Missouri Taxes Out of State Deliveries with FOB Origin Missouri Shipping Terms

The Missouri Supreme Court has held that a Missouri corporation that designs and builds exhibits for trade shows was liable for state sales tax on its sales of displays to customers that were delivered by common carrier to out-of-state addresses since title transferred in Missouri because delivery was stated as “F.O.B. (free on board) manufacturer.”The court looked to the display order language to decide when title passed. The display order provided that title transferred to the purchaser upon delivery of the goods to the shipper.The display order stated that “delivery will be F.O.B. manufacturer” and that “all transportation, handling and insurance costs incurred in delivery will be charged to Purchaser.” Additional language in the display order also made it clear that responsibility for the goods transferred to the buyer upon their placement with a shipper. The court found that inspecting the goods on arrival did not delay the transfer of title but rather, this was when the goods could no longer be returned. Under the Uniform Commercial Code, title passed to the buyer when the seller completed its performance, which was when the goods were delivered to the shipper.The Taxpayer argued that Regulation 12 CSR 10-113.200(3)(B) would apply. This regulation states that for goods delivered to a common carrier or contract carrier for delivery to an out of state location, title does not transfer in Missouri and the sale is not subject to Missouri sales tax, unless otherwise agreed to by the parties. The Court ruled that this regulation is invalid as it expands the statute which states that title passes to the buyer at the time and place at which the seller completes his or her performance with reference to the physical delivery of the goods. The Court also stated that the regulation could only apply when the seller actually controls the delivery, not when it transferred responsibility for delivery to the purchaser upon delivery to the common carrier. Based on this decision, any transaction with FOB Origin terms will be considered a sale in Missouri subject to Missouri sales tax regardless of where the ultimate destination of the goods will be. Anyone purchasing from a Missouri supplier is advised to review their delivery terms. It is unclear if other states will recognize the Missouri tax as legally due and provide a credit for tax paid in Missouri against the destination state use tax. (Visionstream, Inc. v. Director of Revenue, Missouri Supreme Court, No. SC94441, June 30, 2015)

Posted on July 16, 2015