Missouri – Taxability of Back Office Support Services

SALT Report 2718 – The Missouri Department of Revenue issued a letter ruling regarding the taxability of back office management services provided by a Taxpayer to its franchisees. The Taxpayer in this case, operates a chain of restaurants with franchise locations throughout Missouri. The support services that are provided to the franchisees are accessed through a website owned by the Taxpayer.

The support services include: employee scheduling, inventory cost management, supply ordering, sales tracking, and a prep list. The Taxpayer requested guidance as to whether the computer-accessed services are subject to tax.

In its decision, the Department referred to regulation 144.020.1, RSMo which states that, “a tax is levied and imposed upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state.”

Based on that regulation the Department determined that the support services offered by Taxpayer are not taxable services because:

  • The Taxpayer provides these services through a website that the franchisee only has access to,
  • The franchisees data is stored on the Taxpayer’s computer network, and
  • The server that stores the data is not located in Missouri

For those reasons, the Taxpayer is not required to collect and remit sales tax on the back office support services it provides to its franchisees.

For Further Information

Missouri Department of Revenue – Letter Ruling # LR 7267