Shipping Charges Are Subject to Sales Tax
October 17, 2016
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated August 15, 2016.
The facts as presented in your letter ruling request are summarized as follows:
Applicant sells items including large items such as implements, utility task vehicles, lawn mowers, and culverts. Some of Applicant's customers have the ability to pick up the items themselves but prefer to have Applicant deliver the items. Other customers do not have the ability to pick up the items themselves and have Applicant deliver the items. When delivery is selected, the delivery charge will be separately stated on the invoice, and the entire amount is paid before delivery takes place. Applicant's delivery charges are not designed to make a profit itself, but merely to recover Applicant's costs in delivering the items to their customers. Applicant does not offer delivery services for hire to anyone other than its customers.
Are Applicant's delivery charges subject to sales tax as part of the sale of items subject to sales tax?
Yes. Applicant's delivery charges are subject to sales tax as part of the sale of items subject to sales tax.
Section 144.020.1, RSMo, imposes a gross receipts sales tax "upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state." Delivery services are not one of the enumerated taxable services under Section 144.020.1, RSMo. However, Section 144.010.1(4), RSMo, defines "gross receipts" as "the total amount of the sale price of the sales at retail including any services . . . that are a part of such sales made by the businesses herein referred to, capable of being valued in money, whether received in money or otherwise[.]" (Emphasis added.)
In Alberici Constructors, Inc. v. Director of Revenue, 452 S.W.3d 632, 639 (Mo. banc 2015), the Missouri Supreme Court held:
In determining whether a delivery charge is a part of the sale transaction, "the intention of the parties is the guiding factor." May Dep't Stores Co. v. Dir. of Revenue, 791 S.W.2d 388, 389 (Mo. banc 1990). This Court has identified a number of factors relevant to the determination of whether a delivery service was intended to be a part of the sale, including "when title passes from the seller to the buyer, whether delivery charges are separately stated, who controls the cost and means of delivery, who assumes the risk of loss during delivery, and whether the seller derives financial benefit from the delivery." Southern Red-E-Mix v. Dir. of Revenue, 894 S.W.2d 164, 167 (Mo. banc 1995). This list is not an exclusive list of factors, and "[t]he weight to be given any factor ... is largely a function of the fact finder." Id.
Missouri Code of State Regulations 12 CSR 10-113.200(3)(A) provides, in relevant part, "Title transfers when the seller completes its obligations regarding physical delivery of the property, unless the seller and buyer expressly agree that title transfers at a different time."
Applicant and its customers intend for delivery to be part of the sale of tangible personal property under the facts provided. Applicant provides delivery as part of its sales of tangible personal property when its customers require or desire delivery. The charge for delivery appears on the same invoice as the sale of tangible personal property and is paid for at the same time. The mere fact that the charge is separately stated does not necessarily mean the parties do not intend for delivery to be part of the sale. Applicant and its customers do not specify a particular time for title transfer; therefore, title transfers at the time of delivery. Applicant controls the cost and means of delivery, and Applicant derives the financial benefit of making sales that it may not otherwise have made if it did not include delivery. Therefore, when Applicant makes a taxable sale of tangible personal property for delivery, the delivery charges are included as part of the sales price subject to sales tax.
This letter ruling is binding upon the Department of Revenue with respect to the 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 Stephen P. Sullivan, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.