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Missouri has enacted legislation that establishes the Facilitating Business Rapid Response to State Declared Disasters Act. The Act provides that an out-of-state business or any of its out-of-state employees assisting in repairing, renovating, installing, or building infrastructure related to a declared state disaster or emergency in Missouri are not subject to Missouri use tax on equipment used or consumed if the equipment does not remain in the state after the disaster period, unless the out-of-state business or employee remains in Missouri after the disaster period has ended. In addition, the out of state business will not be deemed to have created nexus for sales tax or income tax purposes.  No income tax will be due nor will the employees working in Missouri under the program be subject to withholding or individual income tax.  An out-of-state business shall provide notification to the secretary of state within ten days after entry to the state during a disaster period that the business is in the state for purposes of responding to the declared state disaster or emergency. For purposes of the exemption, an out-of-state business includes a business that is affiliated with a registered business solely through common ownership if that entity does not have any registrations, tax filings, or nexus in the state before the declared disaster or emergency. Also for purposes of the exemption, prior registration as an out-of-state business for a declared disaster or emergency is not considered a registration in Missouri.(H.B. 1190, Laws 2014, effective August 28, 2014)


Missouri has amended its sales and use tax rule on taxation of software to address new items. The amended rule provides that the sale of software as a service (SaaS) is not subject to tax. The SaaS provider must pay sales or use tax on tangible personal property used to provide the service that is purchased or used in Missouri. The amended rule also defines software as a service as a model for enabling ubiquitous, convenient, and on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service provider interaction. Per the rule, the term includes platform as a service (PaaS), infrastructure as a service (IaaS), and similar service models. It does not include any service model that gives the purchaser the right to use specifically identified tangible personal property.


The amended rule also addresses more traditional software products and stipulates that tax does not apply to the amount charged to a customer for customized software. Sellers of customized software are subject to tax on the purchase of any tangible personal property or taxable services used to provide the service. The rule also provides that mandatory software maintenance agreements for canned software provided on a tangible medium are subject to tax, whether or not the charges are separately stated. Optional software maintenance agreements that provide for canned software updates, upgrades, or enhancements delivered on a tangible medium are subject to tax. If the optional maintenance agreements do not provide for canned software updates, upgrades, or enhancements delivered on a tangible medium, the separately stated cost of the maintenance agreement is not taxable. Charges for custom software maintenance agreements that provide for software updates, upgrades, or enhancements delivered on a tangible medium are not subject to tax. (12 CSR 10-109.050, Missouri Department of Revenue, effective July 30, 2014)


On June 5, 2013, Missouri Gov. Jay Nixon vetoed a bill passed by the Legislation that, among other provisions, would have required the Missouri Department of Revenue to enter into the Streamlined Sales and Use Tax Agreement. On September 11, 2013, the House of Representatives, voting to override the veto, fell short of the two-thirds majority vote needed for an override. As a result, the override was not passed onto the Senate for consideration and the SST provisions failed. (H.B. 253, failed to pass over veto, September 11, 2013)


The Missouri Supreme Court has held that a utility company was properly denied a refund for Missouri sales tax paid on electricity and natural gas provided to grocery stores for operating equipment in their bakery departments such as ovens, retarders, and proofers because the Missouri exemption for electricity and gas used in manufacturing and processing does not apply. The taxpayer argued that the stores’ food preparation activities constituted "processing" for purposes of the exemption, because the stores’ bakery departments transformed raw frozen dough that they received into edible baked goods by using energy and equipment to defrost the dough, allow it to rise, and bake it. The court rejected this argument because "processing," as used in the exemption statute, did not include in-store preparation of cooked goods for retail sale. The term "processing" as used in the exemption statute must be narrowly construed. The burden was on the taxpayer to show that the stores’ preparation of baked goods for sale in its stores fell within this exemption, and the taxpayer failed to do so. The relevant exemption is for "electrical energy and gas … used or consumed in the manufacturing, processing, compounding, mining, or producing of any product." The court held that the activities described in the statute can best be described as large-scale industrial activities, not on-site cooking or preparing of food for retail sale. The court stated that one does not speak of a grocery store bakery department as "processing" baked goods any more than one speaks of it as manufacturing, compounding, or producing such goods. Therefore, the term "processing" did not encompass the activities of the stores’ bakery departments. The court also held that the bakery departments of the grocery stores did not constitute bakeries as the term is used in an example in a regulation promulgated pursuant to the relevant tax statute. Regardless, the taxpayer would not have been entitled to the exemption because the statutory term "processing" did not encompass the stores’ activities in preparing baked goods for retail sale in their bakery departments. A statute prevails over a regulation, and a regulation cannot expand or modify a statute. (Union Electric Co. d/b/a Ameren Missouri v. Director of Revenue, Missouri Supreme Court, No. SC93083, March 11, 2014)


Representative Lamar Smith (Republican, Texas) has introduced a bill to bar multiple taxes on digital goods and services.  Smith had proposed an earlier bill which failed to pass.  This bill is a revised version of the earlier bill. The proposed bill – called the Digital Goods and Services Tax Fairness Act of 2013 – would only allow a state to tax sales of digital goods and services to customers with a tax address within that state. Additionally, states would be barred from imposing multiple taxes on digital goods. The bill defines digital goods as sounds, images, data and facts maintained in digital form. Internet access service is not included as a digital good in the bill. (H.R. 3724)



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