The Missouri Supreme Court affirmed the administrative hearing commission’s decision that the sale of room furnishings to a hotel company were not exempt under the state’s resale exemption. The taxpayer sells room furnishings – such as linens, mattresses, chairs, desks, wall art, etc. – to a hotel company. The taxpayer argued that the room furnishings were purchased for resale to hotel guests and therefore exempt. In doing do, the taxpayer relied on Missouri use tax statutes in defining a “sale for resale.” Under the use tax statutes, a subsequent transfer of a “right to use” qualifies a purchase for the use tax resale exemption. However under sales tax statutes, a transfer of a “right to use” does not qualify a sale for the sales tax “resale” exemption. The Court admitted that in prior cases, it had applied the two definitions interchangeably. The Court identified a few of the prior cases and described them as a “small sampling of the tangled analysis that led the <taxpayer> to argue its sales are exempt from sales tax because the hotels “resell” the room furnishings by transferring the right to use them to hotel guests, despite the fact that the “right to use” is not mentioned in the statute setting forth a resale exemption from sales tax. The sales tax and use tax “definitions of ‘sale,’ though similar, have different requirements.” The Court added, “as such, the employment of the use tax definition of “sale” in sales tax resale exemption cases must no longer be followed.”
The Court held that to qualify for the sales tax resale exemption, the taxpayer must show a sale at retail of the room furnishings from the hotel to the hotel’s guests. To show a sale at retail, the taxpayer must show a transfer, barter or exchange of the title or ownership of tangible personal property for that purchaser’s use or consumption for a consideration paid or to be paid. For the sales tax resale exemption to apply, the taxpayer must show title or ownership of the room furnishing transfers to hotel guests during the duration of their stay. While hotel guests pay consideration for the use of certain room furnishings, the taxpayer failed to show that title or ownership of the room furnishings is transferred to hotel customers. Therefore, the taxpayer failed to show the applicability of the sales tax resale exemption to its sales of room furnishings and was liable for tax on the sales. (DI Supply I, LLC v. Director of Revenue, Missouri Supreme Court, No. SC97932, March 17, 2020)