LR 8296
Taxability of Purchases Made Out of State Used in Missouri
April 29, 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 21, 2024.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a steel pipe and tube service center located outside the state of Missouri. Applicant has a customer located outside of the state of Missouri wanting to purchase material. Applicant hires a common carrier to ship the material into the state of Missouri to a fabricator of their choosing. The common carrier is responsible for any lost or damaged items between the time the material was picked up at Applicant's facility in Illinois and subsequently delivered to the Missouri fabricator. The Missouri fabricator does not take legal possession of the materials at any time; however, they may be modifying/altering the product. Once the fabrication work has been completed, the customer will hire a common carrier to pick up the material from the Missouri fabricator and deliver it to the customer located outside of the state of Missouri.
ISSUE 1:
Are Applicant's sales to its customers located outside of Missouri subject to Missouri sales tax?
RESPONSE 1:
No. Applicant's sales to customers outside of Missouri are not subject to Missouri sales tax.
Sales of tangible personal property are subject to tax pursuant to section 144.020, RSMo. Additionally, regulation 12 CSR 10-113.200.1 provides:
In general, a sale of tangible personal property is subject to sales tax if title to or ownership of the property transfers in Missouri unless the transaction is in commerce.
And 12 CSR 10-113.200(3)(A) provides:
(A) title transfers when the seller completes its obligations regarding physical delivery of the property, unless the seller and buyer expressly agree that title transfers at a different time.
According to Applicant, title to the materials transfer upon pick-up by the Common Carrier in Illinois, not Missouri. Therefore, the transaction is not subject to Missouri sales tax.
ISSUE 2:
Are Applicant's sales to its customers located outside of Missouri subject to vendor's use tax?
RESPONSE 2:
Yes. Applicant's sales to its customers outside of Missouri are subject to vendor's use tax.
Section 144.610.1, RSMo, provides:
A tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property, excluding motor vehicles, trailers, motorcycles, mopeds, motortricycles, boats, and outboard motors required to be titled under the laws of the state of Missouri and subject to tax under subdivision (9) of subsection 1 of section 144.020, purchased on or after the effective date of sections 144.600 to 144.745 in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020. This tax does not apply with respect to the storage, use or consumption of any article of tangible personal property purchased, produced or manufactured outside this state until the transportation of the article has finally come to rest within this state or until the article has become commingled with the general mass of property of this state.
Section 144.635, RSMo, provides:
Every vendor making a sale of tangible personal property for the purpose of storage, use or consumption in this state shall collect from the purchaser an amount equal to the percentage on the sale price imposed by the sales tax law in section 144.020 and give the purchaser a receipt therefor.
Section 144.605.10, RSMo, defines 'storage':
[A]ny keeping or retention in this state of tangible personal property purchased from a vendor, except property for sale or property that is temporarily kept or retained in this state for subsequent use outside the state[.]
Section 144.605.13, RSMo, defines 'use':
[T]he exercise of any right or power over tangible personal property incident to the ownership or control of that property, except that it does not include the temporary storage of property in this state for subsequent use outside the state, or the sale of the property in the regular course of business[.]
Although the materials Applicant sells to its customer will eventually be used outside the state of Missouri, 12 CSR 10-113.300(3)(D) explains that the temporary storage exclusion from use tax "...will not apply if any further processing, fabrication or other modifications are performed on or to the property while in this state."
Because the materials are undergoing further fabrication work within Missouri, they are subject to use tax. Applicant ships the materials to Missouri for use by Missouri fabricators, so Applicant is responsible for remitting vendor's use tax.
However, Applicant can accept a resale exemption from its customers if their purchase is solely for resale, and if the reseller incorporates the value of all items sold in the price.
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