified in Section 1862(A)(12) of the Social Security Act of 1965. Exempt items included in this class are those used in connection with the treatment, removal or replacement of teeth, or structures directly supporting teeth. These terms encompass dentures, inlays, bridge work, fillings, crowns, braces and other artificial dentistry and dental reconstructions which are made, manufactured or fabricated from molds or impressions made by dentists of the mouths of their particular patients and sold to dentists for insertion in the patient's mouth as a direct support of, substitution for, or part of the patient's teeth. Dental equipment and supplies are not exempt.
For a list of usually exempt restorative materials, prosthetic devices, supporting materials, orthodontic devices and materials, and endodontic devices, please refer to Regulation 12 CSR 10-110.013.
Farm machinery and equipment are exempt from tax if used for any agricultural purpose, used on land owned or leased for the purpose of producing farm products, and is used directly in the production of farm products to be ultimately sold at retail. Farm machinery and equipment includes utility vehicles used for any agricultural use and is a motorized vehicle manufactured and used exclusively for off-highway use that is more than fifty (50) inches but not more than eighty (80) inches in width, has a dry weight of three thousand five hundred (3,500) pounds or less, and travels on four or six wheels.
Section 144.030.22, RSMo, provides for an exemption of lubricants used exclusively for farm machinery and equipment. For further information concerning farm machinery, please refer to Regulation 12 CSR 10-110.900.
Yes. Replacement machinery, equipment and parts, and the materials and supplies solely required for the installation or construction of such replacement machinery, equipment and parts, used directly in manufacturing, mining, fabricating or producing a product which is intended to be sold ultimately for final use or consumption are exempt.
Materials and supplies are also exempt when they are required solely for the operation, installation or construction of the machinery and equipment purchased and used to establish a new, or to replace or expand existing, material recovery processing plants in the state of Missouri.
Parts and the materials and supplies are also exempt when they are solely required for the installation or construction of such machinery and equipment purchased and used to establish new or to expand existing manufacturing, mining or fabricating plants in the state of Missouri, if such machinery and equipment is used directly in manufacturing, mining or fabricating a product which is intended to be sold ultimately for final use or consumption.
Section 144.054 RSMo, exempts purchases of machinery, equipment, materials and chemicals used or consumed in manufacturing, processing, compounding, mining, or producing any product or used in research and development related to manufacturing, processing, compounding, mining, or producing any product from state and local sales and use tax.
For additional information regarding exemptions in the state of Missouri, please refer to Section 144.030 RSMo.
In general, materials, replacement parts, and equipment purchased for use directly upon and for the repair and maintenance or manufacture of, motor vehicles, boat/vessel, railroad rolling stock, or aircraft engaged as common carriers of persons or property, are not subject to tax.
Materials, replacement parts, and equipment which qualify for the exemption include, but are not limited to, grease, motor oil, antifreeze, fuel additives, paint for body work, radio repair parts purchased for use on the vehicle, and power take-off (PTO) units which are attached to the transmission.
Are federal employees required to have an exemption letter in the name of the agency they are representing?
No. The federal government is exempt by the Constitution and not required to obtain an exemption letter. Exemption letters are issued to federal agencies only as a courtesy. Persons claiming to be a federal employee should be able to produce identification as to their employment status and may only purchase exempt on behalf of the government.
The sale of livestock is exempt. Sales of animals or poultry for breeding or feeding purposes, as part of a business enterprise, are not subject to tax. The sale of animals for personal enjoyment or use is subject to tax.
For more information regarding exemptions for animals or livestock, please refer to 12 CSR 10-110.910.
Any social, civic, religious, political subdivision, or educational organization can apply for a sales tax exemption by completing Form 1746, Missouri Sales Tax Exemption Application. This form lists the information needed to verify the organization is indeed a tax-exempt non-profit organization.
A 501(c) is an Internal Revenue Service (IRS) exemption from federal income tax. Having a 501(c) status does not guarantee an exemption from Missouri sales tax. Please visit the IRS website for information on how to apply.
By-laws are the rules or law governing internal affairs of a group or organization. The bylaws may contain any provision for regulating and managing the affairs of the corporation that is not inconsistent with the law or the articles of incorporation.
Exempt charitable, religious, and educational entities, or political subdivisions will present the purchasing contractor a copy of the exempt organization's Missouri Sales and Use Tax Exemption Letter, and a completed project exemption certificate (Form 5060). The purchasing contractor may use the certificate to purchase materials for a specific project . Only materials that are incorporated into real property are exempt. This certificate must contain the following information:
- The exempt entity's name, address, Missouri tax identification number, and a signature of an authorized representative;
- The project location, description, and unique identification number;
- The date the contract is entered into, which is the earliest date materials may be purchased for the project on a tax-exempt basis;
- The estimated completion date, and;
- The certificate expiration date.
- The Missouri Department of Revenue does not issue these exemptions. This is a transaction between the exempt organization and the contractor.
The articles of incorporation is a document filed with the Secretary of State creating a corporation.
Are contractors responsible for tax on materials when they are constructing, repairing or remodeling?
Contractors are responsible for tax on materials when they are constructing, repairing or remodeling unless they are constructing, repairing or remodeling facilities for an exempt entity located outside the state and the exempt entity is authorized to issue an exemption certificate to contractors in accordance with the provision of that state’s law and the applicable provisions of Section 144.062, RSMo.
Section 144.030.1(46) states a sales tax is only exempt if the system is purchased or constructed and is sold or leased to an end user or is used to produce, collect and transmit electricity for resale or retail sale. This would allow companies who create or buy a solar farm, to qualify for an exemption. However, someone that is purchasing solar panels themselves to install on their house would not be eligible for the exemption because it is not sold to an end user.
How do I report my sales that qualify for the manufacturing exemption on my sales or use tax return?
Prior to January 1, 2023, sales qualifying for the partial manufacturing exemption were reported using item code 4001. Effective January 1, 2023, businesses with sales qualifying for the manufacturing exemption will report the sales as a negative adjustment on their sales or use tax return and will no longer need to report these sales using the separate item code of 4001 for the exemption in Section 144.054 RSMo.
If you still have questions, please check out other Business Tax FAQs.
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