Taxation Law in Missouri

John P. Barrie, Esquire

Sales Tax - Airline not entitled to sales tax refund on sales of fuel to third party airlines because not established that taxpayer retained title or control over the fuel. American Airlines, Inc. v. Director of Revenue, No. 92314 (Mo. banc, January 8, 2013), Fischer, J.

Taxpayer sought a refund of sales tax collected on its transfers of aviation jet fuel to third party airlines in connection with air services agreements on the basis that the sales did not constitute “sales at retail.” The taxpayer claimed that neither title or ownership of the fuel was transferred because the taxpayer restricted use of the purchased fuel (fuel could only be used for the contracted flights) so as to exercise dominion and control over it. The director denied the refund claim and administrative hearing commission upheld the denial of same.

Held: Affirmed.
The Court found that the restrictions imposed on the use of the fuel were not sufficient, based on the record, to find that a transfer of title or ownership did not occur.

Sales Tax - Residential cooperative which purchased utilities for all of its units and common areas through separate meters entitled to domestic use sales tax exemption on all of the purchases. 801 Skinker Boulevard Corporation v. Director of Revenue, No. 92401 (Mo. banc, January 8, 2013), Fischer, J.

Taxpayer paid sales tax, based on commercial rates, on its purchases of electricity and natural gas used for heating, cooling, lighting, hot water and other services in the residential units and common areas of the cooperative and thereafter sought refund claims on basis that the purchases were for domestic use and therefore exempt from tax under § 144.030.2(23), RSMo. The refund claims were denied by the director and the administrative hearing commission.

Held: Reversed.
The Court held that regardless of whether the purchases were through a single master meter or through separate meters, the use was domestic and therefore exempt from tax.

Sales/Use Tax Exemptions – Taxpayer’s chemical plant did not satisfy definition of a “material recovery processing plant” and therefore the taxpayer was not entitled to exemptions relating to its purchases of chemicals, coal, natural gas, and electricity utilized in its manufacturing processes. BASF Corporation v. Director of Revenue, No. 92446 (Mo. banc, December 18, 2012), per curiam.

Taxpayer operated a chemical plant which it claimed qualified as a “material recovery processing plant” and that therefore its purchases related to operation of same where exempt from sales and use tax. The director denied the exemption and the administrative hearing commission similarly determined that the taxpayer’s purchases of chemical, coal, natural gas, and electricity were subject to taxation.

Held: Affirmed.
The Supreme Court, relying  on the statutory definition in §§ 144.030.2(4) and 144.030.2(12), RSMo, upheld the commission’s finding that the taxpayer’s processing plant was not “a facility which converts recovered materials into a new product, or a different form which is used in producing a new product,” and therefore the facility did not qualify as a “material recovery processing plant.” The court found that the taxpayer’s processes did not remove “recovered materials” as defined in § 260.200(31), RSMo.

Income Tax - Intercompany dividends excluded from sales factor denominator because inclusion would result in unfair apportionment. Embarq Corporation v. Director of Revenue, No. 10-1485RI (Mo. AHC, October 17, 2012), Dandamudi, C.

Taxpayer was a holding company engaged in providing telecommunication services that filed on a consolidated basis in Missouri. Intercompany dividends were excluded for federal tax purposes but taxpayer included same in its sales factor.  On audit, the director eliminated the dividends from the taxpayer’s sale factor.

Held: Director’s determination upheld.
The administrative hearing commission, while finding that the intercompany dividends could normally be included in the sales factor as “intercompany transactions,” nevertheless held that the inclusion of same would prevent fair apportionment because, based on the facts presented, the dividends derived from Missouri sources could not be distinguished from dividends derived elsewhere and therefore the director properly excluded all of the dividends from the sales factor denominator.