LR 8283
Taxability of Construction Supplies
January 04, 2024
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 November 17, 2023.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is an electrical contractor and subcontractor with a supplies warehouse located in a Missouri city. Applicant stores supplies in this warehouse until they are needed at various Missouri job sites. As Applicant purchases items in advance, the location they are ultimately used is unknown at the time of purchase. When purchasing supplies from out of state retailers, if the seller does not collect tax, Applicant accrues and remits the use tax at the rate for the warehouse location.
ISSUE 1:
Is the warehouse use tax rate the correct rate for purchases of supplies later used at various job sites?
RESPONSE 1:
Yes. The warehouse use tax rate is the correct rate for purchases of supplies.
Section 144.610.1, RSMo, imposes a use tax "for the privilege of storing, using or consuming within this state any article of tangible personal property purchased . . . in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020.
Missouri Code of State Regulations 12 CSR 10-112.010 states "[i]n general, a contractor is the final user and consumer of the materials and supplies used and consumed in fulfilling a construction contract and which become part of a completed real property improvement." Acting as a contractor, Applicant is purchasing tangible personal property subject to use tax. See Buchholz Mortuaries, Inc. v. Director of Revenue, 113 S.W.3d 192 (Mo. banc 2003).
Applicant is operating as a contractor and a contractor is deemed to be the final consumer of tangible personal property prior to the tangible personal property becoming part of the real property. As the final consumer of the supplies as tangible personal property, Applicant must pay sales or use tax on Applicant's purchase of the materials for later installation. The tax rate of the warehouse location will be the correct rate as Applicant is the final consumer at the time of purchase and storage.
ISSUE 2:
Does Applicant need to remit the difference between the warehouse use tax rate and the rate at the location of installation?
RESPONSE 2:
No. Applicant does not need to remit the difference between the warehouse tax rate and the rate at the location of installation.
The supplies Applicant purchases are considered personal property until they are attached to the land at the job site. When Applicant contracts with a job site using the supplies, the supplies are permanently affixed to the real property and title passes after installation.
Because the supplies are not tangible personal property at the time of installation, no additional sales or use tax is due on the supplies. See response 1 above explaining that contractors are deemed to be the final consumer of supplies.
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 Michael C. Reed General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford