LR 8226
Taxability of Materials Used in Making Drywall
December 30, 2022
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 communication of November 16, 2022.
The facts as presented in your letter ruling request, along with research into your operations, are summarized as follows:
Applicant manufactures high end drywall. The Applicant uses splicing tape to bond rolls of material that have been turned into finished goods to the next roll that will be worked into finished goods. This allows the production process to "continue continuously."
ISSUE:
Are the Applicant's purchases of splicing tape subject to sales or use tax?
RESPONSE:
No. Applicant's purchases of splicing tape are not subject to sales or use tax. The splicing tape is exempt from sales and use tax, as a material used and consumed in producing a product.
Section 144.020.1. (1), RSMo, imposes a sales tax on retail sales of tangible personal property.
Section 144.030.2(4) and (5), RSMo, exempts from state and local tax, certain machinery, equipment, parts, materials and supplies.
12 CSR 10-111.010(4)(N) offers an example demonstrating the implementation of the manufacturing exemptions in Section 144.030.2 RSMo, and notes:
A commercial photo developer... uses tape to connect negative strips so that the negatives may be fed through its automatic film developing machinery and equipment. The... [tape constitutes] consumable supplies, not parts or equipment, and therefore are subject to tax.
Section 144.054.2. RSMo, exempts machinery, equipment, materials, and chemicals used or consumed in manufacturing, processing, compounding, mining or producing any product from sales and use tax.
12 CSR 10-111.011(4)(B) offers an example demonstrating the implementation of the manufacturing exemptions in Section 144.054.2. RSMo, and notes:
A commercial photo developer... uses tape to connect negative strips so that the negatives may be fed through its automatic film developing machinery and equipment. The... [tape is] exempt from state tax and local use tax, but not local sales tax, as materials used and consumed in producing a product.
In this instance, the splicing tape of the Applicant is treated in a manner similar to how tape is used by the photo developers from the examples in the regulation. The regulation indicates that the tape used to feed materials through a machine are treated as supplies used in production. The rules indicate that supplies, like tape, are not eligible for the exemptions under Sections 144.030.2(4) and (5) RSMo, but those supplies are eligible for the exemption under Section 144.054.2. RSMo. The exemption under Section 144.054.2 RSMo, is only available for state taxes and local use tax, but not local sales taxes. Therefore the splicing tape is exempt from sales and use taxes.
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 Nathan Jefferson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford
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