LR 8293
Taxability of Purchases Made by a Government Contractor
March 22, 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 February 12, 2024.
The facts as presented in your letter ruling request are summarized as follows:
Applicant holds a contract with the United States Department of Energy (DOE) National Nuclear Security Administration (NNSA) to manage and operate a federal facility in Kansas City, Missouri. The contract is a 'cost plus award fee' contract where Applicant receives an annual fee in addition to reimbursement for the costs of operating the plant, and any costs are reimbursed by the DOE. Title to tangible personal property passes directly from the vendor to the DOE upon delivery. And the government is the purchaser of utilities for the government-owned and government-leased facilities in Missouri.
Additionally, Applicant is managing a multi-year construction project in Missouri. The Applicant issues Form 5060 to the applicable subcontractors. Due to the number of subcontractors engaged on the construction project, NNSA does not sign a unique Form 5060 for each subcontractor. Rather, NNSA has provided a signed Form 5060 with a period on the form through the end of Applicants' federal contract.
ISSUE 1:
Are Applicant's purchases of tangible personal property made on behalf of DOE and NNSA subject to Missouri sales and use tax?
RESPONSE 1:
No. Applicant's purchases of tangible personal property made on behalf of the NNSA and DOE are not subject to Missouri sales and use tax.
Section 144.030.1, RSMo, exempts from sales tax, in relevant part, "...any retail sale which the state of Missouri is prohibited from taxing pursuant to the Constitution or laws of the United States of America[.]"
In Olin Corp. v. Dir. of Revenue, 945 S.W.2d 442, 443 (Mo. banc 1997), Olin operated and maintained an ammunition plant for the federal government. Olin would purchase the necessary equipment and materials needed to operate and maintain the plant. Id. By contract, title would pass from the vendor directly to the government upon delivery. Id. The Missouri Supreme Court held that since Olin did not obtain title to, nor an ownership interest in, the property, no taxable transaction occurred, so Olin was not liable for the additional taxes assessed and entitled to a refund of taxes. Id. at 444.
Here, Applicant purchases the necessary equipment and materials needed to operate the federal facility in Kansas City. Title transfers to the DOE upon delivery. Therefore, Applicant's purchases of tangible personal property made on behalf of the NNSA and DOE are not subject to Missouri sales and use tax. Applicant should complete Form 149 to present to its suppliers when purchasing equipment and materials for its contract. On Form 149 under 'Other Sales/Use Tax Exemptions," check the box for "Other" and enter "Purchase for U.S. Government."
ISSUE 2:
Are Applicant's purchases of utilities made on behalf of DOE and NNSA subject to Missouri sales and use tax?
RESPONSE 2:
No. Applicant's purchases of utilities made on behalf of the NNSA and DOE are not subject to Missouri sales and use tax.
Section 144.605.11, RSMo, defines "tangible personal property" as:
[A]ll items subject to the Missouri sales tax as provided in subdivisions (1) and (3) of subsection 1 of section 144.020;
Section 144.020.1(3), RSMo, provides:
A tax equivalent to four percent of the basic rate paid or charged on all sales of electricity or electrical current, water and gas, natural or artificial, to domestic, commercial or industrial consumers[.]
The purchases of utilities therefore qualify as purchases of tangible personal property made on behalf of the NNSA and DOE.
See Response 1.
ISSUE 3:
Are Applicant's purchases, and the Applicant's subcontractors' purchases, of tangible personal property to be incorporated or consumed in the construction project subject to Missouri sales and use tax if the NNSA provided a signed Form 5060 that covers the project's initiation?
RESPONSE 3:
No. Applicant's and Applicant's subcontractors' purchases are not subject to Missouri sales and use tax. However, Applicant and Applicant's subcontractors should submit Form 149.
See Response 1.
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 J. Ross Shelton General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford