LR 8183
Artwork Sold by Non-profit is Subject to Sales Tax
February 25, 2022
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 January 6, 2022.
The facts as presented in your letter ruling request and a review of your website are summarized as follows:
Applicant is a non-profit organization that works to share its joy of art with others. Applicant holds monthly meetings and sponsors art exhibits in a Missouri city (City). Applicant plans on sponsoring an art event in 2022 (Event). At the Event, artists from around central Missouri will come to City and paint pictures of anything the artists find within the community. Later the same day, the artists will take the completed pictures to a centralized location in order to sell the paintings. The artists are also allowed to bring two additional paintings the artists created in order to offer them for sale as well.
The paintings offered for sale will be displayed and club sponsors and the public may purchase the displayed paintings. Once a piece of art has sold, Applicant will receive a 25% commission from the sale of all pieces. The commissions Applicant will receive will be used to support community art activities and for Applicant's operations.
ISSUE 1:
Is artwork tangible personal property?
RESPONSE 1:
Yes. Artwork is tangible personal property.
The Missouri Supreme Court has stated "[t]he primary rule of statutory construction is to ascertain the intent of the lawmakers by construing words used in the statute in their plain and ordinary meaning." Hyde Park Housing Partnership v. Director of Revenue, 850 S.W.2d 82, 85 (Mo. banc 1993). The Court also stated "[a]bsent statutory definition, words used in statutes are given their plain and ordinary meaning with help, as needed, from the dictionary." SEBA, LLC v. Director of Revenue, 611 S.W.3d 303, 316 (Mo. banc 2020) (citing Am. Healthcare Mgmt., Inc. v Dir. of Revenue, 984 S.W.2d 496, 498 (Mo. banc 1999)). Tangible property is defined as "property having physical substance apparent to the senses." Webster's Third New International Dictionary, p. 2337 (unabr. 1986).
Artwork has physical substance apparent to the senses. An individual may look at the artwork, touch it, carry it, and ponder the artist's intent conveyed in the artwork. Because the artwork is apparent to the senses, artwork is tangible personal property.
ISSUE 2:
Are the artist's sales of the artwork at the event subject to Missouri state and local sales tax?
RESPONSE 2:
Yes. The artist's sales of artwork at the event are subject to Missouri state and local sales tax.
Section 144.020.1, RSMo, imposes a sales tax on sales of tangible personal property and certain enumerated services. Section 144.021.1, RSMo, provides "[t]he purpose and intent of sections 144.010 to 144.510 is to impose a tax upon the privilege of engaging in the business, in this state, of selling tangible personal property and those services listed in section 144.020[.]" 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[.]" Section 144.030.2(20), RSMo, exempts from sales tax "all sales made by or to not-for-profit civic, social, service or fraternal organizations, including fraternal organizations which have been declared tax-exempt organizations pursuant to Section 501(c)(8) or (10) of the 1986 Internal Revenue Code, as amended, in their civic or charitable functions and activities[.]"
Applicant intends to sponsor an event where artists are invited to come to City and paint scenes the artists see throughout the city. Later, the completed pieces will be available for sale to the public along with two other art pieces the artists bring in order to sell. Applicant will receive a 25% commission from every piece or art sold at the event; the proceeds Applicant will use to fund its organization.
The sale of artwork is a sale at retail because the artist, who is in the business of selling artwork the artist creates, transfers the artwork to the purchaser for use or consumption and not for resale. The artist keeps the majority of the price received when the artwork is sold. Applicant receives a commission from the artist for each piece of art sold. The artist will not just sell the pieces the artist painted for the event, the artist is allowed to bring two additional pieces to sell. The intent of the event is to sell artwork. Therefore, Applicant's sales of artwork at the event are subject to Missouri state and local sales tax and the artist should collect tax on the full sales price.
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,
Wayne Wallingford