Missouri – Taxability of Diesel Fuel and Other Products Used in Equipment and Manufacturing

SALT Report 2863 – The Missouri Department of Revenue issued a letter ruling regarding whether a Taxpayer who operates a quarry and manufacturing facility can make purchases of diesel fuel, lubricants, and coolants for use in its front-end loaders, trucks, locomotives, and excavators exempt from sales and use taxes under Section 144.030.2, RSMo or Section 144.054.2, RSMo.

In its response, the Department stated that the Taxpayer’s purchases of diesel fuel, lubricants, and coolants are not exempt from state and local sales or use tax under Section 144.030.2, RSMo because the exemption only applies to machinery, equipment, or parts.

Additionally, even if considered a “supply” the lubricants would only be exempt under Sections 144.030.2(5) and (6), RSMo if they were “solely required for the installation or construction of” machinery, equipment, or parts.  However, because the Taxpayer does not use the diesel fuel, coolants, or lubricants in that manner, the Taxpayer may not purchase them exempt under Section 144.030.2(5) and (6), RSMo.

Additionally, the Department stated that the exemption in Section 144.054.2, RSMo, applies to “electrical energy and gas, whether natural, artificial, or propane, water, coal, and energy sources, chemicals, machinery, equipment, and materials used or consumed in the manufacturing, processing, compounding, mining, or producing of any product.”

Therefore, because the diesel fuel, lubricants, and coolants purchased by the Taxpayer are all used and consumed in mining and manufacturing operations they qualify for the exemption from state sales tax and state and local use tax, but not local sales tax under Section 144.054.2, RSMo.

For Further Information

Missouri Department of Revenue – Letter Ruling # LR 7280