Taxation Law in Missouri
Editor:John P. Barrie, Esquire
Sales and Use Tax - Purchases of raw granite slabs used in
constructing installed countertops exempt from tax - treated as
materials used or consumed in the manufacture of a product. E & B Granite, Inc. v. Director of Revenue, No. 91010 (Mo. banc, February 8, 2011), Price, C.J.
The taxpayer, in the business of manufacturing and installing granite
countertops, purchased raw granite slabs. Sales and use tax with
respect to the purchases were paid under protest on the basis that the
purchases were exempt under Section 144.054.2, RSMo (purchases of
materials used to manufacture a product). The director denied the
exemption. On appeal, the administrative hearing commission upheld the
exemption and granted the refunds.
Held: Decision of the administrative hearing commission is
affirmed. Relying on dictionary definitions, the court held that the
granite slabs constituted "materials" used in the manufacturing of a
"product" (the countertops) and therefore the purchases were exempt as
claimed by the taxpayer. The fact that title to the tabletops in
issue did not pass until the countertops were installed so that the
sales of the countertops were not the sales of tangible personal
property did not preclude application of the exemption. The term
"product" was broader than "tangible personal property" and therefore
included the installed countertops.
Use Tax - Taxpayer not liable for use tax on purchases of parts and items used in contracts with federal government. Custom Hardware Engineering & Consulting, Inc. v. Director of Revenue, No. 08-0154RS (Mo. AHC, December 2, 2010), Winn, C.
Taxpayer performed computer maintenance and repair on sophisticated
computers pursuant to contracts with, among others, the federal
government. Pursuant to the federal contracts, the government took
title to the parts and items used in these contracts. On audit, the
Director of Revenue determined that use tax should have been paid on
the parts used pursuant to the federal contracts on the basis that
under the then existing case law, the purchases were not purchases for
resale since the resale was a nontaxable sale (see ICC Management, Inc. v. Director of Revenue, 290 S.W. 3d 699 (Mo. banc 2009); negated by new Section 144.018, RSMo, 2010).
Held: Taxpayer not liable for use tax on transfers of parts
and items used in contracts with the federal government. The
Commission found that under the applicable Federal Acquisition
Regulations, title passed directly to the federal government and
therefore no use tax was due on the purchases - title vesting in the
government immediately upon purchase (unlike purchases pursuant to
non-federal government contracts which were subject to use tax).
The Missouri Bar Courts Bulletin, 11-Feb