SALT Report 1585 – The Missouri Department of Revenue issued a Letter Ruling regarding the taxability of a distribution company’s purchases of raw materials from an out-of-state supplier that are shipped to, and stored in, a third-party warehouse and later resold to the distribution company’s customers.
The Department used two criteria to determine the Taxpayer’s sales and use tax liability:
- Was the transaction a sale at retail
- Was the Taxpayer involved in a taxable use of the property
Section 144.010.1(10), RSMo, defines a sale at retail as, “Any transfer…of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property, for a valuable consideration.” Since the Taxpayer purchases the property from its supplier so that it can resell the materials to its customers, it is not considered a sale at retail.
Section 144.605(13), RSMo, defines use as, “The exercise of any right or power over tangible personal property incident to the ownership or control of that property, except that it does not include the temporary storage of property in this state for subsequent use outside the state, or the sale of the property in the regular course of business.” Since the taxpayer does nothing more than provide a warehouse for temporary storage and reshipping, the taxpayer is not “using” the parts in Missouri.
Based on the above facts, the Taxpayer is not subject to Missouri sales or use tax when it purchases tangible personal property from its supplier outside Missouri for resale to its customers in Missouri. However, the Taxpayer should provide a resale exemption certificate to its supplier for these purchases.
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