Purchases by Missouri Contractor Do Not Qualify for Resale Exemption

The Missouri Supreme Court has affirmed the Director of Revenue’s audit determination that a private jail facility operator’s purchases of inmate consumables pursuant to contracts with municipalities are subject to sales and use taxes. The jail operator argued that it is reselling the consumables to the municipalities, and is therefore eligible for a resale exemption because it factors the cost of the consumables into the fee it charges the municipalities. However, since the municipalities are exempt entities, the jail operator does not charge sales tax when the consumables are transferred. Since the underlying reasoning behind the exemption is to avoid double taxation, the operator’s purchases are not eligible for the resale exemption because allowing such would result in avoiding taxation even once. (ICC Management Inc. v. Director of Revenue, No. SC89559, Mo. Sup. Ct. 6/16/09)

Posted on August 27, 2009