SALT Report 2245 – The Missouri Department of Revenue issued a letter ruling regarding the taxability of export sales to buyers in foreign countries. The Taxpayer is a Missouri-based business that purchases medical supplies manufactured by American companies and exports them to medical supply companies in other countries. One hundred percent of the Taxpayer’s sales are export sales made to these foreign companies.
On occasion, some of the products may be held in Missouri while waiting to be shipped. However, this storage is temporary and only until the products are exported. Once the products reach the other country’s port of entry title passes to the buyer. The taxpayer requested guidance regarding whether its export sales are subject to sales or use tax.
In its ruling, the Department referred to Missouri Code of Regulations 12 CSR 10-113.200(1) which provides that, “a sale of tangible personal property is subject to sales tax if title to, or ownership of, the property transfers in Missouri…” Based on this regulation, the Department determined that because the Taxpayer purchases medical equipment to resell to foreign buyers, and title passes at the other country’s port of entry, these sales are not subject to tax because no retail sales occur in Missouri.
Additionally, section 144.610.1, RSMo, states that, “a tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property…” and section 144.605(10), RSMo, defines storage as “keeping or retention in this state of tangible personal property purchased from a vendor, except property for sale or property that is temporarily kept or retained in this state for subsequent use outside the state.”
Therefore, the medical equipment that is physically located in Missouri during the shipping process is not subject to use tax because it is held in the state for resale.
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