Sales tax on invoices in Missouri

A Missouri contractor is generally the final consumer of the materials that become part of the real property it improves. It pays tax when it buys them and, in the usual case, where the customer takes title only after installation, collects no sales tax from the customer.

Missouri retail sales license

Anyone with a business location in Missouri who sells or leases goods, or provides a taxable service, to a final consumer must collect and remit Missouri sales tax, and needs a Missouri retail sales license before making sales. Selling without one carries a penalty of $500 for the first day and $100 for every day after, up to $10,000. Register through the Department of Revenue’s Online Business Registration or on Form 2643, Missouri Tax Registration Application.

Contractors: title passing decides who’s taxed

Missouri’s contractor rule, 12 CSR 10-112.010, defines a contractor as anyone who agrees to improve, repair, replace, erect or alter real property. In general, a contractor is the final user and consumer of the materials and supplies it uses on a construction contract that become part of the finished improvement, so its suppliers owe tax on those sales, which aren’t for resale.

• Title passes after attachment: the contractor pays tax on its purchase and collects no tax when ownership passes to the customer. In general, title passes after installation is complete, unless the contractor and the purchaser expressly agree otherwise.
• Title passes before attachment: the contractor doesn’t pay tax on its purchase, but must collect tax on the item’s sale price.
• Dual operators: a business that buys materials both to consume as a contractor and to resell as a retailer pays tax on materials identified for a contracting job when it buys them, and pays sales or use tax on the original purchase price of anything it takes from inventory for a contracting job.

Exempt entities, flow-through exemptions and out-of-state jobs

• Project exemption certificates: a contractor, and its subcontractors, building, repairing or remodeling facilities for an exempt entity the rule lists may buy tax-exempt the materials incorporated into or consumed in the project, if the entity furnishes a project exemption certificate. The list includes political subdivisions, the federal government, religious and charitable organizations, public and private schools and higher education institutions, and the Missouri Department of Transportation. No specific form is required, but the certificate must include the information the rule lists.
• “Consumed” means used up on that job, like sandpaper, fuel to run equipment and drill bits, not hand tools, hardhats or bulldozers.
• Flow-through exemptions: some exemptions based on the owner’s use of an item, such as the manufacturing machinery exemption, may flow through to the contractor selling and installing it.
• Jobs outside Missouri: property a contractor buys in Missouri for use on an out-of-state construction job is taxed on the purchase, unless the contract is with an entity authorized to issue an exemption certificate under that other state’s law.

Services: taxed only when a statute says so

Missouri’s rule 12 CSR 10-103.600 says the sale of tangible personal property is taxable unless a specific statute exempts it, while a service isn’t taxable unless a specific statute authorizes taxing it. When a sale includes property and a nontaxable service sold separately, only the property is taxed.

• Repair labor: under this rule, if the charge for a repair or personal service is stated separately from the property used to do it, the service charge isn’t taxable. If it isn’t separately stated, the whole price is taxable, unless the property is less than 10% of the total sale price; then none of it is taxable, and the seller pays tax on its purchase of the property. Repairs to real property are contractor work and follow the title rule above instead.
• Fabrication labor is taxable as part of the sale of the fabricated property, even when it’s separately stated on the invoice.
• Sod (12 CSR 10-103.876): an installer that buys sod to improve real property as a contractor or subcontractor pays tax on the sod. An installer that buys sod for resale and sells it to consumers, not as a contractor, collects tax on the sod, and its separately stated installation labor is taxable too if the installation is part of the sale of the sod.

Tax line on a Missouri invoice

• Who owes the tax: under RSMo 144.080 the seller collects the tax from the purchaser as far as possible, but not being able to collect it doesn’t relieve the seller of paying it.
• Absorbing the tax: a seller may advertise or tell a customer that it will assume or absorb all or part of the tax only if the amount it absorbs is stated on the invoice or receipt. Violating the section is a misdemeanor.
• The total rate: a seller that sells more than $500,000 of goods a year and gives the purchaser a sales receipt or invoice must clearly state on it the total rate of all state and local sales tax on the sale.
• Contract work: when title passes after installation, you’ve paid the tax on your materials and collect none, so there’s no tax line for them.

The Department’s sales tax filing FAQs tie your return to your invoices: collected sales tax isn’t part of your gross receipts, but you may back it out of them only if it was separately stated to your customers.

Local sales tax: the seller’s location

Missouri cities, counties and certain districts, such as fire districts, may add local sales taxes, and a seller collects the combined state and local rate at the seller’s location. Local use tax depends on the combined rate at the Missouri location where the property is stored, used or consumed. Local rate changes take effect on the first day of a calendar quarter, and the Department’s rate portal shows the rates at addresses throughout Missouri.