LR 8161

Fulfillment Center and Web Platform Sales Subject to Tax

September 23, 2021

Dear Applicant:

            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 July 21, 2021.

            The facts as presented in your letter ruling request and in a conversation with Senior Counsel Thomas A. Houdek are summarized as follows:

Applicant is a remote seller located outside Missouri. Applicant specializes in making products for household pets, including but not limited to ear wash and ear tonics for dogs and cats. Applicant sells its products through Amazon (Facilitator #1) and Shopify (Facilitator #2) as well as directly from its website. Applicant currently collects and remits vendor's use tax to the state of Missouri.

Applicant participates in Facilitator #1's fulfillment program.   Fulfillment is the process of storing, packing, and shipping orders as well as handling returns at one of Facilitator #1's "fulfillment" centers. Applicant stores some of its products at Facilitator #1's warehouse located in Missouri. Orders placed through Facilitator #1 by Missouri customers typically ship from this location.

Applicant also uses Facilitator #2 to sell its products. Facilitator #2 is a subscription-based website host that allows anyone to set up an online store to sell its products. Facilitator #2 characterizes itself as a "commerce platform" that provides Applicant multiple services including creating a website, accepting credit cards through Facilitator #2's payment gateways, offering shipping options, marketing Applicant's website or specific items, managing inventory, and offering technical support to operate Applicant's website. 

Applicant's sales made on Facilitator #2's platform are shipped from Applicant's location using a third party shipper including, but not limited to USPS, UPS, or FedEx.  The shipping service Applicant uses is based on how quickly the customer wants to receive the order. 

ISSUE 1:

            Are Applicant's sales made to Missouri customers through Facilitator #1's fulfillment program subject to Missouri state and local sales tax?

RESPONSE 1:

            Yes.  Applicant's sales made to Missouri customers through Facilitator #1's fulfillment program are subject to Missouri state and local sales tax.

In relevant part, Section 144.020.1, RSMo, imposes a 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."  Section 144.010.1(13), RSMo, defines "sale at retail" as any "transfer made by any person engaged in business as defined herein of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property, for a valuable consideration[.]"

In relevant part, under Missouri Code of State Regulations 12 CSR 10-113.200(1):

In general, a sale of tangible personal property is subject to sales tax if title to or ownership of the property transfers in Missouri unless the transaction is in commerce. If a sale is not subject to Missouri sales tax but the property is stored, used or consumed in Missouri, the transaction is subject to use tax.

In relevant part, under Missouri Code of State Regulations 12 CSR 10-113.200(3)(C):

When an out-of-state seller delivers tangible personal property to a third-party common or contract carrier for delivery to Missouri, title transfers in Missouri. If delivery is made to seller or an agent of seller (other than a third-party common or contract carrier) in Missouri and subsequently delivered to the buyer in Missouri, the sale is subject to Missouri sales tax. If delivery is made directly from the out-of-state seller to the buyer in Missouri, the sale is subject to sales tax if the order was approved in Missouri. If the order was approved outside Missouri, the sale is not subject to sales tax, but the transaction is subject to use tax unless otherwise exempt.

(Emphasis added.)

Applicant engages in the business of making online retail sales of tangible personal property.  Facilitator #1 holds Applicant's products in inventory at its Missouri fulfillment warehouse.  Orders for Applicant's Missouri customers, placed through Facilitator #1, ship from Facilitator #1's Missouri fulfillment warehouse. 

When Applicant's sales ship from Facilitator #1's warehouse to its Missouri customers, title passes in Missouri from Applicant to its customers.  Therefore, Applicant's sales of products to its Missouri customers, fulfilled from Facilitator #1's warehouse, are subject to Missouri sales tax.  Applicant must file a sales tax return and remit state and local sales tax on its sales to Missouri customers sent from Facilitator #1's Missouri fulfillment warehouse. 

ISSUE 2:

Is Applicant required to collect and remit Missouri vendor's use tax on sales to Missouri customers made through Facilitator #2's web platform?

RESPONSE 2:

Yes.  Applicant is required to collect and remit Missouri vendor's use tax on sales to Missouri customers made through Facilitator #2's web platform.

In relevant part, under Section 144.610.1, RSMo, "[a] tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property . . . in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020."

In relevant part, under Section 144.610.2, RSMo.:

[e]very person storing, using or consuming in this state personal property subject to the tax in subsection 1 of this section is liable for the tax imposed by this law, and the liability shall not be extinguished until the tax is paid to this state, but a receipt from a vendor authorized by the director of revenue under the rules and regulations that he prescribes to collect the tax, given to the purchaser in accordance with the provisions of section 144.650,

relieves the purchaser from further liability for the tax to which receipt refers.

            In relevant part, under section 144.655, RSMo:

Every vendor . . . shall file with the director of revenue a return of all taxes collected for the preceding quarter in the form prescribed by the director of revenue, showing the total sales price of the tangible personal property sold by the vendor, the storage, use or consumption of which is subject to the tax levied by this law, and other information the director of revenue deems necessary.  The return shall be accompanied by a remittance of the amount of the tax required to be collected by the vendor during the period covered by the return.

Therefore, the answer to Applicant's question turns on which entity is a "vendor" for the purpose of Chapter 144.  In relevant part, section 144.605(14), RSMo, defines "vendor" as:

every person engaged in  making sales of tangible personal property by mail order, by advertising, by agent or peddling tangible personal property, soliciting or taking orders for sales of tangible personal property, for storage, use or consumption in this state, all salesmen, solicitors, hawkers, representatives, consignees, peddlers or canvassers, as agents of the dealers, distributors, consignors, supervisors, principals or employers under whom they operate or from whom they obtain the tangible personal property sold by them, and every person who maintains a place of business in this state, maintains a stock of goods in this state, or engages in business activities within this state and every person who engages in this state in the business of acting as a selling agent for persons not otherwise vendors as defined in this subdivision. Irrespective of whether they are making sales on their own behalf or on behalf of the dealers, distributors, consignors, supervisors, principals or employers, they must be regarded as vendors and the dealers, distributors, consignors, supervisors, principals or employers must be regarded as vendors for the purposes of sections 144.600 to 144.745.         

(Emphasis added.)                                                          

As discussed in Issue 1, Applicant engages in the business of making online retail sales of tangible personal property.  Further, Applicant maintains a stock of goods within the state, which means Applicant qualifies as a vendor.  However, unlike Issue 1, sales made through Facilitator #2's web platform are fulfilled from out of state.  Therefore, Applicant is required to collect and remit use tax on all of its sales fulfilled from out of state.

Applicant should also be aware that, subsequent to the Supreme Court Ruling in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (US 2018), Governor Parson has signed Senate Bill 153 into law. Beginning January 1, 2023, Senate Bill 153 will change the laws regarding sales tax and Marketplace Facilitators.  After that date, pursuant to 12 CSR 1.020(8)(A), this letter ruling may no longer be binding.

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 Thomas A. Houdek, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me. 

Sincerely,  

Ken Zellers