LR 8192
Items Offered for Donations are Subject to Sales/Use Tax
June 01, 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 April 1, 2022.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a registered Political Action Committee with the Missouri Ethics Commission (MEC). Applicant accepts donations from supporters that are reported to the MEC along with their expenses. Applicant is planning on offering branded gift items such as t-shirts or tote bags to their supporters in exchange for their donations.
ISSUE:
Are the branded gift items offered to supporters in exchange for their donations subject to tax?
RESPONSE:
Yes, Applicant would be responsible for paying sales tax on their purchases of promotional gift items made in-state in accordance with section 144.020, RSMo, and for accruing and remitting use tax in accordance with section 144.610, RSMo, on promotional gift items purchased outside the State of Missouri.
Section 144.020.1, RSMo, states:
A tax is hereby levied and imposed ... 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.
Applicant should pay sales tax on their initial purchases of the promotional gift items that occurred in the State of Missouri. For the purchases of gift items out of state, Applicant should collect and remit use tax specified in section 144.610, RSMo, which states:
A tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property, excluding motor vehicles, trailers, motorcycles, boats, and outboard motors required to be titled under the laws of the state of Missouri and subject to tax under subdivision (9) of subsection 1 of section 144.020, purchased on or after the effective date of sections 144.600 to 144.745 in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020. This tax does not apply with respect to the storage, use or consumption of any article of tangible personal property purchased, produced or manufactured outside this state until the transportation of the article has finally come to rest within this state or until the article has become commingled with the general mass of property of this state.
The promotional gifts given to Applicant's supporters in exchange for donations are not "sold at retail," but rather used or consumed by the Applicant for advertising purposes. Supporters likely do not contemplate that the amount of their donation to Applicant represents the fair market value of the tangible personal property being received. The object of the transaction is to support the Applicant's activities, not to buy a t-shirt or tote bag.
Instead, Applicant is using and consuming the tangible personal property by gifting it to their supporters in appreciation of their donations, and Applicant gains the benefit of advertising their branded products. Applicant would be responsible for accruing and remitting use tax under section 144.610, RSMo.
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 Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, (573) 751-0961.
Sincerely,
Wayne Wallingford