LR 8374
Taxability of Items Purchased by a Contractor
November 24, 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 communication on September 30, 2025.
The facts presented in your letter ruling request are summarized as follows:
Applicant is a Missouri citizen who entered into an agreement with Contractor to purchase a home addition on their Missouri residence. Applicant and Contractor entered into a lump-sum agreement for Contractor to construct the home addition. Contractor provides a contract price estimate to Applicant in their agreement. This estimate explicitly does not include the final cost of sales tax on materials, per the terms of the agreement. To fulfill this agreement, Contractor purchases the necessary materials to construct the home addition and pays sales tax on their purchase of the materials. Contractor later sends an invoice to Applicant for the cost of sales tax paid by Contractor when purchasing the material.
ISSUE:
Are contractors the final user and consumer of materials purchased to fulfill the contractor's obligation(s) under a lump-sum agreement to construct a real property addition?
RESPONSE:
Yes, contractors who purchase materials that are used to construct additions to real property are considered the final user and consumer of such materials.
Section 144.020.1, RSMo, provides "a tax is hereby levied and imposed [...] 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."
12 CSR 10-112.010(1) provides:
In 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. Consequently, persons selling materials and supplies to a contractor are subject to tax on the gross receipts from all such sales because the purchase is not for resale as tangible personal property.
A contractor's purchase of materials to be used in constructing a real property addition is considered a purchase of tangible personal property not for resale, which is thus subject to sales tax. See Buchholz Mortuaries, Inc. v. Director of Revenue
Sales of tangible personal property are subject to tax unless a specific exemption applies, and tax exemptions and exclusions are strictly construed against the taxpayer, with any doubt resolved in favor of the tax.
Contractors should not charge sales tax on the lump-sum contract price of a real property addition. Contractors are the final users and consumers of materials used to construct real property additions and thus owe sales tax for such materials at the time of purchase. However, a contractor is not prohibited from factoring the cost of sales tax for materials into the lump-sum contract 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 Legal Counsel Gabriel Barnes, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Trish Vincent