The Missouri Department of Revenue (DOR) has issued a letter ruling discussing the taxability of items purchased by a contractor. The taxpayer requesting guidance had entered into a lump-sum agreement with a contractor to construct a home addition. The contractor provided a price estimate in the agreement. Per the terms of the agreement, the estimate explicitly did not include the final cost of sales tax on materials. The contractor purchased the materials to construct the home addition and paid sales tax on the purchase of the materials. The contractor later sent an invoice to the taxpayer for the cost of sales tax paid by the contractor on the purchases of materials.
The question at hand is whether the contractor is considered the final user and consumer of the materials purchased to fulfill the contractor’s obligations under the lump-sum agreement.
The DOR responded that the contractor is indeed the final user and consumer of the materials. The contractor’s purchases of materials to be used in constructing the real property addition are a purchase of tangible personal property not for resale, and thus subject to sales tax.
The DOR stated that a contractor should not charge sales tax on the lump-sum contract price of a real property addition since the contractor is the final user and consumer of the materials. The DOR does note that a contractor is not prohibited from factoring the cost of sales tax for materials into the lump-sum contract price. However, the contractor may not bill the customer separately for the sales tax as if the customer owes the tax. (Letter Ruling No. LR 8374, Missouri Department of Revenue, November 24, 2025)