LR 8391
Taxability of Purchases of Building Materials Made by a Political Subdivision
April 23, 2026
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 March 4, 2026.
The facts presented in your letter ruling request and subsequent email on April 6, 2026 are summarized as follows:
Applicant is a Missouri entity created by ordinance in cooperation between a county and city of Missouri. Applicant's purpose is to attract, retain, and facilitate the growth of business; collaborating with private and public partners on regional projects to advance its mission of serving the economic interests of the communities it serves. Applicant's board is appointed by city and county elected officials.
Applicant has taken up a renovation project that requires Applicant to hire contractors to complete renovations on Applicant's plant and life sciences facility. The renovations will increase lab space and upgrade building infrastructure necessary to support the unique needs of the agricultural technology businesses operating within Applicant's facility. Modernizing the facilities will help Applicant attract new business and more effectively facilitate the research and development interests of local businesses Applicant serves.
For these renovations, contractors hired by Applicant must purchase building materials for the renovation project. Funding will come primarily from federal and local grants, though Applicant is required to contribute $10,000 to receive some grants and must also pay for any expenses exceeding grant amounts.
ISSUE:
Are purchases of building materials by contractors hired for Applicant's renovation project subject to sales tax?
RESPONSE:
No. Purchases of building materials by contractors hired for Applicant's renovation project are not subject to sales tax, because Applicant is an instrumentality of a political subdivision and the project is funded by public grants.
Section 144.020.1(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."
Article III, Section 39(10) of the Missouri Constitution provides:
"The general assembly shall not have power: ... (10) To impose a use or sales tax upon the use, purchase, or acquisition of property paid for out of the funds of any county or other political subdivision."
Section 144.062.1 RSMo., provides:
"With respect to exempt sales at retail of tangible personal property and materials for the purpose of constructing, repairing or remodeling facilities for: (1) A county, other political subdivision or instrumentality thereof exempt from taxation under subdivision (10) of Section 30 of Article II of the Constitution of Missouri ... such exemptions shall be allowed for such purchases if the purchases are related to the entities' exempt functions and activities. In addition, the sales shall not be rendered nonexempt nor shall any material supplier or contractor be obligated pay, collect, or remit sales tax with respect to such purchases made by or on behalf of an exempt entity due to such purchases being billed to or paid for by a contractor..."
(Emphasis added.) Section 144.062.2 RSMo., adds:
"When an exempt entity contracts for the purpose of constructing, repairing or remodeling facilities, and purchases of tangible personal property and materials to be incorporated into or consumed in the construction of the project are to be made on a tax-exempt basis, such entity shall furnish to the contractor an exemption certificate authorizing such purchases for the construction, repair or remodeling project."
Applicant is an instrumentality of the county and city. Political entities are exempt from state and local sales or use tax on purchases or acquisitions of property paid for by the funds of the county or other political subdivision. Purchases are exempt when made by contractors hired by exempt entities so long as they are furnished an appropriate exemption certificate. Any purchases made using Applicant's contribution funds or purchases exceeding the public grant budget which require Applicant's private funding are subject to tax, as they are not paid for by the county funds.
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