LR 8193
Plants Sold at Plant Sales are Subject to Sales 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 request received by the General Counsel's Office on April 7, 2022.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a 501(c)(3) charitable and educational organization whose exclusive purpose is horticultural education to support and to supplement the efforts of a Missouri University and its horticultural program.
Applicant's trained volunteers provide educational programming and additional information on horticultural and environmental stewardship to the residents of Missouri. These volunteers participate in local "chapters" scattered throughout Missouri.
The majority of Applicant's efforts are "self-funded." Therefore, fundraising by local chapters is crucial to the chapter's success. Many chapters raise funds through "spring plant sales." At these events, chapter members sell plants that are either donated by chapter members or produced in greenhouses maintained by larger chapters.
These plant sales mimic farmers' markets in their structure. Plants are brought to a convenient, public location such as a parking lot. At this location, the general public is allowed to attend the sale and make purchases. Proceeds are managed either directly or indirectly by the chapter's council.
ISSUE:
Are Applicant's sales of plants at spring plant sales subject to sales tax?
RESPONSE:
Yes. Applicant's sales of plants at spring plant sales are subject to sales tax.
Section 144.020, 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 144.030.2(19), RSMo, provides an exemption from sales tax for "[a]ll sales made by or to religious and charitable organizations and institution in their religious, charitable or educational functions and activities."
However, sales by religious and charitable organizations which compete with commercial establishments selling the same items are not exempt from sales tax. St. John's Medical Center, Inc. v. Spradling, 510 S.W.2d 417, 418 (Mo. 1974). While the sales made by hospital cafeterias and gifts shops in St. John's Medical Center were found to be tax-exempt, the Court found that the cafeterias and gift shops in that case were "operated primarily for the convenience of hospital patients and their visitors." Id. "There [was] no intention to serve the general public." Id.
In contrast, Applicant's plant sales are open to the public and compete directly with commercial plant sellers surrounding the local chapter's area of operation. Unlike the cafeterias and gift shops in St. John's Medical Center, Applicant intends to serve the general public. Therefore, Applicant's plant sales are subject to sales tax.
Despite the similarities between Applicant's plant sales and tax-exempt farmers' markets operated throughout the state, the farmers' market exemption of section 144.527, RSMo, is inapplicable to Applicant's plant sales. Among other restrictions, the exemption of section 144.527, RSMo, applies only to events wherein "the products sold are produced . . . with the sole intent and purpose of generating a portion of household income." Applicant's plant sales are not made with the sole intent and purpose of generating a portion of household income. Instead, Applicant's plant sales are made with the sole intent and purpose of generating funds to further Applicant's charitable purpose. Therefore, the farmer's market exemption of section 144.527, RSMo, is inapplicable to Applicant's plant sales.
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 Associate Counsel Stephen S. Krogmeier, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, (573)-751-0961.
Sincerely,
Wayne Wallingford