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A national retailer that sells merchandise online to be picked up at its brick and mortar stores in Missouri is subject to Missouri sales tax and not seller’s use tax on the sales. Customers order products and pay for them on the retailer’s website and choose to pick up the products at one of the retailer’s brick and mortar stores in Missouri. Missouri tax law states that “In general, a sale of tangible personal property is subject to sales tax if title to or ownership of the property transfers in Missouri unless the transaction is in commerce.” A transaction is “in commerce” if the order is approved outside of Missouri and the tangible personal property is shipped from outside of Missouri directly to the buyer in Missouri. The retailer’s sales are not made “in commerce.” Ownership of and title to the merchandise transfers at the brick and mortar location. The sales are subject to the local sales tax in effect at the location of the brick and mortar store where the customer picks up the merchandise, because that is where the sale is consummated. (Letter Ruling No. LR 6985, Missouri Department of Revenue, December 9, 2011, released February 2012)


A Missouri company that contracted with a third-party manufacturer to produce a prototype of a brain scanning device must pay Missouri sales and use tax on the transaction. Missouri tax law exempts from state sales and use tax “machinery, equipment, and materials used…in research and development related to manufacturing, processing, compounding, mining, or producing any product.” The brain scanning device is not a material. Materials were used to make the device. The device is also not machinery or equipment used in research and development related to manufacturing or producing a product. The device is the product, and is therefore subject to sales or use tax. The purchase of the prototype, even though it was being used to evaluate and refine the device, did not qualify for the research and development machinery exemption because it will not create or manufacture anything. (Letter Ruling No. LR 6791, Missouri Department of Revenue, July 22, 2011)


The sale of vapor extraction systems and oxygen injection systems by a Missouri firm to its clients is exempt from Missouri sales and use tax. Both systems are used to remove pollutants from contaminated groundwater. Equipment used “solely for the purpose of preventing, abating, or monitoring water pollution” is exempt according to Missouri tax code. To claim the tax exemption, the firm must obtain from purchasers a signed Sales/Use Tax Exemption Certificate (Form 149) claiming the exemption for “Air and/or water pollution control machinery, equipment, appliances and devices” and maintain the certificates in its records. The firm is required to collect and remit taxes on the sales of these systems if said certificate is not provided. (Letter Ruling No. LR6637, Missouri Department of Revenue, February 24, 2011)


In a letter ruling, the Missouri Department of Revenue discussed the requirements for machinery and equipment used in a qualifying material recovery processing plant. A taxpayer who recovers sawdust and converts it into wood pellets qualifies as a material recovery processing plant for the purposes of the state’s sales and use tax exemption so long as its machinery and equipment is substantially used in the recovery of materials into a usable product. If the taxpayer didn’t recover the sawdust to make a new product, the sawdust would become a part of the solid waste stream. As such, the taxpayer qualifies for the material recovery processing plant exemption so long as their equipment is substantially used for the recovery. The pulp wood logs that the taxpayer purchases to convert into wood pellets do not qualify as recovered materials because they could have been used as firewood and as such, were not removed from the solid waste stream. The diesel fuel that the taxpayer purchases for equipment and machinery at its facility is exempt from state and local use tax, but not local sales tax. The fuel is used in the processing of recovered materials as well as the manufacturing of wood pellets. As a result, the fuel qualifies for the state and local use tax exemption. (Letter Ruling No. LR6540, Missouri Department of Revenue, November 24, 2010)


Out-of-state registered taxpayers should collect and remit sales tax on sales that are drop shipped by suppliers within and outside of Missouri to Missouri customers. Missouri law provides that sales of tangible personal property are subject to sales tax if the title of the property transfers in Missouri. In the case of drop shipments, this title transfer occurs when an out-of-state seller delivers tangible personal property to a third party common carrier for delivery into the State. For transactions that are drop shipped from within Missouri to a Missouri customer, the local tax rates at the supplier’s (drop shipper) location should be applied. The local sales tax is determined by where a product is shipped from for a product sold by a taxpayer and the shipping of the product originates within Missouri. The Missouri supplier’s location is considered the place of business for determining the local sales tax. For transactions that are drop shipped from outside Missouri to a Missouri customer, the local use tax rates at the customer’s location should be applied. In this case, the local sales tax is determined by where title passes for the product (Letter Ruling No. LR6271, Missouri Department of Revenue, May 20, 2010).



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