LR 8313
Purchases of Consumables and Rentals of Machinery and Equipment by Contractor Are Exempt from Sales Tax
August 30, 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 June 28, 2024.
The facts as presented in your letter ruling request are summarized as follows:
Applicant is a contractor working on a tax-exempt project for a medical based University. Rental equipment is used on the project such as lifts, rented construction fencing and rented motorized machinery. Consumables such as plywood put on the ground to walk on, bits for drills, small misc. tools, etc. are also used on the project.
ISSUE 1:
Is the rental equipment used on the project exempt from sales tax?
RESPONSE 1:
No. Purchase and rental of machinery and equipment such as lifts, construction fencing, and motorized machinery is not exempt from sales tax.
Section 144.020.1, RSMo, imposes a tax "upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state."
Section 144.010.1(13), RSMo, provides: "'[s]ale at retail' means any transfer made by any person engaged in business as defined herein of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property, for a valuable consideration..."
Section 144.062.1(6), RSMo, provides that a sales tax exemption shall be allowed for purchases by an exempt entity as defined in that section, such as an institution of higher education, to the extent that the purchases are "related to the entities' exempt functions and activities."
However, section 144.062.3, RSMo, provides, "Nothing in this section shall be deemed to exempt the purchase of any construction machinery, equipment or tools used in constructing, repairing or remodeling facilities for the exempt entity." Consequently, the sale or rental of machinery and equipment such as lifts, construction fencing, and motorized machinery is not exempt from sales tax.
ISSUE 2:
Are the consumables used in the project sales tax-exempt?
RESPONSE 2:
Yes. Consumables used in the project are sales tax-exempt.
Section 144.062.3, RSMo, provides that the exemption certificate created in this section exempts, "[a]ll tangible personal property and materials to be incorporated into or consumed in the construction of that project and no other." Thus, a difference is recognized between machinery, equipment and consumables, the former not being tax exempt and the latter being tax exempt. This exemption does not apply to small tools which might be purchased and used in the construction of the project because they are not consumable.
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 Senior Counsel, Kent L. Brown, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961,
e-mail Kent.Brown@DOR.mo.gov.
Sincerely,
Wayne Wallingford