Missouri — Sales & Use Tax

Missouri imposes a sales tax on sellers for the privilege of selling tangible personal property or rendering taxable services at retail in the state, and a complementary use tax on the privilege of storing, using, or consuming tangible personal property within Missouri. The tax burden is placed on the seller making the taxable sale; the seller must collect the tax from the purchaser and remit it to the Department of Revenue.

The combined state sales and use tax rate is 4.225 percent, composed of four separate taxes: a 4 percent base tax on retail sales of tangible personal property and specified taxable services; a 0.125 percent (one-eighth of one percent) conservation tax imposed by the Missouri Constitution for conservation purposes; a 0.1 percent (one-tenth of one percent) parks, soils, and water conservation tax also imposed by the Missouri Constitution; and a 1 percent education tax. These constitutional taxes are voter-approved and dedicated to their specified purposes.

Use tax applies to tangible personal property purchased outside Missouri for storage, use, or consumption in the state. The use tax does not apply if the transaction was subject to Missouri sales tax. Cities, counties, and special taxing districts may impose additional local sales and use taxes on top of the state rate.

Source: RSMo § 144.021; RSMo § 144.020; RSMo § 144.610; Mo. Const. Art. IV, § 43(a)&constit=y); Mo. Const. Art. IV, § 47(a)&constit=y)

Missouri imposes sales and use tax collection obligations on remote sellers whose gross receipts from taxable sales of tangible personal property delivered into Missouri exceed $100,000 in either the previous calendar year or the current calendar year. No transaction count threshold applies. Sellers must determine at the close of each calendar quarter whether they met the $100,000 threshold during the twelve-month period ending on the last day of the preceding quarter. If the threshold is met, the seller must register and begin collecting tax within three months following the close of that quarter. This economic nexus standard took effect January 1, 2023.

Source: RSMo § 144.605(2)(e); Missouri DOR Remote Seller FAQs

Missouri requires marketplace facilitators to collect and remit use tax on all taxable sales made through their marketplace by or on behalf of marketplace sellers, effective January 1, 2023. A marketplace facilitator is defined as a person who facilitates a retail sale by listing or advertising tangible personal property or taxable services and either directly or indirectly collects payment from the purchaser and transmits all or part of the payment to the marketplace seller. The law treats marketplace facilitators as sellers, making them liable for tax collection and remittance on facilitated transactions. Marketplace facilitators must register if their gross receipts from taxable sales delivered into Missouri exceed $100,000 in the previous or current calendar year.

Source: RSMo § 144.752; Missouri DOR Remote Seller FAQs

Missouri taxes only services specifically enumerated in statute. Unlike tangible personal property sales (which are presumptively taxable), services are taxable only if listed in RSMo § 144.020.

The taxable services are: (1) admissions and seating accommodations or fees to places of amusement, entertainment, recreation, games, and athletic events, except amounts paid for instructional classes; (2) sales of electricity, water, and natural or artificial gas to domestic, commercial, or industrial consumers; (3) local and long-distance telecommunications services, including equipment rental or leasing and related services, but excluding internet access; (4) telegraph message transmission services; (5) rooms, meals, and drinks furnished at hotels, motels, taverns, inns, restaurants, eating houses, drugstores, dining cars, tourist cabins, tourist camps, or other places where such items are regularly served to the public; (6) intrastate transportation tickets for railroads, boats, airplanes, and certain buses and trucks; and (7) rental or lease of tangible personal property.

Most professional, personal, and business services—including consulting, legal, accounting, medical, repair, and personal care services—are not subject to Missouri sales tax.

Source: RSMo § 144.020

Missouri exempts from sales and use tax purchases of electrical energy, gas (natural, artificial, or propane), water, coal, energy sources, chemicals, machinery, equipment, and materials that are used or consumed in the manufacturing, processing, compounding, mining, or producing of any product, or in the processing of recovered materials, or in research and development related to manufacturing. This exemption is codified in RSMo § 144.054.2 and is structurally separate from the machinery and equipment exemptions for replacement or new/expanded plants in RSMo § 144.030.2(4) and (5).

"Used or consumed" versus "used directly" — distinct statutory tests

The § 144.054 exemption applies to items "used or consumed" in manufacturing. Missouri regulation 12 CSR 10-111.011 explains that this is a broader test than the "used directly" requirement that applies under § 144.030. The regulation states: "To qualify for this exemption, the item must be used or consumed and does not have the same requirement of direct use that is required in Section 144.030, RSMo." Additionally, under § 144.054, the manufactured product is not required to be ultimately subject to tax, whereas the § 144.030 machinery exemptions require that the product be intended to be sold ultimately for final use or consumption.

Missouri regulation 12 CSR 10-111.010 addresses the § 144.030 "used directly" test for manufacturing machinery. That regulation states: "In order for the machinery and equipment to be exempt from tax it need not be used exclusively or primarily for an exempt purpose. The purchaser must intend at the time of purchase to use and actually make material use of the machinery and equipment in an exempt capacity to qualify. The fact that it may also be used for nonexempt purposes will not prevent the purchase of the item from qualifying for the exemption." The § 144.054 "used or consumed" test does not expressly incorporate this same "material use" language, but the regulatory framework distinguishes the two tests by the presence or absence of the "direct use" requirement.

Partial to full exemption — effective January 1, 2023

Prior to January 1, 2023, purchases qualifying under § 144.054 were exempt from state sales and use tax (the 4.225% combined state rate) and from local use tax, but remained subject to local sales tax. This meant sellers had to collect and report local sales taxes imposed by political subdivisions even when the state tax was exempt. Effective January 1, 2023, the exemptions under § 144.054 became full exemptions from both state and local sales and use taxes. Sellers are no longer required to collect any local sales tax on items qualifying under § 144.054 for purchases made on or after January 1, 2023.

Scope of covered items

The statute exempts electrical energy and gas (natural, artificial, or propane), water, coal, energy sources, chemicals, machinery, equipment, and materials. These items must be "used or consumed" in manufacturing, processing, compounding, mining, or producing any product, or used or consumed in processing recovered materials, or used in research and development related to manufacturing, processing, compounding, mining, or producing any product. Missouri regulation 12 CSR 10-111.011 provides examples: a manufacturing company purchasing equipment to perform research and development on potential future products qualifies; a commercial photo developer's purchases of crop cards (discarded after a single use to hold individual negatives) and tape used to connect negative strips qualify as materials used and consumed in producing a product.

Product requirement and case law

The exemption applies only to the manufacturing, processing, compounding, mining, or producing of a "product." RSMo § 144.030.2(4) and § 144.054 both provide that the term "product" includes telecommunications services and the term "manufacturing" includes the production, or production and transmission, of telecommunications services. However, the exemption does not extend to machinery or equipment used in producing services that do not qualify as products. In IBM Corp. v. Director of Revenue, 491 S.W.3d 535 (Mo. banc 2016), the Missouri Supreme Court held that computer hardware and software used to check customer credit information while completing purchases did not qualify as manufacturing and thus was not exempt under § 144.054. In Charter Communications Entertainment 1, LLC v. Director of Revenue, 667 S.W.3d 84 (Mo. banc 2023), the court held that replacement telecommunications equipment used to transform an input (the caller's voice) into an output with a separate and distinct value from the original was used directly in manufacturing and qualified for the tax exemption under § 144.054.

Documentation

Purchasers claim the § 144.054 exemption by providing sellers with Missouri Form 149 (Sales and Use Tax Exemption Certificate). The form instructs purchasers to check the appropriate box under the "Manufacturing - Section 144.054, RSMo" heading and to complete any additional information as required by the vendor. For purchasers claiming utilities (electrical energy, gas, or water), the form states that the purchaser must record account numbers, meter numbers, or other information as required by the vendor, and that "all purchasers who are claiming an exemption for energy use must provide the amount of energy use which is related to manufacturing in the space provided and also select the method by which this percentage was obtained."

Source: RSMo § 144.054; 12 CSR 10-111.011; 12 CSR 10-111.010; Missouri DOR Form 149

Missouri sellers accepting a properly completed exemption certificate in good faith are relieved of sales and use tax liability with respect to that transaction. RSMo § 32.200 provides that whenever a vendor receives and accepts in good faith from a purchaser a resale or other exemption certificate or other written evidence of exemption authorized by the appropriate state or subdivision taxing authority, the vendor is relieved of liability for sales or use tax. If a seller accepts an exemption certificate in good faith but the certificate is not actually valid, the purchaser—not the seller—is liable for the tax.

Good faith acceptance standard

Missouri regulation 12 CSR 10-107.100 explains the good faith requirement. "Good faith" means honesty of intention and freedom from knowledge of circumstances that ought to put the seller upon inquiry. A seller must exercise care that the property being sold is exempt and that the claimed exemption matches the transaction. Missouri courts have held that a seller does not act in good faith when the seller prepares the exemption certificates two years after the transaction and obtains the buyer's signatures retroactively (Director of Revenue v. Armco, Inc., 787 S.W.2d 722 (Mo. banc 1993)), or when the seller fails to provide exemption certificates to the Department of Revenue at the time of an audit, thus forfeiting the right to claim the sales were exempt. An unsigned exemption certificate is not valid and provides no protection to the seller.

While there is no statutory requirement that a seller accept an exemption certificate contemporaneously with the sale or that the certificate be dated, the fact that an exemption certificate is received after the sale or is not dated may influence a factual finding on whether the seller acted in good faith. If a seller does not act in good faith when accepting an exemption certificate, both the seller and the purchaser can be jointly liable for the amount due.

Form 149 — standard exemption certificate

Missouri's standard exemption certificate is Form 149 (Sales and Use Tax Exemption Certificate). The form includes checkboxes for various exemptions including:

• Resale exemptions: Purchases of tangible personal property for resale, purchases of taxable services for resale (requires Missouri retail license; a resale certificate for taxable services cannot be taken by a seller in good faith unless the purchaser is registered in Missouri), and purchases by manufacturer or wholesaler for wholesale.

• Manufacturing exemptions under RSMo § 144.030: Ingredient or component parts, manufacturing machinery and equipment and parts (used directly in manufacturing), plant expansion machinery and equipment, material recovery processing, and agricultural, biotechnology, and pharmaceutical research and development.

• Manufacturing exemptions under RSMo § 144.054: Research and development related to manufacturing, manufacturing chemicals and materials, machinery and equipment used or consumed in manufacturing, utilities or energy and water used or consumed in manufacturing (must complete purchaser's manufacturing percentage and square footage), and materials, chemicals, machinery, and equipment used or consumed in material recovery processing.

• Other exemptions: Agricultural, common carrier, locomotive fuel, air and water pollution control machinery, commercial motor vehicles or trailers greater than 54,000 pounds, broadband communications infrastructure, electricity production, and other exemptions provided by statute.

The form requires the purchaser to provide identifying information (name, contact person, DBA name, Missouri Tax ID number or SSN/FEIN, address, telephone number, type of business), describe the products or services purchased exempt from tax, seller name and contact information, and sign under penalties of perjury declaring that the information is true, complete, and correct.

Certificate validity period and renewal

Missouri exemption certificates do not have a statutory expiration date. However, Missouri regulations and Department of Revenue guidance recommend that sellers update resale certificates on file every five years. Sellers should update or obtain new certificates when there are changes in the purchaser's business structure, ownership, tax identification number, or business purpose that might affect the validity of the exemption claim. If the purchaser's Missouri retail sales tax license or out-of-state sales tax registration becomes inactive or is revoked, the exemption certificate is no longer valid.

Blanket certificates

Missouri permits the use of blanket exemption certificates. A single certificate on file with a vendor can be used for all qualifying exempt purchases made from that vendor over time. A new certificate does not need to be issued for each individual transaction, unless the nature of the exemption or the purchaser's qualifying status changes.

Streamlined Sales Tax certificate

Missouri is a member of the Streamlined Sales and Use Tax Agreement. Buyers can use the Multistate Tax Commission (MTC) Uniform Sales Tax Certificate when making qualifying sales-tax-exempt purchases from vendors in Missouri, as an alternative to Missouri Form 149.

Burden of proof

Under RSMo § 144.210 and 12 CSR 10-101.500, the taxpayer generally has the burden of proof to establish that a transaction is exempt from sales or use tax. A seller can generally meet this burden by obtaining and maintaining an exemption certificate signed by the purchaser or its agent. If a seller provides a valid exemption certificate obtained in good faith, the burden of proof shifts to the Director of Revenue. Even when a seller does not have a valid exemption certificate, the seller may prove that a transaction is exempt from sales and use tax by other proof admissible under the applicable rules of evidence, but the practical effect is that the seller must produce other documentation to satisfy the burden.

Resale of taxable services — Missouri registration required

For purchases of taxable services for resale, Missouri Form 149 specifically states that purchasers for resale must have a Missouri retail license in order to claim resale of taxable services in Missouri, and that a resale certificate cannot be taken by a seller in good faith unless the purchaser is registered in Missouri. Taxable services subject to this requirement include sales at restaurants, hotels, motels, places of amusement, recreation, entertainment, games and athletic events (when not at arm's length), and sales of telecommunications and utilities (see RSMo § 144.018). This is distinct from purchases of tangible personal property for resale, where an out-of-state purchaser may provide an out-of-state sales tax ID number.

Source: RSMo § 32.200; 12 CSR 10-107.100; Missouri DOR Form 149; 12 CSR 10-101.500