Machinery, Equipment and Other Items Used in Construction-Related Activities Taxable in Missouri

A taxpayer’s purchases of machinery, equipment, materials, and supplies for use in its construction-related activities involving concrete are not exempt from Missouri sales and use tax. The taxpayer engages in various construction-related activities involving concrete that has already been poured and cured. These activities include cutting into concrete slabs and sealing the slabs after cutting, drilling or coring into large concrete slabs, and sawing into concrete to create openings.Missouri sales tax statutes exempt machinery and equipment and materials and supplies used solely to establish either a new or a replacement manufacturing, mining, or fabricating plant only if the machinery and equipment is used directly in the manufacturing of a product for final use or sale. The taxpayer does not create a final product that will be sold for final use or consumption. Therefore, the taxpayer’s purchases of machinery, equipment, materials, and supplies are not exempt.

Section 144.054.2, RSMo provides an exemption from state sales and use taxes and local use taxes for: [E]lectrical energy and gas, whether natural, artificial, or propane, water, coal, and energy sources, chemicals, machinery, equipment, and materials used or consumed in the manufacturing, processing, compounding, mining, or producing of any product[.] The Missouri Supreme Court recently decided Ben Hur Steel Worx, LLC v. Director of Revenue and determined that materials and supplies purchased to be used in construction activities are not exempt under Section 144.054.2. The taxpayer is using the machinery, equipment, materials and supplies in its construction related activities. Therefore, its purchases of the building machinery and supplies are not exempt from tax under this statute. (Letter Ruling No. LR 7531, Missouri Department of Revenue, April 10, 2015)

Posted on May 20, 2015