Taxation Law in Missouri

John P. Barrie, Esquire

Use Tax - Taxpayer not subject to use tax on either its purchase of wastewater treatment chemicals or its purchase of laundering supplies. AAA Laundry & Linen Supply Co. v. Director of Revenue, No. 11-2210RS (Mo. AHC, April 18, 2013), Dandamudi, C.

Taxpayer operated a commercial laundry business and rents items of tangible personal property, including uniforms, tablecloths, towels, aprons, sheets, etc., to its customers.  It did not pay use tax on its purchase of the rental items in question, but collected sales tax on its rental receipts.  Taxpayer purchased wastewater treatment chemicals for its wastewater treatment equipment and purchased laundering supplies for use in the laundering process to cleanse and sanitize the soiled or used items. The director determined that use tax should have been paid on these purchases.

: Director’s determination not upheld. The commission held that (i) waste water treatment chemicals are an integral part of the process of abating and preventing water pollution that they are essentially components of the pollution control machinery which is exempt under  §   144.030.2(15), RSMo; and (ii) laundering supplies are exempt under § 144.054, RSMo., as part of processing a product. The commission also held that the laundering supplies were not exempt under § 144.020.1(8), RSMo., on the basis that these supplies were not deemed to have been rented to the taxpayer's customers.

Income Tax - Federal net operating loss not permitted to offset income that was taxable under Missouri law but not under federal law. Eilian v. Director of Revenue, No. 93075 (Mo. banc June 11, 2013), Wilson, J.

Taxpayers had a net operating loss for federal income tax purposes which they claimed against income that was taxable for Missouri law purposes but not under federal law. The director disallowed the offset and the administrative hearing commission overturned the director’s determination.

Held: Reversed and remanded
. The Supreme Court determined that the net operating loss analysis set forth in Brown Group, Inc. v. Administrative Hearing Commissioner, 649 S.W. 2d 874 (Mo. banc 1983), was still good law, and while Brown addressed the issue in the corporate taxpayer context, the analysis was similarly applicable to individual taxpayers, and therefore based on the holding in Brown concluded that the taxpayers were not entitled to the offset.