LR 8198
Utilities Purchased for Baking/Freezing are Subject to Sales Tax
June 17, 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 29, 2022.
The facts as presented in your letter ruling request are summarized as follows:
Applicant has a bakery and freezing operation that produces dough which is then sold to its stores. Applicant combines the raw materials necessary to make the dough.
ISSUE 1:
Is Applicant's purchase of utilities used in its freezing and baking operation exempt from state sales tax?
RESPONSE 1:
No. Applicant's purchase of utilities used in its freezing and baking operation are not exempt from state sales tax. Section 144.020.1, RSMo, provides "[t]ax 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 in this state."
Section 144.030.2(12), RSMo, exempts:
Electrical energy used in the actual primary manufacture, processing, compounding, mining or producing of a product, or electrical energy used in the actual secondary processing or fabricating of the product...
Section 144.054.2, RSMo, exempts:
...electrical energy and gas, whether natural, artificial, or propane, water, coal, and energy sources, chemicals, machinery, equipment, and materials used or consumed in the manufacturing, processing, compounding, mining, or producing of any product...
The Missouri Supreme Court has consistently held that food preparation for retail consumption does not constitute manufacturing or processing as contemplated by the exemptions in sections 144.030.2(12) and 144.054.2., RSMo:
"The legislature did not include the words 'restaurant' or 'preparation' or 'furnishing' or 'serving' in section 144.030.2, RSMo., nor did it elsewhere indicate that it intended the words 'manufacturing,' 'mining,' 'fabricating' or 'producing' to be used in a broad sense to include preparation and cooking of food..." Brinker Mo., Inc. v. Dir. Of Revenue, 319 S.W.3d 433, 438 (Mo. Banc 2010)(abrogated on other grounds).
"Section 144.054.2 lists 'processing' along with 'manufacturing,' 'compounding,' 'mining,' and 'producing.' The industrial connotations of those terms in section 144.054.2 indicate that the legislature did not intend "processing" to include food preparation for retail consumption." Aquila Foreign Qualifications Corp. v. Director of Revenue, 362 S.W. 3d 1, 5 (Mo. Banc 2012).
Therefore, Applicant's purchases of utilities used in its freezing and baking operations are not exempt from state 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 Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford