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Taxation Law in Missouri

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