LR 8337
Taxability of Equipment Used by an Electrical Contractor/Subcontractor
February 28, 2025
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 request dated December 6, 2024.
The facts as presented in your letter ruling request, Reinhold Electric, Inc. website, and information from the Missouri Public Service Commission's website, are summarized as follows:
Applicant is an electrical contractor/subcontractor which provides various electrical services throughout the state of Missouri. Applicant contracts with residential and commercial customers for the installation, maintenance, and repair of electrical systems in the customer's property. Applicant in its function as a contractor makes several purchases of materials, machinery, equipment, and parts in order to perform its services for customers. Applicant is not a utility provider, nor is Applicant registered with the Missouri Public Service Commission as a public utility.
ISSUE:
Are Applicant's purchases of electrical materials, machinery, equipment and parts as a contractor exempt from sales tax or use tax under Section 144.058, RSMo.?
RESPONSE:
No. Applicant's purchases of electrical materials, machinery, equipment and parts as a contractor are not exempt from sales tax or use tax under Section 144.058, RSMo.
Section 144.020.1, RSMo, imposes a tax "[u]pon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state." "Sale at retail" is defined by Section 144.010.1(13), RSMo, as "any transfer made by any person engaged in business ... 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[.]" Missouri Code of State Regulations 10-112.010(1), in the pertinent part, provides that "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."
Section 144.058, RSMo, effective August 28, 2024, provides a state and local sales tax exemption for utilities, equipment, and materials used to generate, transmit, distribute, sell, or furnish electricity. The full text of the newly enacted exemption reads as follows:
144.058. Exemption for utilities, equipment, and materials used to generate electricity - public utility, savings passed through to rate. - In addition to the other exemptions granted pursuant to this chapter, there is hereby specifically exempted from the provisions of and the computation of the tax levied, assessed, or payable pursuant to this chapter and the local sales tax law as defined in section 32.085, electrical energy and gas, whether natural, artificial, or propane; water, coal, and energy sources; chemicals, machinery, equipment, parts, and material used or consumed in connection with or to facilitate the generation, transmission, distribution, sale, or furnishing of electricity for light, heat, or power; and any conduits, ducts, or other devices, materials, apparatus, or property for containing, holding, or carrying conductors used or to be used for the transmission of electricity for light, heat, or power service to consumers. The provisions of this section shall be in addition to any other sales or use tax exemption provided by law. Any public utility, as such term is defined in section 386.020, that realizes any savings as a result of the sales tax exemption provided in this section shall provide the public service commission information on the amount of savings realized in such public utility's next general rate proceeding and shall include a statement that such savings will be passed through to the public utility's rate revenue requirement determined in the public utility's next general rate proceeding. As used in this section, savings realized shall be calculated as the difference between sales tax incurred and sales tax expense included in current rates.
Section 144.058, RSMo, Emphasis added.
Public utilities, as defined in Section 386.020(43), RSMo, include "every pipeline corporation, gas corporation, electrical corporation, telecommunications company, water corporation, heating company or refrigerating corporation, and sewer corporation, as these terms are defined in this section, and each thereof is hereby declared to be a public utility and to be subject to the jurisdiction, control and regulation of the commission and to the provisions of this chapter[.]"
The Missouri Supreme Court has stated that "[t]he primary rule of statutory construction is to ascertain the intent of the lawmakers from the language used, to give effect to that intent if possible, and to consider words used in the statute in their plain and ordinary meaning." Blue Springs Bowl v. Spradling, 551 S.W.2d 596, 598 (Mo. banc 1977). The Court has also stated that "[w]ords and phrases in statutes are to be given their plain and ordinary meaning, which can be typically derived from the dictionary." Missouri State USBC Association v. Director of Revenue, 250 S.W.3d 362, 364 (Mo. banc 2008) (citing section 1.090, RSMo, and Indian Lake Property Owners Association, Inc. v. Director of Revenue, 813 S.W.2d 305, 308 (Mo. banc 1991)). Last, tax exemptions are to be construed strictly against the taxpayer, and the taxpayer claiming the exemption bears the burden of showing that it falls within the statutory language. Aquila Foreign Qualifications Corp. v. Dir. of Revenue, 362 S.W.3d 1, 3 (Mo. banc 2012). An exemption will be allowed only "on clear and unequivocal proof." Id. "Any doubt is resolved in favor of taxation." Id.
Under the plain language Section 144.058, RSMo, as emphasized above, the state and local sales tax exemption for utilities, equipment, and materials used to generate, transmit, distribute, sell, or furnish electricity is limited to purchases made by public utilities who are engaged in those activities. The exemption specifically mentions public utilities in its title and provides that such entities are required to report any savings as a result of the exemption at the utility's next general rate proceeding before the Public Service Commission.
Applicant is not a public utility generating and selling electricity. Applicant is not registered as a utility provider with the Missouri Public Service Commission. Applicant's purchases do not qualify for tax exemption under Section 144.058, RSMo. Therefore, Applicant's purchases as a contractor are subject to sales tax or use tax unless otherwise exempt.
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 Benjamin C. Slawson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (Telephone 573-751-0961), or me.
Sincerely,
Trish Vincent