rules of department of revenue - missouri …...robin carnahan (6/30/05) code of state regulations 3...

CODE OF STATE REGULATIONS 1JOHN R. ASHCROFT (3/31/19)Secretary of State

Rules ofDepartment of RevenueDivision 10—Director of Revenue

Chapter 110—Sales/Use Tax—Exemptions

Title Page

12 CSR 10-110.013 Drugs and Medical Equipment ............................................................3

12 CSR 10-110.016 Refunds and Credits (Moved to 12 CSR 10-102.016) .................................5

12 CSR 10-110.200 Ingredient or Component Part Exemption, as Definedin Section 144.030, RSMo................................................................5

12 CSR 10-110.201 Materials and Other Goods Used or Consumed in Manufacturing, as Defined in Section 144.054, RSMo..................................................6

12 CSR 10-110.210 Television and Radio Broadcasters........................................................6

12 CSR 10-110.220 Hotels and Motels ...........................................................................6

12 CSR 10-110.300 Common Carriers............................................................................7

12 CSR 10-110.400 Newspapers and Other Publications ......................................................9

12 CSR 10-110.600 Electrical Energy, as Defined in Section 144.030, RSMo ..........................10

12 CSR 10-110.601 Electrical, Other Energy and Water as Defined in Section 144.054, RSMo............................................................................12

12 CSR 10-110.621 Application of Sales Tax Exemption as Defined in Section144.054, RSMo............................................................................13

12 CSR 10-110.858 Purchases by State Senators or Representatives.......................................14

12 CSR 10-110.900 Farm Machinery and Equipment Related Exemptions ...............................14

12 CSR 10-110.910 Livestock.....................................................................................17

12 CSR 10-110.920 Sales of Grains, Seed, Pesticides, Herbicides and Fertilizers.......................18

12 CSR 10-110.950 Letters of Exemption Issued by the Department of Revenue .......................18

12 CSR 10-110.955 Sales and Purchases—Exempt Organizations ..........................................19

12 CSR 10-110.990 Tax—Sales of Food.........................................................................21

CODE OF STATE REGULATIONS 3ROBIN CARNAHAN (6/30/05)Secretary of State

Chapter 110—Sales/Use Tax—Exemptions 12 CSR 10-110

Title 12—DEPARTMENT OFREVENUE

Division 10—Director of RevenueChapter 110—Sales/Use Tax—Exemptions

12 CSR 10-110.013 Drugs and MedicalEquipment

PURPOSE: Section 144.030.2(18), RSMo,provides an exemption for prescription drugs,orthopedic and prosthetic devices, numerousdental items, hearing aids, hearing aid sup-plies and certain sales of over-the-counterdrugs. This rule explains the sales tax law asit applies to these exemptions.

(1) In general, sales of prescription drugs,orthopedic and prosthetic devices and certainqualifying health-related equipment, and cer-tain sales of over-the-counter drugs, areexempt from Missouri sales tax.

(2) Definition of Terms.(A) Orthopedic device—a rigid or semi-

rigid leg, arm, back or neck brace and cast-ing materials which are directly used for thepurpose of supporting a weak or deformedbody member or restricting or eliminatingmotion in a diseased or injured part of thebody.

(B) Over-the-counter drug—a drug productwhich may be purchased without a physi-cian’s prescription.

(C) Prescription drug—a drug dispensedby a licensed pharmacist only upon a lawfulprescription from a licensed practitioner.

(D) Prosthetic device—a device thatreplaces all or part of the function of a per-manently inoperative or malfunctioning inter-nal body organ and is medically required.

(3) Basic Application of Tax.(A) Sales of prescription drugs, insulin,

medical grade oxygen, drug samples andmaterials used to manufacture samples,which may be dispensed by a licensed practi-tioner are exempt from tax. Sales of over-the-counter drugs when sold to an individual witha disability or to the individual’s agent areexempt from tax. When selling over-the-counter drugs to an individual with disability,the retailer should obtain a purchaser’ssigned statement of disability. The retailershould retain these statements for three (3)years. The statement should include the pur-chaser’s name, type of purchase and amountof purchase, and be signed by the purchaseror the purchaser’s agent. The retailer shouldrequest a form of identification, such as driv-er’s license, credit card, etc. to verify theidentity of the purchaser. Sales of prostheticdevices as defined on January 1, 1980, by the

Federal Medicare Program under Title XVIIIof the Social Security Act of 1965 are exemptfrom tax.

(B) Sales of orthopedic devices as definedby the Federal Medicare Program under TitleXVIII of the Social Security Act of 1965 areexempt from tax.

(C) Also exempt from sales tax are itemsspecified in section 1862(A)(12) of the SocialSecurity Act of 1965. Exempt items includedin this class are those used in connection withthe treatment, removal or replacement ofteeth or structures directly supporting teeth.Dental equipment or supplies are not exempt.The exempt items include:

1. Dentures2. Inlays3. Bridge work4. Fillings5. Crowns6. Braces, or7. Artificial dentistry and dental recon-

structions, which are made, manufactured orfabricated from molds or impressions madeby dentists of the mouths of their particularpatients and sold to dentists for insertion inthe patient’s mouth as the direct support of,substitution for, or part of the patient’s teeth.

(D) Sales of other specific health-relatedequipment and accessories are exempt fromsales tax.

1.These specific items are—A. Ambulatory aidesB. Braille writersC. Electronic Braille equipmentD. Home respiratory equipment and

accessoriesE. Hospital beds and accessoriesF. Stairway liftsG. Wheelchairs, manual and powered

2. If purchased by or on behalf of a per-son with one or more physical or mental dis-abilities to enable them to function moreindependently, the following items are alsoexempt:

A. Electronic print enlargers andmagnifiers

B. Electronic alternative and augmen-tative communication devices

C. Items used solely to modify motorvehicles to permit the use of such motor vehi-cles by individuals with disabilities

D. Reading machinesE. Scooters

(4) Examples.(A) A retailer sells an over-the-counter

drug to an individual claiming a disability.The sale is exempt if the retailer obtains fromthe purchaser or their agent a statement sim-ilar to the following:

Purchases of over-the-counter drugs by indi-viduals with disabilities are exempt fromsales tax. IT IS UNLAWFUL TO FRAUDU-LENTLY CLAIM AN EXEMPTION. ICERTIFY THAT I HAVE A DISABILITYAND AM ENTITLED TO CLAIM THISEXEMPTION OR I AM CLAIMING THISEXEMPTION ON BEHALF OF A PERSONOR PERSONS WITH A DISABILITY.

Type of Purchase ______________________Amount _____________________________Type of ID ___________________________ID Number __________________________Name (print)__________________________Signature_____________________________

(B) Examples of exempt prosthetic devicesinclude:

1. Breast prosthetics, including surgicalbrassieres for postmastectomy patients

2. Cardiac pacemakers3. Colostomy and other ostomy bags and

the necessary equipment required for attach-ment

4. Electronic speech aids if the patienthas had a laryngectomy or his/her larynx ispermanently inoperative

5. Hearing aids and hearing aid supplies6. Hemodialysis equipment7. Maxillofacial devices and devices

which replace all or part of the ear or nose8. Prosthetic lenses which replace the

lens of an eye9. Urinary collection systems, including

Foley catheters, when replacing bladder func-tion in cases of permanent urinary inconti-nence

10. Eyeglasses, contact lenses, bedpansand incontinent apparel are not consideredprosthetic devices and are subject to sales tax

(C) Examples of exempt orthopedicdevices include:

1. Artificial legs, arms and eyes includ-ing terminal devices such as artificial hands

2. Hoods and space shoes which replacepart of a foot

3. Orthotics4. Stump stockings and harnesses when

they are essential to the effective use of anartificial limb

5. Trusses6. Elastic braces, elastic stockings, arm

slings, elastic wraps and garter belts, are notconsidered orthopedic devices and are subjectto sales tax

(D) Examples of exempt orthopedic andprosthetic devices used in dentistry include:

1. Restorative materials.A. AcrylicsB. Aluminum crownsC. Amalgam

D. Bases and linersE. CementsF. Chrome steel crownsG. Copper bandsH. Crown formsI. Dentin enamel adhesivesJ. Denture anchors K. Denture repair materials L. Denture teeth M. Gold N. Mercury O. Pins P. Pit and fissure sealants Q. Porcelains R. PostsS. Temporary filling materialsT. Zinc oxide (Eugenol)

2. Prosthetic devices and supportivematerials.

A. Acrylics B. Bonding materialsC. Chrome alloys D. Composed materialsE. Denture anchors F. Denture repair materialsG. Denture teethH. Implant materials I. Metal alloys

3. Orthodontic devices and materials.A. Arch bar splitsB. Bone grafting materialsC. CresitineD. Endodontic materialsE. Face bow head gearF. Gor-tex grafting materialsG. Gutta percha pointsH. Muscosal grafts (natural and arti-

ficial)I. Orthodontic appliancesJ. Orthodontic bracketsK. Orthodontic elasticsL. Orthodontic expansion screwM. Orthodontic resinsN. Orthodontic separatorsO. Orthodontic waxesP. Orthodontic wiresQ. Root canal sealantsR. Silver pointsS. Surgical wires

(E) Sales of other specific health-relatedequipment and accessories are exempt fromsales tax.

1. These specific items are—A. Ambulatory aidesB. Braille writersC. Electronic Braille equipmentD. Hospital beds and accessoriesE. Home respiratory equipment and

accessoriesF. Stairway liftsG. Wheelchairs, manual and powered

2. If purchased by or on behalf of a per-son with one (1) or more physical or mentaldisabilities to enable them to function moreindependently, the following items are alsoexempt:

A. Electronic alternative and augmen-tative communication devices

B. Electronic print enlargers and mag-nifiers

C. Items used solely to modify motorvehicles to permit the use of such motor vehi-cles by individuals with disabilities

D. Reading machinesE. Scooters

AUTHORITY: section 144.270, RSMo 1994.*Original rule filed Sept. 29, 1999, effectiveApril 30, 2000.

*Original authority: 144.270, RSMo 1939, amended 1941,1943, 1945, 1947, 1955, 1961.

EBI Medical Systems, Inc. v. Director ofRevenue (AHC 1997). The taxpayer manu-factured and sold osteogenic (bone) stimula-tors. The devices provided small amounts ofelectrical current that stimulate the bone topromote growth and healing, and were avail-able by prescription only. The taxpayerargued the stimulators were exempt from tax-ation under section 144.030.2(18), RSMo,using three alternative theories: (1) as a pros-thetic device, (2) as an orthopedic device,and (3) as a prescription drug. The Commis-sion found the stimulator was an orthopedicdevice, but not a prosthetic device nor a pre-scription drug. The stimulators qualified asorthopedic devices under Regulation 12 CSR10-3.852(3) that defines orthopedic devices toinclude orthotics. The Commission definedorthotics as “an orthopedic appliance orapparatus used to support, align, prevent, orcorrect deformities or to improve the functionof movable parts of the body.” The Commis-sion concluded the stimulator promotes bonegrowth to correct deformities, and therefore,was an orthotic and an orthopedic device.The Social Security Act of 1965, 42 U.S.C.Section 1395x(s)(8), defines prostheticdevices as devices “which replace all or partof an internal body organ.” Since the stimu-lators do not “replace all or part of the func-tion of a permanently inoperative or malfunc-tioning internal body organ,” the stimulatorswere not prosthetic devices. The federal defi-nition of “Prescription drug,” set forth in 21U.S.C.A. Section 321(g)(1), specificallyexcludes devices or their component parts oraccessories. The Commission found the stim-ulator was a device, and therefore, by defini-tion, was not a prescription drug.

Red Line Medical Supply, Inc. v. Director ofRevenue (AHC 1995). This case involved ataxpayer engaged in the business of sellingmedical supplies at retail. The taxpayer stat-ed its belief that enteral nutrients were “pros-thetic devices” under Title XVIII of the SocialSecurity Act of 1965 and, therefore, its salesof the nutrients were exempt from Missourisales/use tax. The Commission found that thefederal statutes were interpreted in part bythe Carriers Manual and, therefore, could beutilized in determining whether enteral nutri-ents were prosthetic devices. It further found,however, that the manual did not define enter-al nutrients as prosthetic devices. The Com-mission also found that under Missouri caselaw, Medic House, Inc. v. Director of Rev-enue, 799 S.W.2d 81 (Mo. banc 1990), inorder for enteral nutrients to qualify as “pros-thetic devices,” they must “(1) ‘replace all orpart of an internal body organ’ and (2) be‘medically required.’” Applying the facts tothe case, the Commission found that enteralnutrients were not prosthetic devices and,therefore, taxpayer should have collected andremitted Missouri sales taxes on its sales ofenteral nutrients.

Four Rivers Home Health Care, Inc. v.Director of Revenue (AHC 1992). Taxpayersold oxygen for medicinal use and also solddurable medical equipment. Taxpayer did notcollect or remit sales tax on either oxygen ordurable medical equipment because it consid-ered both to be exempt pursuant to144.030.2(18), RSMo. Taxpayer sold oxygenonly upon a physician’s prescription; but tax-payer did not have a licensed pharmacist onthe premises. Taxpayer also sold wheelchairs,motorized three-wheel vehicles, crutches,walkers, canes, commode chairs, pressurepads and cushions, seat lift chairs andpatient lifts, arm slings, flow meters, oxygenregulators and intermittent partial pressurebreathing apparatus. The Commission foundthat oxygen was a drug. However, it is notdesignated as a prescription drug. The Mis-souri Supreme Court has ruled that the salestax exemption does not apply to this oxygensince persons other than a licensed pharma-cist dispense it. Medic House, Inc. v. Direc-tor of Revenue, 799 S.W.2d 81 (Mo. banc1990). The Commission found that a pros-thetic device physically replaces a missingorgan. A device that accommodates theabsence of an organ or supplements theimpaired function of an organ is not a pros-thetic device. The listed durable medicalequipment did not replace a missing organand were not prosthetic devices. The Com-mission also found that orthopedic devicesare defined in 42 U.S.C.1395x(s)(9). Leg,

4 CODE OF STATE REGULATIONS (6/30/05) ROBIN CARNAHAN

Secretary of State

12 CSR 10-110—DEPARTMENT OF REVENUE Division 10—Director of Revenue



arm, back, and neck braces, and artificiallegs, arms, and eyes, including replacements,are exempt if required by a change in thepatient’s physical condition. The durablemedical equipment items sold by taxpayerwere not artificial limbs or braces. Theseitems are not exempt under section144.030.2(18), RSMo.

12 CSR 10-110.016 Refunds and Credits(Moved to 12 CSR 10-102.016)

12 CSR 10-110.200 Ingredient or Com-ponent Part Exemption, as Defined in Sec-tion 144.030, RSMo

PURPOSE: Section 144.030.2(2), RSMoexempts from taxation certain materials,goods, machinery and parts. This ruleexplains the requirements for this exemption.

(1) In general, purchases of ingredients orcomponent parts are exempt from tax if theyblend with the final product and are intendedto and do become a part of the finished prod-uct. In addition, materials that are consumedin the manufacturing, processing, compound-ing, mining, producing or fabricating ofproducts intended to be sold ultimately forfinal use or consumption are exempt fromtax.

(2) Definition of Terms.(A) Component part—a constituent ele-

ment of a manufactured or fabricated prod-uct.

(B) Ingredient—an element in a mixture orcompound.

(C) Interacting—means that the materialsand component parts or ingredients act uponeach other in manufacturing a steel product.

(D) Reacting—means that the materialscause a chemical change in the componentparts or ingredients in manufacturing a steelproduct.

(E) Steel product—the product madeentirely of steel resulting from:

1. Smelting and refining molten pigiron, scrap steel or other metals; or

2. Rolling, drawing, casting or alloyingsteel.

(3) Basic Application of Exemption.(A) Materials, manufactured goods,

machinery, and parts that become a compo-nent part or ingredient of new personal prop-erty to be sold ultimately for final use or con-sumption are not subject to tax. Purchases ofingredients or component parts are exemptfrom tax if they are intended to and dobecome a part of the finished product. The

exemption does not apply to materials thatare totally consumed and are not intended toand do not become a part of the final prod-uct. In order to qualify for this exemption,the material in question must be intended toremain in the finished product in at least traceamounts for a specific purpose.

(B) Materials, including without limita-tion, slagging materials and firebrick, whichare consumed in the manufacturing processby blending, reacting or interacting with orby becoming, in whole or in part, componentparts or ingredients of steel products to besold ultimately for final use or consumptionare exempt from tax.

(C) If any portion of purchased materialqualifies as an exempt ingredient or compo-nent part, the entire purchase is exempt fromtax. The material is exempt even if a signifi-cant portion is consumed in the manufactur-ing process.

(D) Materials purchased to be used as aningredient or component part to repair exist-ing property does not qualify for theseexemptions because the property producedfrom the repair work does not constitute“new personal property.”

(4) Examples.(A) A toy manufacturer purchases wood,

glue, and paint to use in the manufacturing ofwooden rocking horses. The purchases ofwood, glue and paint are exempt from tax.

(B) A restaurant purchases apple wood touse in the smoking of foods. The restaurantburns the wood in a closed chamber, called asmoker, in which it places the food. Theburning wood releases compounds, and smallbut measurable quantities of the compoundsenter and permeate the food. Because a partof the wood, in the form of smoke particles,blends with and remains as part of the fin-ished product, the apple wood may be pur-chased tax exempt as an ingredient or com-ponent part.

(C) An automobile manufacturer purchas-es wax to wax all automobiles as they leavethe manufacturing plant. The wax qualifies asa component part because it is intended toremain with the product.

(D) A steel mill purchases firebrick andvarious gases to be used in the production ofsteel. These purchases are exempt.

(E) A steel fabricator purchases weldingrods for use in fabricating a product out ofsteel plates. The welding rods are exemptbecause they become a component part ofnew personal property.

AUTHORITY: section 144.270, RSMo 2000.*Original rule filed Aug. 30, 2000, effectiveMarch 30, 2001. Emergency amendment filed

Aug. 14, 2007, effective Aug. 28, 2007,expired Feb. 23, 2008. Amended: Filed Aug.14, 2007, effective Feb. 29, 2008.


The Doe Run Resource Company, d/b/a/Doe Run Company Smelting Division, et al.,S.W.2d (Mo. banc 1998). The issue was thetaxability of coke used in the processing oflead. The Missouri Supreme Court found thecase to be analogous to the facts in Sipco,Inc v. Director of Revenue, 875 S.W.2d 539(Mo. banc 1994). In that case the court heldnatural gas used in a singer to remove hairfrom hog carcasses before butchering did notqualify as an ingredient or component part,because no part of the natural gas used inSipco’s singer remained as an essential ornecessary element of a finished pork product.The Court in Sipco concluded that no part ofthe natural gas used in Sipco’s singerremained as an essential or necessary ele-ment of the finished pork product. According-ly, the purchase was not tax exempt.

Spacewalker, Inc., v. Director of Revenue(AHC 1997). The purchase of shielding gasused in welding was held taxable. The pur-pose of the shielding gas was to shield thepuddle (molten metal) from the atmosphereand not to become mixed with the metal. TheAHC referenced the Al-Tom decision, whichfound that if any part of a material is intend-ed and does remain as an essential or neces-sary element of the finished product, theentire purchase is exempt. Because theshielding gases were present in the finishedproduct, incidentally or accidentally, theywere not exempt as component parts. TheMissouri Court of Appeals affirmed the deci-sion by the AHC.

Concord Publishing House, Inc. d/b/a CapeMississippi Development, Inc., d/b/a South-east Missourian v. Director of Revenue(AHC 1995). The taxpayer, a newspaper pub-lisher and printer, claimed an ingredient orcomponent part exemption on its toner. TheAHC held that the toner and toner cartridgesdid not qualify for exemption because thetoner became a component part of the layoutfrom which the photonegative was developed.The toner was not physically present in thenewspaper sold to the public.

Robertson’s Creative Photography, (AHC1994). The Commission held that the taxpay-er as a commercial photographer was subjectto sales tax on its purchases of film. The filmwas not a component part or ingredientbecause it did not remain as an essential ornecessary element of the finished product.

12 CSR 10-110.201 Materials and OtherGoods Used or Consumed in Manufactur-ing, as Defined in Section 144.054, RSMo

PURPOSE: Section 144.054.2, RSMo,exempts from state tax and local use tax, butnot local sales tax certain materials, goods,machinery and parts. This rule explains therequirements for this exemption.

(1) In general, purchases of electricity, gas(natural, artificial, or propane), water, coal,and energy sources, chemicals, machinery,equipment and materials that are used or con-sumed in the manufacturing, processing,compounding, mining or producing a productare exempt from state tax and local use tax,but not local sales tax. Local sales tax appliesto these transactions.

(2) Basic Application of Exemption.(A) Electricity, gas (natural, artificial, or

propane), water, coal, and energy sources,chemicals, machinery, equipment and materi-als that are used or consumed in manufactur-ing, processing, compounding, mining orproducing a product are exempt from statetax and local use tax, but not local sales tax.It is not necessary for the item purchased tobe used directly in manufacturing, process-ing, compounding, mining or producing aproduct in order to qualify for the exemption.

(3) Examples.(A) A toy manufacturer purchases sandpa-

per to use in the manufacturing of woodenrocking horses. The purchase of sandpaper isexempt from state tax and local use tax, butnot local sales tax because it is a material thatis consumed in producing a product.

(B) An automobile manufacturer purchasessoap to wash all automobiles as they leave themanufacturing plant. The soap qualifies as amaterial used or consumed in manufacturingand is exempt from state tax and local usetax, but not local sales tax.

(C) A steel fabricator purchases gases foruse in fabricating a product out of steelplates. The gases that are consumed in thefabrication process are exempt from state taxand local use tax, but not local sales tax,because they are consumed in producing aproduct.

(D) A foundry creates a steel product bycasting molten steel. After casting, a cleaningsolution is poured over the product to removeimpurities from the surface. The solution isused or consumed in the producing of a prod-uct and is exempt from state tax and local usetax, but not local sales tax.

(E) A metal container manufacturer pur-chases coolants, hydraulic fluids, greases andoils for use in machines that are used to shape

the product. Catalysts and acids are also pur-chased to interact with and clean the productbeing manufactured. The coolants, hydraulicfluids, greases, oils, catalysts and acids areexempt from state tax and local use tax, butnot local sales tax.

AUTHORITY: section 144.270, RSMo 2000.*Emergency rule filed Aug. 14, 2007, effectiveAug. 28, 2007, expired Feb. 23, 2008. Origi-nal rule filed Aug. 14, 2007, effective March30, 2008.


12 CSR 10-110.210 Television and RadioBroadcasters

PURPOSE: This rule explains the televisionand radio broadcasters sales tax exemption.

(1) In general, radio and television broad-casters are exempt from sales and use tax,both state and local, on purchases of utilities,machinery, and equipment used or consumeddirectly in the broadcasting of their pro-grams.

(2) Definition of Terms.(A) Broadcaster—An entity who transmits

(a radio or television signal) over the airwavesfor public or general use. A cable or satelliteprovider is not a broadcaster.

(3) Basic Application.(A) A Missouri radio or television station

purchases utilities, machinery and equipmentfor use directly in the broadcasting of theirprogramming. The purchase of the utilities,machinery and equipment are not subject tostate or local tax.

AUTHORITY: section 144.270, RSMo 2000and section 144.054, RSMo Supp. 2007.*Emergency rule filed Aug. 14, 2007, effectiveAug. 28, 2007, expired Feb. 23, 2008. Origi-nal rule filed Aug. 14, 2007, effective Feb.29, 2008.

*Original authority: 144.054, RSMo 2007 and 144.270,RSMo 1939, amended 1941, 1943, 1945, 1947, 1955,1961.

12 CSR 10-110.220 Hotels and Motels

PURPOSE: This rule explains the taxabilityof rooms, meals and drinks provided byhotels, motels, and similar establishments inwhich these items are regularly provided tothe public. It also covers purchases made bythese establishments. The applicable sections

are 144.010, 144.011, 144.020, 144.021,144.030 and 144.080, RSMo.

(1) In general, sales or charges for rooms,meals or drinks at a place that regularlyserves the public are taxable.

(2) Definitions. Permanent resident—Anindividual who contracts in advance for aroom for a period of thirty consecutive daysor more and who actually remains a guest forthirty consecutive days or more. Businessesdo not qualify as permanent residents.

(3) Basic Application of the Tax. (A) Charges for rooms, meals, and drinks

furnished by hotels, restaurants, and otherestablishments, in which rooms, meals, ordrinks are regularly served to the public, aretaxable. Rooms for lodging as well as meet-ing, banquet and conference rooms are tax-able.

(B) A permanent resident is not subject totax on their lease or rental payments. A per-manent reservation for any room is not syn-onymous with permanent resident.

(C) An educational institution, which fur-nishes room and board to students in pursuitof their educational objectives, is not subjectto tax on the gross receipts.

(D) Persons engaged in providing roomsare subject to tax on the gross receipts fromthe sale of tangible personal property and tax-able services:

1. Receipts for food or drink are taxableregardless of whether the charge is made permeal, daily, weekly, or monthly;

2. In room pay-per-view programs ormovies are not subject to tax; and

3. All persons engaged in providingrooms must collect tax on all charges fortelecommunication services, including intra-state and interstate calls.

(E) Rooms, meals and drinks are exemptfrom tax if sold to an exempt organization ora representative of that organization if theseller has documentation of the exemption. Ifthe representative claims the exemption, evenif the representative pays with his own fundsand is reimbursed, and the hotel has a copyof a valid exemption letter issued by the Mis-souri Department of Revenue to the organiza-tion, the sale is exempt. An agent of the Unit-ed States government paying with a U.S.government credit card is also exempt.

(F) Persons providing complimentarymeals and drinks or non-reusable tangiblepersonal property as part of the room accom-modation should not pay tax on the purchas-es. Non-reusable items include soap, sham-poo, tissue, and food or confectionery itemsoffered to the guests without charge.


Secretary of State




(G) The purchaser must pay tax on the pur-chase of reusable items including furniture,curtains, linens, towels, pillows, mirrors,radios and televisions for room accommoda-tion.

(4) Examples.(A) A hotel rents a room to a guest for a

night. The soap and shampoo are included inthe price of the room and may be purchasedtax exempt by the hotel under a resale exemp-tion. The complimentary breakfast providedto the guest is also included in the price of theroom, and the hotel may purchase the foodunder a resale exemption. The towels, bedlinens and furniture are subject to tax at thetime of purchase.

(B) A hotel provides a complimentaryroom for a couple’s wedding night. The hotelincludes a free bottle of champagne and a freebreakfast. The hotel must pay tax on the costof the champagne and the breakfast becausethe hotel did not charge for the room.

(C) An airline reserves rooms at a hotelunder a long-term room contract. In exchangefor room availability, the airline agrees to payfor all rooms on a guaranteed basis, whetheror not it uses the rooms. The entire charge forthe rooms is taxable, regardless of whetherthe rooms are actually used.

AUTHORITY: section 144.270, RSMo 1994.*Original rule filed June 13, 2000, effectiveDec. 30, 2000.

*Original authority: 144.270, RSMo 1939, amended 1941,

1943, 1945, 1947, 1955, 1961.

Drury Supply Co., et al v. Director of Rev-enue, (A.H.C. 1996). The Commissionfound that the “sale for resale” exclusionapplies to the sale of a taxable service and,therefore, the purchases of the tangible per-sonal property used to provide “free” break-fasts and the guest consumables were notsubject to Missouri taxes. It further foundthat the guest room supplies (towels, bedlinens, waste baskets and other items placedin the rooms for the guests’ use) were prop-erty used and consumed by the hotel/motel toprovide the service to the guests and owner-ship of the property was not transferred to theguests. Therefore, the purchases of the guestroom supplies were subject to tax. The Com-mission also found that the taxpayer hadaccepted exemption certificates from exemptentities in good faith. Therefore the sales ofroom services to persons representing theexempt entities were exempt from tax eventhough payment did not come directly fromthe exempt entities. Finally, the Commissionfound that the taxpayer’s charge to the cus-tomer for telecommunications services wastaxable.

HBE Corp. v. Director of Revenue, (A.H.C.1992). The hotel marked up the charges forguest phone calls over the rate paid to its sup-plier. The Commission ruled the hotel “sold”telephone services to “others,” its hotelguests. Where a retail sale occurs between aMissouri buyer and Missouri seller, theexemption for interstate commerce does notapply. See, Bratton Corp. v. Director of Rev-enue, 783 S.W.2d 891 (Mo banc 1990). Eventhough the sale involved the transmission oftelephone message to a recipient located inanother state, it was not exempt as a sale incommerce.

The Hotel Majestic (Majestic Associates) v.Director of Revenue, (A.H.C. 1989). A Mis-souri limited partnership that owned andoperated a hotel was properly denied a salestax refund on certain payments it receivedunder a long-term room reservation rentalagreement. The hotel agreed to reservebetween 10 and 20 rooms per day for the useand convenience of a public utility. Anyreserved room that was not taken by a guestof the utility prior to 6:00 p.m. daily could belet by the hotel to the general public for thatnight. In exchange for making reserved roomsavailable, the utility agreed to pay for all therooms on a monthly basis, whether it usedthem or not, with the exception of reservedrooms let to other patrons.

National Land Management, Inc., v. Direc-tor of Revenue, (A.H.C. 1984). The Com-mission found that receipts from time sharingarrangements at resorts are not taxable. Thepayments in question did not constitutecharges for rooms furnished in any hotel,motel, inn, tourist camp or tourist cabin.Because the time-shares include a thirty-yearlease, the occupants are not transitory in thesense that travelers or tourists are. Rooms intaxpayer’s resort are not regularly rentedbecause they are only open to the generalpublic when they are not already reserved.

Chase Hotel, Inc, v. Director of Revenue,(A.H.C. 1982). The taxpayer’s purchase offurnishings for use in its hotel was not a “salefor resale” because the hotel was the ultimateconsumer of the materials purchased for itsrenovation program.

12 CSR 10-110.300 Common Carriers

PURPOSE: Sections 144.030.2(3), (10), (11),(20) and (30), RSMo, exempt from taxationcertain materials, parts and equipment usedby common carriers. This rule explains whatqualifies for the exemptions.

(1) In general, materials, replacement parts,and equipment purchased for use directlyupon, and for the repair and maintenance ormanufacture of, motor vehicles, watercraft,railroad rolling stock or aircraft engaged ascommon carriers of persons or property arenot subject to tax. Pumping machinery andequipment used to propel products deliveredby pipelines engaged as common carriers arenot subject to tax. Railroad rolling stock usedin transporting persons or property in inter-state commerce is not subject to tax. Motorvehicles licensed for a gross weight of twen-ty-four thousand (24,000) pounds or trailersused by common carriers in the transporta-tion of persons or property are not subject totax.

(2) Definition of Terms.(A) Common carrier—any person that

holds itself out to the public as engaging inthe transportation of passengers or propertyfor hire. A common carrier is required by lawto transport passengers or property for otherswithout refusal if the fare or charge is paid.To qualify as a common carrier, a carriermust be registered as a common carrier withall agencies that require such registration,such as the United States Department ofTransportation.

(B) Contract carrier—any person underindividual contracts or agreements thatengages in transportation of passengers orproperty for hire or compensation. A contractcarrier is a carrier that meets the specialneeds of certain customers to transport itspassengers or property.

(C) Directly upon—used in a direct man-ner without anything intervening and with acertain degree of physical immediacy.

(D) Motor vehicle—any vehicle, truck,truck-tractor, motor bus, or any self-pro-pelled vehicle and trailers or semi-trailersused upon the highways of the state in trans-portation of property or passengers.

(E) Private carrier—any person engaged inthe transportation of passengers or its proper-ty, but not as a common carrier or a contractcarrier.

(F) Watercraft—any boat or craft, includ-ing a vessel, used or capable of being used asa means of transport on waters.

(3) Basic Application of Exemption. (A) Railroad Rolling Stock. Sales of rail-

road rolling stock are exempt provided that itis used in transporting persons or property ininterstate commerce. The sale of flangedwheel equipment used to repair and maintainthe railroad track used in interstate commerceis also exempt. Railroad rolling stock for usesolely in intrastate commerce is not exempt.

(B) Aircraft. Sales of aircraft to commoncarriers for storage or for use in interstatecommerce are not subject to sales tax.

(C) Pipeline Pumping Equipment. Sales ofmachinery and equipment used to propelproducts by pipelines engaged as commoncarriers are exempt. The exemption does notapply to contract carriers or to private carri-ers. All other machinery and equipment suchas pipelines, connecting lines, communica-tion equipment, monitoring equipment,accessory equipment, such as fuel tanks toprovide fuel for pumping engines, and mani-folds used to connect pumping equipment tothe main lines are subject to tax.

(D) Power Take-Off Units. Equipment onmotor vehicles used by common carrierswhich is exempt from tax includes powertake-off (PTO) units which are attached to thetransmission of the power unit of the vehicleand all materials and replacement parts forthe power take-off units.

(E) Materials. Materials used by commoncarriers directly upon and for the mainte-nance or repair of motor vehicles, watercraft,railroad rolling stock or aircraft, which qual-ify for the exemption from tax include, butare not limited to, grease, motor oil, gear oiland lube, water additives, antifreeze, fueladditives, cleaners and paint for body work.

(F) Replacement Parts. Replacement partsused by common carriers directly upon andfor the maintenance or repair of motor vehi-cles, watercraft, railroad rolling stock or air-craft, which qualify for the exemption fromtax include, but are not limited to, decals,permit pouches, tarpaulins and tie-downs,wind deflectors, winter fronts, and radiorepair parts purchased for use on the vehicle.

(G) Barges. The purchase of barges usedprimarily in the transportation of property orcargo on interstate waterways is exempt fromtax.

(H) Tools. Tools and equipment purchasedfor use directly upon, and for the repair andmaintenance or manufacture of, motor vehi-cles, watercraft, railroad rolling stock or air-craft engaged as common carriers of personsor property are not subject to tax.

(4) Examples.(A) A manufacturer registered as a com-

mon carrier maintains a fleet of trucks totransport finished products to various distri-bution centers throughout the United States.The manufacturer advertises that it will trans-port goods belonging to others on return tripsfrom the distribution centers and advertisesthat service. The purchase of the manufactur-er’s fleet of trucks and repair parts for thefleet are not taxable.

(B) A manufacturer maintains a fleet oftrucks to transport finished products to vari-ous distribution centers throughout the Unit-ed States. The manufacturer also negotiateswith other companies to transport goods onreturn trips from the distribution centers. Thepurchase of the manufacturer’s fleet of trucksand repair parts for the fleet are taxablebecause the manufacturer is not a commoncarrier.

(C) A common carrier purchases a cab andchassis. The cab and chassis are licensed fora gross weight of 24,000 pounds and will beused only in intrastate commerce as a com-mon carrier. The purchase of the cab andchassis is not taxable. The common carriersubsequently purchases a dump bed to add tothe cab and chassis. The dump bed is exemptfrom tax because it is materials or equipmentused in the manufacture of a motor vehicle tobe used by a common carrier.

(D) The sale of a switch engine to be usedto move railroad cars around a switchingyard, if part of an interstate rail system, is notsubject to tax.

(E) A common carrier purchases a trailer.The common carrier subsequently purchasesa refrigeration unit to add to the trailer. Therefrigeration unit is exempt from tax becauseit is materials or equipment used in the man-ufacture of a motor vehicle to be used by acommon carrier.

(F) The sale of a switch engine to be usedto move railroad cars around a switchingyard, if part of an interstate rail system, isnot subject to tax.

(G) An airline purchases equipment to testengine parts that have been removed from theplane and brought to their repair facility. Theequipment purchased would be exempt fromtax.

(H) The owner of a Missouri furniturestore is registered as a common carrier, butdoes not hold itself out to the general publicas a common carrier. It uses its truck only todeliver furniture sold to customers residing inand outside Missouri. The owner installs newbrakes on the truck. Even though the owneris registered as a common carrier, the brakesare taxable because the furniture store isoperating as a private carrier.

(I) A charter company contracts with pri-vate groups for exclusive use of its bus anddriver for transportation between Missouriand destinations in the Southeastern UnitedStates. The company provides no other trans-portation services. The charter company pur-chases new tires. The tires are taxablebecause the business is a contract carrier.

(J) A railroad purchases a flanged wheelmechanized tie replacement machine forrepairing broken rail segments on an inter-state system. The purchase of the machine isexempt.

AUTHORITY: section 144.270, RSMo 2000and section 144.030, RSMo Supp. 2007.*Original rule filed Jan. 24, 2001, effectiveAug. 30, 2001. Emergency amendment filedAug. 14, 2007, effective Aug. 28, 2007,expired Feb. 23, 2008. Amended: Filed Aug.14, 2007, effective Feb. 29, 2008.

*Original authority: 144.030, RSMo 1939, amended 1941,1943, 1945, 1949, 1961, 1965, 1967, 1969, 1977, 1979,1980, 1982, 1983, 1985, 1986, 1988, 1989, 1991, 1994,1995, 1996, 1997, 1998, 1999, 2003, 2004, 2005, 2007and 144.270, RSMo 1939, amended 1941, 1943, 1945,1947, 1955, 1961.

Burlington Northern Railroad v. Director ofRevenue, 785 S.W.2d 272 (Mo. banc 1990).Railroad rolling stock normally has flangedwheels. The equipment does not have to beused directly in transporting persons or prop-erty in interstate commerce. Thus, this flangewheeled equipment used to repair and main-tain the track was held exempt.

Trailiner Corp. v. Director of Revenue, 783S.W.2d 917 (Mo. banc 1990). The court heldthat the trailers constituted “motor vehicles”within the meaning of 144.030.2(3). Thecourt relied on the definition of motor vehiclefound in chapter 390, RSMo, rather thanchapter 301, RSMo, as argued by the direc-tor.

Hogan Motor Leasing, Inc. v. Director ofRevenue (AHC 1999), Hogan Transports,Inc. v. Director of Revenue (AHC 1999). Thetaxpayer purchased equipment that allowedthe taxpayer to monitor the maintenanceneeds of its trucks, which were used to trans-port goods in interstate commerce. Theequipment also permitted certain communica-tions functions between the truck and dis-patchers. The communications functions wereimplemented first. The commission held thatthe maintenance functions of the equipmentmade it equipment that was purchased for usedirectly upon and for the repair and mainte-nance of the trucks and therefore, exempt.Furthermore, the original purchase wasexempt because the evidence established thatthe taxpayer intended when it purchased theequipment to add the maintenance functionsafter implementation of the communicationsfunctions was complete.

Craftsmen Limousine, Inc. v. Director ofRevenue (AHC 1997). After providing defini-tions for common, contract and private carri-ers, the commission found that the taxpayer’scustomers (limousine services) could be anyof the three. Because the taxpayer did notprove that its customers were common carri-ers it was not entitled to the exemption.


Secretary of State




Rocky Mountain Helicopters, Inc. v. Direc-tor of Revenue (AHC 1992). Pursuant to con-tracts with Missouri hospitals, taxpayer oper-ated an air ambulance service which pickedup and transported patients to the hospital. Acommon carrier must convey passengers orfreight without refusal if the approved fare ispaid. Assuming a carrier carries passengersor freight without refusal, the crucial test iswhether the carrier holds itself out as a com-mon carrier. Thus, a carrier may be a com-mon carrier even if it limits its operations tospecial contract or charter flights. Becausethe taxpayer held itself out as a common car-rier, through promotional material and use ofits insignia and placard on the aircraft, andcarried, within the limits of its capacity, allpersons desiring its services, it was found tobe a common carrier.

St. Louis Refrigerator Car Co. v. Director ofRevenue (AHC 1992). Items purchased foreither repair or maintenance may qualify forthe exemption. Use of the phrase “directlyupon” does not relate to the relationshipbetween the item and the repair or mainte-nance process. In this way “directly upon” insection 144.030.2(3), RSMo, is distinguish-able from “used directly for” in section144.030.2(4), RSMo. “Directly upon” indi-cates the close physical relationship requiredbetween the item and the mode of transporta-tion. While physical contact is not required,there must be a certain degree of physicalimmediacy.

Metro Crown International, Inc. v. Directorof Revenue (AHC 1990). Exemption certifi-cates must be provided as evidence for a com-mon carrier’s claim of exemption.

Trans World Airlines, Inc. v. Director ofRevenue (AHC 1988). Cleaners, abrasives,solvents and test equipment qualified for thesection 144.030.2(3), RSMo, exemption eventhough they were used on parts of the aircraftthat were removed for servicing. Cleaningsoaps used to clean the floor of the repairfacility were not used “directly upon” the air-craft and, therefore, not exempt.

Emerson Electric Co. v. Director of Rev-enue, 133 S.W.3d 31 (Mo. banc 2004). Acommon carrier does not have to use an air-craft as part of its common carrier operationsto qualify to purchase the aircraft exemptfrom tax. “Mere storage or use of the plane ininterstate commerce qualifies the commoncarrier for the exemption.”

12 CSR 10-110.400 Newspapers and OtherPublications

PURPOSE: This rule explains the applica-tion of sales and use tax law to the publica-

tion and sale of newspapers and other publi-cations. Additionally, section 144.030.2(8),RSMo exempts from taxation newsprint, ink,computers, photosensitive paper and film,toner, printing plates and other machinery,equipment, replacement parts and suppliesused in producing newspapers published fordissemination of news to the general public.This rule explains what elements must be metin order to qualify for this exemption. Thesale of publications that are not in tangibleform is not subject to tax and is notaddressed in this rule.

(1) In general, newspapers, magazines,newsletters, periodicals, trade journals, booksand other publications are tangible personalproperty and their sale is subject to tax to thesame extent as any other personal property.Sellers of printed materials are subject to allrules applicable to other sellers of tangiblepersonal property, except as otherwise specif-ically provided in this rule. Machinery,equipment, replacement parts, and suppliesused to produce newspapers for disseminationof news to the general public are exempt fromtax. Publishers of other printed materials arenot included within the same exemption asnewspapers that disseminate news to the gen-eral public but may qualify for exemptionsapplicable to manufacturers to the sameextent as any other manufacturer.

(2) Definition of Terms.(A) Equipment—devices that have a degree

of permanence to the business, contribute tomultiple processing cycles over time and gen-erally constitute fixed assets, other than landand buildings, that are capitalized and depre-ciated for purposes of business and account-ing practices.

(B) Machinery—combinations of parts thatwork together as a functioning unit, even ifthey are subordinate elements of more com-plex machinery. Machinery may be simple orcomplex, but does not include the replace-ment of an individual part, even if that partbecomes an element of a functioningmachine.

(C) Newspapers published for the dissemi-nation of news to the general public—publi-cations that are published at stated shortintervals, usually daily or weekly, and containnews of current events available for distribu-tion to anyone; that do not, when successiveissues are put together, constitute a book; andthat are generally in sheet form.

(D) Parts—articles of tangible personalproperty that are components of machineryor equipment, which can be separated fromthe machinery or equipment and replaced.Like machinery and equipment, parts musthave a degree of permanence and durability.

Items that are consumed in a single process-ing and benefit only one (1) production cycleare materials and supplies, not parts. Itemssuch as: nuts, bolts, hoses, hose clamps,chains, belts, gears, drill bits, grinding heads,blades, and bearings, would ordinarily beconsidered parts. Substances such as fuelsand coolants that are added to machinery andequipment for operation are not parts. Sub-stances such as lubricants, paint and adhe-sives that adhere to the surface of machineryand equipment but are not distinct articles oftangible personal property, are not parts;these items would be considered materials orsupplies within the meaning of the exemp-tions.

(E) Producing—for purposes of this ruleonly, the process of creating a newspaper.

(F) Publisher—a person who prepares andissues a publication for public distribution.

(G) Publication—any written material,such as newspapers, magazines, newsletters,periodicals, trade journals, and books,offered for sale or distribution.

(H) Supplies—for purposes of this ruleonly, tangible personal property consumed inthe production of a newspaper. The term sup-plies does not include fuel.

(3) Basic Application of Exemption. (A) If the retail purchaser buys a publica-

tion directly from the publisher or the pub-lisher bears the risk of loss for noncollection,the publisher is the seller and must collectand remit the tax. If the retail purchaser buysthe publication from someone other than thepublisher and that person bears the risk ofloss for noncollection, then that person is theseller and must collect and remit the tax.

(B) If the purchaser receives the publica-tion in Missouri, the seller must collect andremit sales tax, unless the order for the pub-lication is approved outside Missouri anddelivered to the purchaser from outside Mis-souri by common or contract carrier, inwhich case the seller must collect and remituse tax.

(C) The sale of a publication subject tostate sales tax is subject to the local sales taxat the rate in effect at the seller’s place ofbusiness in Missouri. A sale of a publicationsubject to state use tax is subject to the localuse tax in effect where the publication is firstdelivered in Missouri.

(D) The sale by the publisher of a publica-tion through a vending machine is subject totax based on one hundred thirty-five percent(135%) of the average price at which the pub-lisher sells the publication to vendors or onactual gross receipts. The sale of a publica-tion through a vending machine is subject to

local sales tax at the rate in effect where thevending machine is located.

(E) If the purchaser is required to pay fordelivery, handling, postage costs or similarservice charges as part of the sale price of thepublication, the entire sale price is subject totax. If the purchaser is not required to pay theservice charge as part of the sale price of thepublication, the amount paid for the serviceis not subject to tax if the charge for such ser-vice is separately stated. If the charge for theservice is not separately stated, the entire saleprice is subject to tax.

(F) A publisher may set the individualcopy price to a round amount including tax,provided that the publication states some-where that the amount of the price includestax. Any other seller must collect and remittax on the sale price of the publication.

(G) A publisher may purchase an insert toits publication exempt from tax as an ingredi-ent or component part. See 12 CSR 10-110.200.

(4) Examples.(A) An individual in Missouri subscribes

to the local newspaper by contracting with thepublisher. The publisher contracts with athird party to deliver the newspaper and col-lect the entire cost of the newspaper, includ-ing delivery charges, which are not separate-ly stated. The publisher bears the risk that theindividual will not pay for the subscription.The publisher is the seller and must collectand remit sales tax, including local sales taxat the rate in effect at the publisher’s place ofbusiness. Tax is imposed on the entire saleprice, including delivery charges, because thedelivery charges are not separately stated.The publisher may set the price at a roundamount, including tax, as long as the publi-cation states somewhere that the priceincludes tax.

(B) An individual in Missouri subscribesto an out-of-state newspaper by contractingwith a Missouri newspaper carrier, which isthe only way to obtain this newspaper in Mis-souri. The carrier bears the risk that the indi-vidual will not pay for the subscription. Thecarrier is the seller and must collect andremit sales tax, including local sales tax atthe rate in effect at the carrier’s place of busi-ness. Tax is imposed on the entire sale price,including delivery charges, because the deliv-ery charges must be paid to receive the news-paper.

(C) An individual in Missouri subscribesto an out-of-state newspaper by contractingwith the out-of-state publisher that has nexuswith Missouri. The publisher delivers thenewspaper by mail, which is the only way toobtain the newspaper in Missouri. The pub-

lisher does not have a place of business inMissouri. The publisher is the seller andmust collect and remit use tax, includinglocal use tax at the rate in effect where thenewspaper is delivered. Tax is imposed on theentire sale price, including postage and han-dling charges.

(D) A retailer sells local and national pub-lications. The retailer is the seller of the pub-lications and must collect and remit sales tax,including local sales tax at the rate in effectat the retailer’s place of business. The retail-er may claim a resale exemption when pur-chasing the publications from the publishers.

(E) A publisher prints a daily newspaperand occasionally prints extra copies for freedistribution to nonsubscribers. The publishershould not remit tax on the copies distributedfor free and the supplies used to produce thenewspaper are exempt.

(F) Publisher A prints and sells a newspa-per to publisher B. Publisher B distributes thenewspaper for free. Publisher A should col-lect and remit tax on its sales to publisher B.

(G) Same facts as (4)(F), except publisherB sells the newspaper. Publisher B must collectand remit tax on its sale of the newspaper, butmay issue a resale exemption certificate andpurchase the newspaper from publisher Aexempt from tax.

(H) A publisher produces an advertisingcircular that it distributes for free. The pub-lisher should pay tax on the machinery,equipment and supplies used to produce thecircular.

(I) Same facts as (4)(H), except the pub-lisher sells the circular. The publisher mustcollect and remit tax on its sales of the circu-lar. The machinery and equipment used toproduce, and the ingredients or componentparts incorporated in, the circular are exemptfrom tax when purchased because the pub-lisher is manufacturing a product sold atretail.

AUTHORITY: sections 144.270 and 144.705,RSMo 2000.* Original rule filed Dec. 1,2004, effective July 30, 2005.

*Original authority: 144.270, RSMo 1939, amended 1941,1943, 1945, 1947, 1955, 1961 and 144.705, RSMo 1959.

Hearst Corp. v. Director of Revenue, 779S.W.2d 557 (Mo. banc 1990). Newpapers aretangible personal property subject to salestax.

Daily Record Co. v. Ray James, 629 S.W.2d348 (Mo. banc 1982). Newspaper inserts arecomponent parts of the newspaper andexempt from tax on the purchase.

In James v. Mars Enders, Inc., 629 S.W.2d331 (Mo. banc 1982), the Supreme Court

extended the holding in Daily Record to sup-plements printed by a third party printer anddelivered to a newspaper publisher for distri-bution with the newspaper.

12 CSR 10-110.600 Electrical Energy, asDefined in Section 144.030, RSMo

PURPOSE: Section 144.030.2(12), RSMoexempts from tax certain purchases of electri-cal energy used in primary or secondarymanufacturing, processing, compounding,mining or producing a product, or processingof raw materials that contain recovered mate-rials. Section 144.030.2(31), RSMo exemptsfrom tax electricity used in connection withthe manufacturing of cellular glass productsor in any material recovery processing plant.Section 144.030.2(33), RSMo exempts fromtax utilities used or consumed directly orexclusively in the research and developmentof agricultural biotechnology products andplant genomics products and prescriptionpharmaceuticals consumed by humans or ani-mals. This rule explains when these exemp-tions apply and how a taxpayer may claim theexemptions at the time of purchase of theelectrical energy.

(1) In general, electrical energy used in facil-ities owned or leased by the taxpayer in theactual primary manufacturing, processing,compounding, mining or producing of aproduct is exempt from tax if the cost of theelectrical energy used exceeds ten percent(10%) of the total cost of the primary manu-facturing, processing, compounding, miningor producing, exclusive of the cost of electri-cal energy so used. Electrical energy used infacilities owned or leased by the taxpayer inthe actual secondary manufacturing, process-ing, compounding, mining or producing of aproduct is exempt from tax if the cost of theelectrical energy used exceeds ten percent(10%) of the total cost of the secondary man-ufacturing, processing, compounding, miningor producing, exclusive of the cost of electri-cal energy so used. Electrical energy used ina material recovery processing plant ownedor leased by the taxpayer or in manufacturingcellular glass products is exempt from tax.Utilities used or consumed directly or exclu-sively in the research and development ofagricultural biotechnology products and plantgenomics products and prescription pharma-ceuticals consumed by humans or animals areexempt from tax. Electrical energy used infacilities owned or leased by the taxpayer inprocessing raw materials that contain at leasttwenty-five percent (25%) recovered materi-als is exempt from tax.


Secretary of State




(2) Definition of Terms.(A) Compounding—Producing a product

by combining two (2) or more ingredients orparts.

(B) Fabrication—See 12 CSR 10-111.010.(C) Manufacturing—See 12 CSR 10-

111.010.(D) Material recovery processing plant—

See 12 CSR 10-111.060.(E) Mining—See 12 CSR 10-111.010.(F) Primary processing—Manufacturing,

processing, compounding, mining or produc-ing that results in the first marketable prod-uct.

(G) Producing—See 12 CSR 10-111.010.(H) Product—An item with a new identity,

use and market value produced by the tax-payer’s efforts which is intended at the timeof the production activity to be sold ultimate-ly for final use or consumption. A productmay be tangible personal property or a ser-vice, if the property or service is subject tostate or local sales or use taxes, or any taxthat is substantially equivalent thereto, in thisstate or any other state.

(I) Production activity—Manufacturing,processing, compounding, mining, producingor fabricating.

(J) Raw material—any ingredient or com-ponent that becomes part of, or is made intoa finished product.

(K) Recovered materials—See 12 CSR 10-111.060. In order for an item to be a recov-ered material, a facility must recover it fromthe solid waste stream. An item used in pro-cessing for its original intended purpose isnot a recovered material.

(L) Secondary processing—Further pro-cessing or fabricating of a marketable productthat results in another marketable product.

(M) Solid waste—See 12 CSR 10-111.060.(N) Total cost—All allocated costs

incurred in producing the product, includingall elements of production cost in accordancewith generally accepted accounting princi-ples.

(3) Basic Application of Exemption.(A) A taxpayer may claim this exemption

at the time of purchase of the electrical ener-gy by presenting the seller with a direct paycertificate issued by the department. In orderto obtain a direct pay certificate, the taxpayermust submit an electrical energy direct payauthorization application. The applicationmust demonstrate, by the use of the previouscalendar year’s data, a probable entitlementto the electrical energy exemption for thecoming year. The taxpayer must file andremit the appropriate tax on energy purchas-es that do not qualify for this exemption on itssales tax return.

(B) Every transformation of materials doesnot constitute a separate production activity.In order to be a separate production activity,the activity must create a new marketableproduct. If a taxpayer produces only one (1)marketable product, there can only be prima-ry production activity. All production costsmust be included in calculating the total costof production. Secondary production activitycan only exist when an already marketableproduct produced by the taxpayer undergoessubsequent production activity that producesa second marketable product. When there issecondary production activity, the productioncosts attributable to the primary productionactivity are not included in the total cost ofproduction of the secondary production activ-ity.

(4) Examples.(A) A manufacturing firm produces

extruded sheet plastic. The automated pro-duction line is a closed system connectedtogether by use of vacuum feed-pipe. Whenan order is received, the computer controlledproduction line first blends the necessary rawmaterials. After blending, the mix is con-veyed through vacuum pipe to be dried, andthen to the extruder, where the mix is heatedto meltdown and rolled into sheets by theextruder rollers. These sheets are the endproduct. The cost of raw materials is 95% ofthe total cost of producing the end product.The cost of electrical energy is 99% of thecost of drying and extruding the blended rawmaterials. The plastic sheet is the only mar-ketable product produced by this continuous,indivisible operation. Because the cost ofelectricity does not exceed 10% of the totalcost of producing the product, the purchase ofthe electricity does not qualify for the exemp-tion.

(B) A manufacturer produces glass bottlesto be used as packaging. The manufacturercombines raw materials, including recycledglass obtained from recyclers, which is thenmelted under extreme heat. The molten glassis then formed into bottles, which are themanufacturer’s only product. The electricalenergy costs exceed 10% of the total cost ofproduction; therefore the manufacturer quali-fies for the exemption. If the manufacturer’sraw materials include at least 25% recoveredmaterial, the manufacturer may avoid thetime and cost involved in the calculationsnecessary to support the exemption under the10% threshold and claim the exemption basedon its use of recovered materials.

(C) A business contracts with manufactur-ers of frozen food products to receive fresh orpartially frozen food products, reduce thetemperature to zero degrees or below, and

release the fully frozen food product back tothe manufacturer for distribution. The frozenfood products that the business produces havea new and different identity from the fresh orpartially frozen products that it receives.Frozen foods have a longer shelf life and abroader distribution system than refrigeratedfoods. The business qualifies for the exemp-tion if the electricity used in the freezing pro-cess exceeds 10% of the cost of producing thefully frozen food products from the fresh orpartially frozen food products. The businessdoes not have to include the cost of its cus-tomer’s production of the fresh or partiallyfrozen products because the fresh or partiallyfrozen food is a separate marketable productfrom the frozen food.

(D) A frozen food manufacturer uses$100,000 of electricity in manufacturing itsproducts. The manufacturer also uses$150,000 of electricity in its on-premises,refrigerated warehouse to maintain its prod-ucts at the necessary temperature prior toshipping. Total cost of producing the prod-ucts, excluding electricity, is $2,000,000.The combined electricity cost of $250,000exceeds 10% of the $2,000,000 cost of pro-duction. The manufacturer qualifies for theexemption because processing includes anytreatment by the producer at the productionfacility that is necessary to maintain the prod-uct.

(E) A paper manufacturer uses recycledpaper in its primary processing of producingrolls of newsprint. The newsprint includes50% recovered paper, qualifying the manu-facturer for the electrical energy exemptionfrom state and local taxes. The newsprint issubsequently cut into sheets during secondaryprocessing for sale to a book printer. The costof electricity used during the secondary pro-cessing does not exceed 10% of the total costof producing the cut sheets. However, theelectrical energy used to produce the finalproduct is also exempt because the secondaryprocess uses at least 25% recovered materi-als.

AUTHORITY: section 144.270, RSMo 2000.*Original rule filed July 25, 2001, effectiveFeb. 28, 2002. Emergency amendment filedAug. 14, 2007, effective Aug. 28, 2007,expired Feb. 23, 2008. Amended: Filed Aug.14, 2007, effective Feb. 29, 2008.

Original authority: 144.270, RSMo 1939, amended 1941,1943, 1945, 1947, 1955, 1961.

Mid America Dairymen, Inc. v. Director ofRevenue, 924 S.W.2d 280 (Mo. banc 1996).Processing consists of the alteration or phys-ical change of an object or material that pro-duces an article with a use, identity and

market value different from the use, identityand market value of the original. The prima-ry product need not actually be marketed, aslong as it is marketable. It is incumbent onthe taxpayer to prove the existence of a mar-ket. If there is not a market for all of the out-put, the taxpayer may not claim secondaryprocessing exists for the portion of the outputfor which there is no market. When a taxpay-er produces only one marketable product,there can only be primary processing. Sec-ondary processing exists only when there is asecond marketable product that results fromfurther processing of an already marketableproduct. Assuming production stages canproperly be split into primary and secondary,a taxpayer may allocate its total productioncosts accordingly.

Hudson Foods, Inc. v. Director of Revenue,924 S.W.2d 277 (Mo. banc 1996). The tax-payer received live poultry. After the poultrywas killed and dressed it was chilled (tem-perature reduced to 40°), crusted (tempera-ture reduced to 28°) or frozen solid. Thecourt held that chilling, crusting and freezingwere all processing. The taxpayer did notmerely maintain a temperature, but actuallyreduced the temperature to decrease spoilageand extend shelf life.

McKinley Iron v. Director of Revenue, 888S.W.2d 705 (Mo. banc 1994). The taxpayeroperated a scrap metal processing plant thatprocessed raw scrap metal into densifiedscrap metal. Approximately 10-20% of theraw scrap metal was marketable after the ini-tial processing. The remainder was processedfurther before sale. The court found that den-sified scrap metal was the only productproduced by the taxpayer. Even though theinitial processing enhanced the value andmarketability of the scrap metal, it was not aseparate process. The court also held that“total cost of production” is all-inclusive andthe cost of materials must be included. [Note:In 1998, the exemption was expanded toinclude a material recovery processing plantthat uses more than 25% recovered materi-als.]

Wetterau, Inc. v. Director of Revenue, 843S.W.2d 365 (Mo. banc 1992). The taxpayerstored and maintained frozen and refrigeratedfoods as a business. The court held maintain-ing food in a frozen state is not processing.

Union Electric Co. v. Goldberg, 578 S.W.2d921 (Mo. banc 1979). The taxpayer minedand processed ore. The total cost of electric-ity used in the combined operations did notexceed 10% of the total cost of production.

However, the total cost of electricity used inthe processing did exceed 10% of the totalcost of the processing. The court held that thetaxpayer was engaged in primary mining andsecondary processing, and was entitled to theexemption for the electricity used in the pro-cessing.

Bridgeton Refrigerated Warehouse v. Direc-tor of Revenue (AHC 1998). The taxpayercontracted with manufacturers of frozen foodproducts to receive the products, reduce thetemperature to zero degrees or below, andreleases the product back to the manufactur-er for distribution. The Commission held thatfreezing the food constituted secondary pro-cessing.

NF Properties L.P. v. Director of Revenue(AHC 1997). The taxpayer leased a refriger-ated warehouse to a meat distributor. Thedistributor processed the meat into frozenmeat patties. The Commission held that therefrigeration provided by the taxpayer to thedistributor was not a marketable product andthe taxpayer was not entitled to the exemp-tion.

Hazelwood Farms Bakeries, Inc. v. Directorof Revenue (AHC 1994). The taxpayer was acommercial baker. Typically, the taxpayermixed the ingredients of products and frozethe mixture. The taxpayer would ship theproducts to its customers, which baked andsold them. The Commission found that theproducts were marketable before freezing andthat the frozen product had a use, identity andmarket value different from the unfrozenproducts. Therefore, the taxpayer was entitledto the exemption for electricity used in thesecondary process of freezing the products,which exceeded 10% of the total cost of thefreezing process.

12 CSR 10-110.601 Electrical, Other Ener-gy and Water as Defined in Section 144.054, RSMo

PURPOSE: Section 144.054.2, RSMo,exempts from state tax and local use tax, butnot local sales tax, electricity, gas (natural,artificial, or propane), water, coal, and ener-gy sources used or consumed in manufactur-ing, processing, compounding, mining orproducing any product or used in researchand development related to manufacturing,processing, compounding, mining or produc-ing any product or in the processing of recov-ered materials. This rule explains when thisexemption applies and how a taxpayer mayclaim the exemption at the time of purchase.

(1) In general, purchases of electricity, gas(natural, artificial, or propane), water, coal,and energy sources used or consumed inmanufacturing, processing, compounding,mining or producing any product, or used orconsumed in the processing of recoveredmaterials, or used in research and develop-ment related to manufacturing, processing,compounding, mining or producing any prod-uct are exempt from state tax and local usetax, but not local sales tax.

(2) Definition of Terms.(A) Compounding—Producing a product

by combining two (2) or more ingredients orparts.

(B) Energy source—Those resources, suchas petroleum, coal, gas, wind, steam, nucle-ar fuel and sunlight, from which energy isproduced.

(C) Fabrication—See 12 CSR 10-111.010.(D) Manufacturing—See 12 CSR 10-

111.010.(E) Material recovery processing plant—

See 12 CSR 10-111.060.(F) Mining—See 12 CSR 10-111.010. (G) Producing—See 12 CSR 10-111.010.(H) Recovered materials—See 12 CSR 10-

111.060.

(3) Basic Application of Exemption. (A) A taxpayer may claim the exemption

for state tax and local use tax, but not localsales tax at the time of purchase. A taxpayermay not claim an exemption from local taxand then remit the tax directly to the depart-ment. It is the seller’s responsibility to collectand remit the proper amount of local tax tothe department.

(B) Purchases reported to the departmentunder direct pay and Electrical Energy DirectPay (EEDP) are exempt from the applicationof subsection (3)(A) of this rule.

(C) The energy source and water that issubject to this exemption is not required to bedirectly used in the process for which theexemption is being claimed. There is also norequirement that the energy source and watercomprise ten percent (10%) of the cost of aprimary or secondary production process inorder to qualify for this exemption. There isalso no requirement that twenty-five percent(25%) of the raw materials be recycled inorder for the purchaser to claim this exemp-tion.

(4) Method of Collection and Apportionment(A) Energy and water vendors are respon-

sible for remitting tax to the department. Pur-chasers are responsible for informing energyvendors on the MO-149 (Sales/Use TaxExemption Certificate) of the percentage of


Secretary of State




energy used for activities exempt under sec-tion 144.054, RSMo. The purchaser may useany reasonable method to calculate this per-centage, such as square footage or referenceto a use analysis. The exemption will beapplied as follows:

Purchaser’s Calculated Exempt Percentage Percentage Exempt

76–100 10051–75 7526–50 501–25 25

0 0

(B) Beginning on August 28, 2007 andending on January 31, 2008, any vendor whoreceives an exemption certificate exemptingsales of electricity, gas (natural, artificial, orpropane), water, coal, and energy sourcesused or consumed in manufacturing, process-ing, compounding, mining or producing anyproduct, or used or consumed in the process-ing of recovered materials, or used inresearch and development related to manu-facturing, processing, compounding, miningor producing any product after the bill wasissued may take the correction as an adjust-ment on its sales tax return provided the netresult is not a negative figure. In the event anexemption certificate is received after Jan-uary 31, 2008, and an exemption was due andnot properly applied by the vendor, the ven-dor may submit a refund request to thedepartment.

(5) Exempt Examples. (A) A manufacturer purchases propane to

operate forklifts that move raw materials toproduction lines, move work-in-processbetween production steps, move finishedgoods to an on-site storage area, and to loadfinished goods on trucks for shipment fromthe plant. The fuel is exempt from state taxand local use tax, but not local sales tax.

(B) A manufacturer uses electricity to runits equipment, maintain a moderate tempera-ture in its production facility and light theplant. The purchase of all of its electricity isexempt from state tax and local use tax, butnot local sales tax, because it is used or con-sumed in producing a product.

(C) A manufacturer uses coal to fuel boil-ers to generate steam used to manufacture aproduct. The purchase of the coal is exemptfrom state tax and local use tax, but not localsales tax, because it is used or consumed inproducing a product.

(D) A manufacturer purchases compressedgas used for welding a product. The purchaseof the compressed gas is exempt from statetax and local use tax, but not local sales tax

because it is used or consumed in producinga product.

(E) A manufacturer uses water to cool aproduct during the manufacturing process.The water is exempt from state tax and localuse tax, but not local sales tax.

(F) A manufacturer preserves its finalproduct in a warehouse located at the produc-tion facility awaiting shipment. The purchaseof energy to maintain the desired environ-ment and provide lighting is exempt fromstate tax and local use tax, but not local salestax.

(G) A construction company that has beendeemed a manufacturer purchases fuel to beused in a concrete ready-mix truck. The fuelis subject to motor fuel tax; however if arefund claim is made, the refund will beexempt from state tax and local use tax, butnot local sales tax, because the fuel is used inproducing a product.

(6) Taxable Examples.(A) A restaurant preparing food for imme-

diate consumption is not exempt as a manu-facturer. Therefore, all state and local taxesapply.

AUTHORITY: section 144.270, RSMo 2000and 144.054, RSMo Supp. 2007.* Emergencyrule filed Aug. 14, 2007, effective Aug. 28,2007, expired Feb. 23, 2008. Original rulefiled Aug. 14, 2007, effective March 30,2008.

*Original authority: 144.054, RSMo 2007; and 144.270,

RSMo 1939, amended 1941, 1943, 1945, 1947, 1955,

1961.

12 CSR 10-110.621 Application of SalesTax Exemption as Defined in Section144.054, RSMo

PURPOSE: Section 144.054.2, RSMo,exempts from state sales and use tax and localuse tax, but not local sales tax, electricity,gas (natural, artificial, or propane), water,coal, and energy sources used or consumedin manufacturing, processing, compounding,mining or producing any product or used inresearch and development related to manu-facturing, processing, compounding, miningor producing any product or in the processingof recovered materials. This rule explainswhen this exemption applies.

(1) In general, electricity, gas (natural, artifi-cial, or propane), water, coal, and energysources, chemicals, machinery, equipment,and materials used or consumed in manufac-turing, processing, compounding, mining or

producing any product, or used or consumedin the processing of recovered materials, orused in research and development related tomanufacturing, processing, compounding,mining or producing any product is exemptfrom state sales and use tax and local use tax,but not local sales tax.

(2) Definition of Terms.(A) Compounding—See 12 CSR 10-

110.601.(B) Energy source—See 12 CSR 10-

110.601.(C) Fabrication—See 12 CSR 10-111.010.(D) Manufacturing—See 12 CSR 10-

111.010.(E) Material recovery processing plant—

See 12 CSR 10-111.060.(F) Mining—See 12 CSR 10-111.010. (G) Producing—See 12 CSR 10-111.010.(H) Recovered materials—See 12 CSR 10-

111.060.

(3) Basic Application of Exemption.(A) A taxpayer may claim the exemption

for state sales and use tax and local use tax,but not local sales tax at the time of purchase.A taxpayer may not claim an exemption fromlocal tax and then remit the tax directly to thedepartment. It is the seller’s responsibility tocollect and remit the proper amount of localtax to the department.

(4) Exempt Examples.(A) A manufacturer purchases propane to

operate forklifts that move raw materialsbetween production lines. The fuel is exemptfrom state sales and use tax and local use tax,but not local sales tax.

(B) A manufacturer uses electricity to runits equipment, maintain a moderate tempera-ture in its production facility and to light theinterior of the plant. The purchase of all ofits electricity is exempt from state sales anduse tax and local use tax, but not local salestax.

(C) A manufacturer uses coal to fuel boil-ers to generate steam used to manufacture aproduct. The purchase of the coal is exemptfrom state sales and use tax and local use tax,but not local sales tax.

(D) A manufacturer purchases compressedgas used for welding a product. The pur-chase of the compressed gas is exempt fromstate sales and use tax and local use tax, butnot local sales tax.

(E) A manufacturer uses water to cool aproduct during the manufacturing process.The manufacturer’s purchase of water isexempt from state sales and use tax and localuse tax, but not local sales tax.

(F) A manufacturer preserves its final

product in a warehouse located at the produc-tion facility awaiting shipment. The manufac-turer’s purchase of energy to maintain thedesired temperature and provide lightinginside the warehouse is exempt from statesales and use tax and local use tax, but notlocal sales tax.

(G) A construction company, who has beendeemed a manufacturer, purchases fuel to beused in a concrete ready-mix truck. Themanufacturer’s purchase of fuel is subject tomotor fuel tax, however if a refund claim ismade, the refund is exempt from state salestax, but not local sales tax.

(H) A cabinetmaker creates cabinets orcounter tops from raw materials for sale tocontractors or customers. The cabinetmaker’spurchases of energy sources, chemicals,machinery, equipment, and materials used orconsumed in the manufacturing process areexempt from state sales and use tax and localuse tax, but not local sales tax on itemsallowed under section 144.054, RSMo.

(I) A manufacturer builds mobile homes inits factory. The manufacturer’s purchases ofenergy sources, chemicals, machinery, equip-ment, and materials used or consumed in themanufacturing process are exempt from statesales and use tax and local use tax, but notlocal sales tax on items allowed under section144.054, RSMo.

(J) A manufacturer creates pre-fabricatedsteel and concrete products for sale to thepublic. The manufacturer’s purchases ofenergy sources, chemicals, machinery, equip-ment, and materials used or consumed in themanufacturing process are exempt from statesales and use tax and local use tax, but notlocal sales tax on items allowed under section144.054, RSMo.

(K) A hobby shop builds a frame toenclose photographs or pictures. The hobbyshop’s purchases of energy sources, chemi-cals, machinery, equipment, and materialsused or consumed in the manufacturing pro-cess of building the frame are exempt fromstate sales and use tax and local use tax, butnot local sales tax on items allowed undersection 144.054, RSMo.

(L) A company uses energy to test manu-facturing equipment as it is installed. Thisenergy is exempt from state sales and use taxand local use tax, but not local sales tax.

(M) A commercial printer uses energysources, chemicals, machinery, equipment,and materials in its process. These items areexempt from state sales and use tax and localuse tax, but not local sales tax.

(N) A telecommunication company pro-duces a wireless or landline based telephonecall. The energy sources, chemicals, machin-

ery, equipment, and materials used by thetelecommunication company to manufacturethe phone call are exempt from state sales anduse tax and local use tax, but not local salestax.

(O) A bakery creates baked goods for saledirectly to the public or through retailers.The energy sources, chemicals, machinery,equipment, and materials used by the bakeryare exempt from state sales and use tax andlocal use tax, but not local sales tax.

(P) A factory purchases safety equipmentsuch as earplugs and goggles for use by theemployees on the manufacturing floor. Theseitems used by the employees who are manu-facturing a product are exempt from statesales and use tax and local use tax, but notlocal sales tax.

(5) Taxable Examples.(A) A restaurant preparing food for imme-

diate consumption is not exempt. Therefore,all state and local taxes apply.

(B) A wireless company operates a cus-tomer support call center to assist its cus-tomers with questions. The call center is notexempt. Therefore, all state and local taxesapply.

(C) The construction of a road, building,or other fixed structure is not exempt. There-fore, all state and local taxes apply.

(D) The activities of a florist are notexempt. Therefore, all state and local taxesapply.

(E) An auto repair facility repairs vehiclesby installing or replacing parts. This is notexempt. Therefore, all state and local taxesapply.

(F) A butcher shop receives a side of beefand cuts it into steaks and hamburger. This isnot exempt. Therefore, all state and localtaxes apply.

(G) A manufacturer preserves its finalproduct in a warehouse not located at the pro-duction facility. The purchase of energy tomaintain the desired temperature and providelighting inside the warehouse is not exemptdue to the location of the warehouse. There-fore, all state and local taxes apply.

(H) A cable television provider’s purchaseof energy is not exempt. Therefore, all stateand local taxes apply.

AUTHORITY: section 144.270, RSMo 2000and section 144.054, RSMo Supp. 2007.*Emergency rule filed Oct. 10, 2007, effectiveOct. 20, 2007, expired April 16, 2008. Orig-inal rule filed Oct. 10, 2007, effective April30, 2008.

*Original authority: 144.054, RSMo 2007 and 144.270,RSMo 1939, amended 1941, 1943, 1945, 1947, 1955,1961.

12 CSR 10-110.858 Purchases by StateSenators or Representatives

PURPOSE: This rule clarifies the treatmentof the tax liability on purchases by a Missouristate senator or representative.

(1) In general, purchases of tangible personalproperty made by or on behalf of a Missouristate senator or representative are exemptfrom all taxes imposed by Chapters 66, 67,92, 94, and 144, RSMo and Article IV, sec-tions 43A and 47A of the Missouri Constitu-tion providing these purchases are made fromfunds in the senator’s or representative’s stateexpense account.

(2) Basic Application of Rule. Exempt itemsinclude:

(A) Purchases of meals, lodging, and othertravel expenses itemized on the state senator’sor state representative’s monthly expensesaccount (form C-12); and

(B) Purchases or rental of office furniture,supplies, and equipment which are itemizedto the house or senate accounting office forreimbursement.

(3) Purchases and personal living expensesreimbursed by the per diem for state senatorsand state representatives authorized undersection 21.145, RSMo are not exempt fromstate sales and use taxes.

(4) A copy of a valid letter of exemption mustbe furnished to the seller when purchasing orleasing property. The letter of exemption rep-resents evidence of a claim of exemption bythe purchaser to the seller that the sale was toa state senator or state representative and pur-chased from funds in his/her state expenseaccount. Letters of exemption, issued by theDepartment of Revenue, are valid for the statesenator’s or representative’s term of office.

AUTHORITY: section 144.270, RSMo 2016.*This rule originally filed as 12 CSR 10-3.858.Original rule filed Jan. 26, 1989, effectiveMay 11, 1989. Moved to 12 CSR 10-110.858and amended: Filed Oct. 2, 2018, effectiveApril 30, 2019.

*Original authority: 144.270, RSMo 1939, amended 1941,1943, 1945, 1947, 1955, 1961, 2008.

12 CSR 10-110.900 Farm Machinery andEquipment Related Exemptions

PURPOSE: Sections 144.030.2(22),144.045.1, 144.047, and 144.063, RSMo,exempt certain farm machinery, equipment,repair parts, supplies, lubricants, and fuels

14 CODE OF STATE REGULATIONS (3/31/19) JOHN R. ASHCROFT

Secretary of State




from taxation. This rule explains which itemsqualify for these exemptions.

(1) In general, the purchase of farm machin-ery, equipment, and repair and replacementparts and supplies and lubricants used exclu-sively, solely, and directly for producingcrops, raising and feeding livestock, fish, orpoultry, or producing milk for ultimate sale atretail, and motor fuel used for agriculturalpurposes is exempt from tax.

(2) Definition of Terms. (A) Equipment—Devices that have a

degree of permanence to the business, con-tribute to multiple processing cycles overtime, and generally constitute fixed assets,other than land and buildings, that are capi-talized and depreciated for purposes of busi-ness and accounting practices.

(B) Farm machinery, equipment, andparts—Machinery, equipment, and parts useddirectly and exclusively in the agriculturalproduction process.

(C) Machinery—Combinations of partsthat work together as a functioning unit, evenif they are subordinate elements of morecomplex machinery. Machinery may be sim-ple or complex, but does not include thereplacement of an individual part, even if thatpart becomes an element of a functioningmachine.

(D) Motor fuel—Gasoline, diesel fuel,kerosene, and blended fuel, as defined in sec-tion 142.800, RSMo.

(E) Repair and replacement parts—Articlesof tangible personal property that are compo-nents of machinery and equipment, whichcan be separated from the machinery orequipment and replaced. Like machinery andequipment, parts must have a degree of per-manence and durability. Included in therepair and replacement part category are bat-teries, tires, fan belts, mufflers, spark plugs,oil filters, plow points, standard type motors,and cutting parts. Substances such as coolantsthat are added to machinery and equipmentfor operation are not parts. Substances suchas paints or adhesives that adhere to the sur-face of machinery and equipment, but are notdistinct articles of tangible personal property,are not parts.

(F) For the purposes of this rule, suppliesshall mean—Tangible personal property con-sumed in producing crops or milk, or raisingand feeding livestock, fish, poultry, pheas-ants, chukar, or quail for ultimate sale atretail.

(3) Basic Application of Exemption. (A) To qualify for exemption pursuant to

section 144.030.2(22), RSMo, items pur-

chased must be— 1. Used exclusively for agricultural pur-

poses; 2. Used on land owned or leased for the

purpose of producing farm products; and 3. Used directly in producing farm prod-

ucts to be sold ultimately in processed formor otherwise at retail or in producing farmproducts to be fed to livestock or poultry tobe sold ultimately in processed form at retail.The term “used directly” encompasses itemsthat are used in some manner prior to theactual commencement of production, duringproduction, or in some manner after the pro-duction has terminated. In determiningwhether items are used directly, considerationmust be given to the following factors:

A. Where the items in question areused;

B. When the items in question areused; and

C. How the items in question are usedto produce a farm product.

(B) Pursuant to section 144.045.1, RSMo,farm machinery or equipment that would oth-erwise qualify as exempt farm machinery andequipment will not lose its exempt statusmerely because the machinery or equipmentis attached to a vehicle or real property. Suchequipment includes, but is not limited to, agrinder mixer mounted on a vehicle or spe-cial livestock flooring. When exempt farmmachinery or equipment attached to a motorvehicle is sold with the motor vehicle, thepart of the total sales price attributable to thefarm machinery or equipment is exempt fromtax if the farm machinery or equipment isseparately invoiced. If not separatelyinvoiced, the total sales price is subject to taxas a motor vehicle.

(C) Pursuant to section 144.047, RSMo,farm machinery includes aircraft used solelyfor aerial application of agricultural chemi-cals.

(D) Pursuant to section 144.030.2(34),RSMo, all sales of grain bins for storage ofgrain for resale are exempt; pursuant to thissection, parts purchased separately for thesebins are not exempt. However, grain bins,including all parts, that are used in produc-tion of a farm product and qualify as farmmachinery and equipment are exempt pur-suant to section 144.030.2(22), RSMo.

(E) Pursuant to section 144.063, RSMo,fencing and motor fuel used for agriculturalpurposes are exempt.

(F) The fact that particular items may beconsidered to be essential or necessary willnot automatically entitle them to exemption.The following categories of items are exclud-ed from the meaning of the term farmmachinery and farm equipment, including

supplies, and are subject to tax: 1. A motor vehicle and parts for a motor

vehicle do not qualify as exempt farmmachinery or equipment. A trailer and partsfor a trailer generally do not qualify as taxexempt farm machinery or equipment. Theterms motor vehicle and trailer are defined byChapter 301, RSMo;

2. Containers and storage devices suchas oil and gas storage tanks, pails, buckets,and cans;

3. Hand tools and hand-operated itemssuch as wheelbarrows, hoes, rakes, pitch-forks, shovels, brooms, wrenches, pliers, andgrease guns;

4. Attachments and accessories notessential to the operation of the machineryitself (except when sold as part of the assem-bled unit) such as cigarette lighters, radios,canopies, air-conditioning units, cabs, deluxeseats, tool or utility boxes, and lubricators;

5. Equipment used in farm managementsuch as communications and office equip-ment, repair, service, security, or fire protec-tion equipment;

6. Building materials and general heat-ing, lighting, and ventilation equipment fornonproduction areas; and

7. Machinery and equipment used for adual purpose, one purpose being agriculturaland the other being nonagricultural, are notexempt.

(G) Example A is a list of items of farmmachinery, equipment, and supplies that willusually be exempt if used exclusively for agri-cultural purposes on land owned or leased forthe purpose of producing farm products andused directly in producing farm products orlivestock to be sold ultimately at retail.

(4) Examples.(A) Usually Exempt Items.

Anti-freezeArtificial insemination equipmentAugersBale loaderBale transportation equipmentBaler twineBaler wireBalersBatteries for farm machinery and equip-ment

Bedding used in production of livestockor poultry for food or fiber

Binder twineBindersBroodersBulk feed storage tanksBulk milk coolersBulk milk tanksBulldozers used exclusively in agricul-tural production

Calcium for tiresCalf weaners and feedersCattle currying and oiling machineCattle feeder, portableChain saws for commercial use in har-vesting timber, lumber, and in orchardpruning

Chicken pluckersChoppersCleansing agents and disinfectants foragricultural process

CombinesConveyors, portableCorn pickersCrawlers, tractorCrushersCultipackersCultivatorsCurtains and curtain controls for live-stock and poultry confinement areas

Debeakers for productive animalsDehorners for productive animalsDiscsDragsDryersDustersEar TagsEgg handling equipmentEnsilage cuttersEtherFans, livestock and poultryFarm tractorsFarm wagonsFarrowing houses, portableFarrowing cratesFeed cartsFeed grinders/mixersFeed storage binsFeedersFencing MaterialsFence PostsFertilizer distributorsField drain tileFlooring slatsFoggers Forage boxesForage harvesterFreonFruit gratersFruit harvestersFuel additivesGatesGeneratorsGestation cratesGPS—Global Positioning System equip-ment

Grain augersGrain bins for storage of grain for resale(but not separately billed parts or add-ons to these grain bins)

Grain bindersGrain conveyors

Grain drillsGrain elevators, portableGrain handling equipmentGrain plantersGreases and oilsHarrows (including spring-tooth harrow)Hay loadersHead gatesHeaters, livestock and poultryHog feeders, portableHog ringsHoists, farmHusking machines Hydraulic fluid Hydro-coolers Incubators Irrigation equipment Light bulbs Livestock feeding, watering, and han-dling equipment

Lubricating oils and grease Manure handling equipment (includingfront and rear-end loaders and blades)

Manure spreaders Marking chalk Milk cans Milk coolers Milk strainers Milking equipment (including bulk milkrefrigerators, coolers, and tanks)

Milking machine Motor Fuel (gasoline, diesel fuel, kero-sene, and blended fuel)

Mowers, hay and rotary blade used exclusively for agricultural purposes

Off-road utility vehicles, other than all-terrain vehicles (provided the vehiclequalifies as farm machinery or equip-ment)

Panels, livestock Pickers Planters Plows Posthole diggers Poultry feeder, portable Pruning and picking equipment Repair and replacement parts for exemptmachinery

Rollers Root vegetable harvesters Rotary hoes Scales (not truck scales) Seed cleaners Seed planters Seeders Shellers Silo unloaders Snow Fence Sorters SowersSprayersSpreaders

Sprinkler systems, livestock and poultrySqueeze chutesStarting FluidSubsoilerTarps to protect agriculture productsThreshing machinesTillersTires for exempt machineryTractors, farmVacuum coolersVegetable gradersVegetable washersVegetable waxersWagons, farmWashers, fruit, vegetable, and eggWaxersWeedersWire fencing

(B) Usually Taxable Items. Acetylene torches Air compressors Air tanks All-terrain vehicles (unlike an off-road

utility vehicle that does not meet the defini-tion of a motor vehicle, an all-terrain vehicleis a motor vehicle because it has a seat that isstraddled and handlebars for steering)

Automobiles Axes Barn ventilators Brooms Brushes Building materials and building supplies Bulldozers Cement Chain saws Construction tools Electrical wiring Equipment and supplies for home or personal use

Fence building tools Field toilets Fire prevention equipment Garden hose Garden rakes and hoes Gasoline tanks and pumps Golf carts Hammers Hand tools Hog ringers Lamps Lanterns Lawnmowers Nails Office supplies and equipment Packing room supplies Paint and decals Personal property installed in or used inhousing for farm workers

Pumps for household or lawn use Pumps, gasoline Refrigerators for home use


Secretary of State




Repair tools Road maintenance equipment Road scrapers Roofing Sanders Shovels Silos Small tools Snowplows and snow equipment Staples Supplies for home or personal use Tanks, air Tanks, gasoline Tools for repair construction Tractors, garden Truck beds Water hose Welding equipment Wrenches

(C) A farmer purchases a lawnmower. Thefarmer uses the lawnmower to mow in anorchard, as well as to mow his lawn. The pur-chase of the lawnmower is subject to tax,because the lawnmower is not used exclusive-ly and directly for agricultural production.

(D) A farmer purchases a water chiller foruse to control the climate inside the hatchersand setters. The water chiller is also used tocool the administrative areas in the hatchery.The purchase of the water chiller is subject totax, because it is not used exclusively foragricultural production.

(E) A farmer takes his tractor to the imple-ment dealer for routine maintenance, whichincludes changing the oil, filters, andantifreeze. The sale of the oil, filters, andantifreeze are exempt.

(F) A farmer buys a bale spike to beinstalled on his pickup truck. The bale spikeis not subject to tax.

(G) A farm supply store sells commercialrabbitry equipment, such as feeders, nestboxes and wire hanging cages used for rabbitcages and feeders, to a farmer who raises rab-bits in confinement for human consumption.These items are not subject to tax.

AUTHORITY: section 144.270, RSMo Supp.2009 and section 144.705, RSMo 2000.*Original rule filed Nov. 18, 1999, effectiveJune 30, 2000. Amended: Filed Oct. 2, 2009,effective May 30, 2010.

*Original authority: 144.270, RSMo 1939, amended 1941,1943, 1945, 1947, 1955, 1961, 2008; and 144.705, RSMo1959.

Charles A. Johnson, Jr. v. Director of Rev-enue (AHC 1986). A seed cleaner was pur-chased under a claim of exception to processsoybeans. The Commission ruled thatalthough the taxpayer bought the seed clean-er to process his own soybeans, he used theequipment to process other farmers’ seed aswell. Processing the seed of others failed to

meet the requirement that the equipment beused directly and exclusively for the produc-tion of farm products.

Crystal Lake Fisheries v. Director of Rev-enue (AHC 1989). A nearby creek couldflood raceways used to raise rainbow trout. Adike prevents the creek from flooding theraceways. A bulldozer was purchased, whichwas used to repair and maintain the dike. Thebulldozer is also used to prevent flooding ofpasture, hay, and land containing hardwoodand softwood trees, all of which are harvest-ed as required. The court found that the bull-dozer in question met the three requirementsof the exemption statute. The bulldozer wasused exclusively for agricultural purposes, onland owned or leased for the purpose of farm-ing, and directly in producing farm products.

12 CSR 10-110.910 Livestock

PURPOSE: Sections 144.030.2(1),144.030.2(7), 144.030.2(22), 144.030.2(29)and 144.030.2(32), RSMo, exempt from taxa-tion certain livestock, feed and feed additives,medicines and vaccines, and pesticides andherbicides. This rule explains the require-ments that must be met to qualify for theseexemptions.

(1) In general, the sale of livestock, animalsor poultry used for breeding or feeding pur-poses, feed for livestock or poultry, feedadditives, medications or vaccines adminis-tered to livestock or poultry in the productionof food or fiber, and sales of pesticides andherbicides used in the production of aquacul-ture, livestock or poultry are exempt fromtax.

(2) Definition of Term.(A) Aquaculture—The controlled propaga-

tion, growth and harvest of aquatic organismsas defined in section 277.024, RSMo.

(B) Commercial breeder—A person, otherthan a hobby or show breeder, engaged in thebusiness of breeding animals for sale orexchange in return for consideration and whoharbors more than three (3) intact females forthe primary purpose of breeding animals forsale.

(C) Feed—Food essential for growth, fat-tening or nourishment of livestock or poultry.

(D) Feed additives—Tangible personalproperty, including medicine or medical addi-tives added to feed.

(E) Livestock—Cattle, calves, sheep,swine, ratite birds, including but not limitedto, ostrich and emu, aquatic products asdefined in section 277.024, RSMo, elk docu-

mented as obtained from a legal source andnot from the wild, goats, horses, otherequine, or rabbits raised in confinement forhuman consumption.

(F) Poultry—Any domesticated bird, suchas adult or baby chickens, turkeys, ducks,guinea fowl or geese.

(3) Basic Application of Exemptions.(A) Pursuant to section 144.030.2(1),

RSMo, sales of feed for livestock or poultryare not subject to tax.

(B) Pursuant to section 144.030.2(22),RSMo, sales of feed additives, medicationsor vaccines administered to livestock or poul-try in the production of food or fiber, andsales of pesticides used in the production oflivestock or poultry for food or fiber are notsubject to tax. Examples include hormones,digestive aids, antibiotics, hog wormers, ton-ics, medical preparations.

(C) Pursuant to section 144.030.2(7),RSMo, sales of animals used for breeding orfeeding purposes are exempt. Unlike theexemptions for feed and feed additives, whichare limited to livestock or poultry, thisexemption applies to all animals.

(D) Pursuant to section 144.030.2(22),RSMo, sales of bedding used in the produc-tion of livestock or poultry for food or fiberare exempt. Examples of bedding mayinclude, but are not limited to, wood shav-ings, straw and shredded paper.

(E) Pursuant to section 144.030.2(29),RSMo, livestock sales are exempt when theseller is engaged either in the growing, pro-ducing or feeding of such livestock, or in thebusiness of buying and selling, bartering orleasing of such livestock.

(F) Pursuant to section 144.030.2(32),RSMo, sales of pesticides or herbicides usedin the production of aquaculture, livestock orpoultry are exempt.

(G) Pursuant to section 144.030.2(35),RSMo, sales of feed which are developed forand used in the feeding of pets owned by acommercial breeder when such sales aremade to a commercial breeder, licensed pur-suant to sections 273.325 to 273.357, RSMoare exempt.

(H) Sales of poultry to persons to produceeggs for the sole purpose of the person’s con-sumption are subject to tax.

(I) Sellers of poultry are not subject to taxwhen—

1. The poultry is sold for breeding pur-poses; or

2. The poultry is sold to persons whoraise the poultry for subsequent sale indressed or processed form; or

3. The poultry is used to produce eggsto be ultimately sold in processed form or

otherwise at retail; or4. The poultry are purchased for resale.

(J) Sales of animals for the purchaser’spersonal enjoyment or use only, are subject totax. Sales of animals for breeding or feedingpurposes as part of a business enterprise arenot subject to tax.

(4) Examples.(A) An individual purchases feed, nonpre-

scription vaccines, and bedding for showhorses. The purchase of the feed is not sub-ject to tax, however the purchase of the vac-cines and the bedding is subject to tax.

(B) A farmer purchases feed, vaccines andbedding for use in his swine operation. Thepurchases of the feed, vaccines and beddingare exempt.

(C) A rancher breeds and sells horses. Thesales of the horses are not subject to tax.

(D) A rabbit farmer raises rabbits, whichare sold for processing as food for humanconsumption. Feed for the rabbits is not sub-ject to tax because rabbits raised in confine-ment for human consumption are livestock.

(E) A person sells feed to a pet shop whichraises and sells rabbits to the general publicas pets. The sale of the feed is subject to tax.

(F) A fish farmer purchases fish for use inhis aquacultural operation. The purchase ofthe fish is exempt from tax.

(G) An individual decides to construct andstock a lake on his farm for recreational fish-ing by his family, neighbors and friends. Thepurchase of the fish is subject to tax.

(H) A breeder of parakeets purchases feedfor breeding stock. The bird feed is subject totax, because a parakeet breeder does not fitthe definition of a commercial breeder.

AUTHORITY: section 144.270, RSMo 1994.*Original rule filed Jan. 3, 2000, effective July30, 2000.


12 CSR 10-110.920 Sales of Grains, Seed,Pesticides, Herbicides and Fertilizers

PURPOSE: Sections 144.030.2(1), (22), and(32), RSMo, exempt the sales of certaingrains, seed, pesticides, limestone, fertilizerand herbicides. This rule explains therequirements that must be met in order toqualify for these exemptions. Section144.020.1(3), RSMo, taxes certain utility ser-vices. This rule explains the application ofthis taxing provision for sales to agriculturalconsumers.

(1) In general, the sale of grains to be con-

verted into foodstuffs or seed, and limestone,fertilizer, and herbicides used in connectionwith the growth or production of crops, live-stock or poultry is exempt from tax.

(2) Definition of Terms.(A) Herbicides—Chemical substances

used to destroy or inhibit the growth ofplants, especially weeds.

(B) Livestock—See 12 CSR 10-110.900.(C) Pesticides—Chemicals used to kill

pests, especially insects. Pesticides includeadjuvants such as crop oils, surfactants, wet-ting agents and other pesticide carriers usedto improve or enhance the effect of a pesti-cide and the foam used to mark the applica-tion of pesticides and herbicides for the pro-duction of crops, livestock or poultry.

(3) Basic Application of Tax.(A) The sale of grain to be converted into

foodstuffs ultimately sold in processed format retail is exempt.

(B) The sale of seed, lime or fertilizer usedin producing crops that will be sold at retailor will be fed to livestock or poultry to besold ultimately in processed form at retail isexempt.

(C) Sales of pesticides or herbicides usedin the production of crops, orchards, aqua-culture, livestock or poultry are exempt.

(D) Seed, pesticides and fertilizers sold fornonagricultural use are subject to tax. Salesof fertilizer for lawns, shrubbery and similarornamental uses and seeds for ornamentalpurposes are examples of sales subject to tax.

(E) The sale of electricity, water, and gasused for agricultural production is exempt.

(4) Examples.(A) A pesticide dealer sells pesticides to an

orchard to spray on the fruit trees to killinsects. The sale of the pesticide is not sub-ject to tax.

(B) An agricultural chemical dealer sellsfoam marker to a farmer to aid in determin-ing where herbicides have been sprayed oncrops. The sale of the foam marker is notsubject to tax.

(C) A seed dealer sells seed, pesticides andfertilizer to a construction company for useon a construction site. These sales are subjectto tax.

(D) A pesticide dealer sells fly spray fordairy cattle and rat and mouse poison for usein the dairy barn. The sale of the fly spray isnot subject to tax. The sale of the rat andmouse poison is not subject to tax because itis used in the production of an agricultureproduct.

AUTHORITY: section 144.270, RSMo 1994.*Original rule filed Jan. 3, 2000, effective July30, 2000.


Conagra Poultry Co. v. Director of Revenue,862 S.W.2d 915 (Mo. banc 1993). Woodshavings were sold by the taxpayer, a turkeyprocessor, to its contractors as part of thecontractors’ compensation for raising theturkeys. The contractors expected to use asfertilizer all the litter that the turkey-raisingoperation would produce in their own farm-ing. The court ruled that at the time the woodshavings passed to the contractors, the woodshavings had no value as fertilizer. The woodshaving become fertilizer upon absorbingnutrients in the turkey droppings. The woodshavings were not exempt as materials used inprocessing because even though the woodshavings became a component part of the fer-tilizer, the contractors used the fertilizer fortheir own farming and did not sell any prod-ucts for final use or consumption.

Norwin G. Heimos Greenhouse, Inc. v.Director of Revenue, 724 S.W.2d 505 (Mo.banc 1987). Gas, water and electricity wereused for the operation of greenhouses. Arefund was requested on tax paid on utilitiesused in the greenhouse’s production of flowerand vegetable plants for sale to retailers. Thecourt found that the greenhouse’s use of util-ities constituted agricultural consumptionand was not subject to sales tax under Section144.020.1(3), RSMo. The legislatures distin-guished between agricultural and commercialin the property tax statutes and the Employ-ment Security Law. The court concluded thatthe legislature also intended that agriculturalconsumers be considered as a class separatefrom commercial consumers for sales tax pur-poses.

12 CSR 10-110.950 Letters of ExemptionIssued by the Department of Revenue

PURPOSE: Chapter 144, RSMo provides thatcertain organizations are exempt. This rulesets out the steps necessary to obtain a letterof exemption from the department.

(1) In general, the department issues letters ofexemption to qualifying exempt entities.Documentation verifying the exempt status ofthe organization must be filed with thedepartment to obtain a letter of exemption.

(2) Application of the Rule.(A) The seller is responsible for collecting

tax unless the exempt entity provides proofthat it is exempt. One form of proof ofexemption is a letter of exemption issued bythe department.


Secretary of State




(B) An organization seeking a letter ofexemption certificate must complete a Mis-souri Sales/Use Tax—Exemption Applica-tion—Form 1746. If the documentation estab-lishes that the entity qualifies as an exemptentity, the department issues a letter ofexemption. Once a letter of exemption isissued by the department, it will continue ineffect unless there are changes in the struc-ture or operation of the organization causingthe exemption to be invalid.

(C) The department may require the fol-lowing supporting documentation to verifythe claim:

1. A copy of the Articles of Incorpora-tion, Bylaws or both;

2. A copy of the Section 501 tax exemp-tion letter or ruling issued by the UnitedStates Department of Treasury, Internal Rev-enue Service;

3. A copy of the tax exemption rulingissued by the assessing officers in each coun-ty in which the applicant’s property is or willbe located for property tax purposes;

4. Financial statements of the organiza-tion for the previous three (3) years, indicat-ing sources and amount of revenue, and abreakdown of the disbursements, or if justbeginning the organization, an estimated bud-get for one (1) year;

5. A copy of the not-for-profit certifi-cate, registration or charter issued by theMissouri secretary of state’s office, if regis-tered or incorporated within Missouri; and

6. Any other documents, statements andinformation as may reasonably be requestedby the Department of Revenue.

(D) If any of the documents requestedabove are not submitted with the application,a letter of explanation must accompany theapplication. Federal agencies and instrumen-talities, Missouri state agencies and Missouripolitical subdivisions are not required to sendsupporting documentation. Out-of-state polit-ical subdivisions do not qualify.

(E) Foreign diplomatic and consular per-sonnel exempt from Missouri sales by treatyneed not obtain a letter of exemption. TheUnited States Department of State will issuean exemption card for use.

AUTHORITY: section 144.270, RSMo 2000.*Original rule filed Aug. 1, 2000, effectiveJan. 30, 2001. Amended: Filed Oct. 15,2002, effective April 30, 2003.


12 CSR 10-110.955 Sales and Purchases—Exempt Organizations

PURPOSE: Sections 144.030.1, 144.030.2(6),144.030.2(17), 144.030.2(19), 144.030.2(20),144.030.2(21), 144.030.2(22), 144.030.2(27),144.030.2(36) and 144.062, RSMo exemptcertain types of organizations from tax on cer-tain transactions. This rule clarifies whichtransactions are exempt for each type of orga-nization.

(1) In general, some organizations are exemptfrom tax on all or certain sales and purchas-es, while other organizations are only exempton all or certain purchases. An exemptionfrom federal income tax does not necessarilyexempt an organization from state sales oruse tax.

(2) Definition of Terms.(A) Exempt organization—one (1) of the

following types of organizations:1. United States government or agency;2. Political subdivisions of the state of

Missouri;3. Missouri Department of Transporta-

tion;4. Rural water districts;5. Religious organizations and institu-

tions;6. Charitable organizations and institu-

tions;7. Public elementary and secondary

schools;8. Not-for-profit civic, social, service or

fraternal organizations;9. Eleemosynary, penal institutions and

industries of the state of Missouri;10. Public and private not-for-profit

post-secondary educational institutions;11. State of Missouri relief agencies;12. Benevolent, scientific and educa-

tional agricultural associations;13. Nonprofit summer theater organiza-

tions;14. Missouri state fair and county agri-

cultural and mechanical societies; 15. Private not-for-profit elementary and

secondary schools;16. Interstate compact agencies.

(B) Charitable—to benefit the commongood and welfare of the people of a commu-nity while relieving government of a financialburden that it would otherwise be required tomeet.

(C) Civic—concerned with and related tothe citizenry at large and benefiting the com-munity it serves on an unrestricted basis.

(D) Direct sales—sales of tangible person-al property or taxable services to an organi-zation for use in its exempt functions andactivities or sales by an organization wherethe net proceeds from such sales are for itscharitable purpose.

(E) Direct costs—costs directly incurred inmaking direct sales. Direct costs do notinclude indirect costs such as overhead costs.

(F) Educational—to provide with knowl-edge or training.

(G) Net proceeds—the proceeds remainingfrom direct sales after deducting direct costs.

(H) Exemption letter—a document issuedby the Department of Revenue recognizing anorganization’s exemption from sales or pur-chases or both.

(3) Basic Application of Rule.(A) All sales of tangible personal property

or taxable services to the United States gov-ernment or its agencies and all sales of tangi-ble personal property used exclusively in themanufacturing, processing, modification orassembling of products that are sold to theUnited States government or its agencies areexempt from tax. See 12 CSR 10-112.300.

(B) All sales of tangible personal propertyor taxable services to the state of Missouri orits political subdivisions are exempt from tax.Except for school districts and the MissouriDepartment of Transportation, sales by thestate of Missouri and its political subdivisionsare subject to tax. Sales by school districtsand the Missouri Department of Transporta-tion are exempt from tax. Amounts paid in orfor any place of amusement, entertainment orrecreation, games or athletic events, includ-ing museums, fairs, zoos and planetariums,owned or operated by a political subdivisionare exempt from tax, if all the proceeds ben-efit the political subdivision. Sales to otherstates and their political subdivisions are notexempt from tax.

(C) All sales of tangible personal propertyto Missouri rural water districts are exemptfrom tax. Sales by such organizations aresubject to tax, unless otherwise exempt.

(D) All sales made to or by any religiousand charitable organizations and institutionsin their religious, charitable or educationalfunctions and activities are exempt from tax.All sales by the same type of organizationsand institutions of other states are exemptfrom tax providing such organizations andinstitutions are exempt from a similar tax intheir own states.

(E) All direct sales made to or by Missourinot-for-profit civic, social, service or frater-nal organizations, including qualified frater-nal organizations exempt under Internal Rev-enue Code Section 501(c)(8) and (10), solelyin their civic or charitable functions andactivities are exempt from tax providing thenet proceeds are designated for civic or char-itable functions and activities. Sales to or bynot-for-profit civic, social, service or frater-nal organizations of other states are exempt


Secretary of State


from tax if such organizations are exemptfrom a similar tax in their own states and oth-erwise qualify for the exemption in Missouri.

(F) All sales made to or by public elemen-tary and secondary schools in their educa-tional functions and activities are exemptfrom tax. School districts are also exemptfrom all sales by or to the district. All salesto or by public elementary and secondaryschools of other states are exempt from taxproviding such public elementary and sec-ondary schools are exempt from a similar taxin their own states.

(G) All sales to eleemosynary, penal insti-tutions and industries of the state of Missouriare exempt from tax. Sales by such organiza-tions are subject to tax, unless otherwiseexempt.

(H) All sales to public and private not-for-profit post-secondary education institutionsare exempt from tax. Sales by such organiza-tions are subject to tax, unless otherwiseexempt. Sales made to or by public and pri-vate not-for-profit post-secondary educationinstitutions of other states are exempt fromtax if such organizations are exempt from asimilar tax in their own states.

(I) All sales to state of Missouri reliefagencies are exempt from tax. Sales by suchorganizations are subject to tax, unless other-wise exempt.

(J) All ticket sales by benevolent, scientif-ic and educational agricultural associationswhich are formed to foster, encourage, andpromote progress and improvement in the sci-ence of agriculture and in the raising andbreeding of animals are exempt from tax. Allticket sales by the same type of associationsof other states are exempt from tax providingsuch associations are exempt from a similartax in their own states.

(K) All ticket sales by nonprofit summertheater organizations exempt from federalincome tax under the provisions of the Inter-nal Revenue Code are exempt from tax. Allticket sales by the same type of organizationsof other states are exempt from tax providingsuch organizations are exempt from a similartax in their own states.

(L) All admission charges and entry fees tothe Missouri state fair and any fair conductedby a county agricultural and mechanical soci-ety organized and operated pursuant to sec-tions 262.290 to 262.530, RSMo are exemptfrom tax.

(M) All sales to private not-for-profit ele-mentary and secondary schools are exemptfrom tax. All sales to private not-for-profitelementary and secondary schools of otherstates are exempt from tax if such organiza-tions are exempt from a similar tax in theirown states.

(N) All sales to an interstate compact agen-cy created pursuant to sections 70.370 to70.430, RSMo (“Bi-State DevelopmentAgency”) and sections 238.010 to 238.100,RSMo (“Kansas City Area TransportationAuthority”) in the exercise of the functionsand activities of such agencies as provided bycompact are exempt from tax.

(O) For exempt entities listed in 144.062,RSMo, all sales of tangible personal proper-ty and materials, for the purpose of con-structing, repairing or remodeling facilitiesthat are related to the entity’s exempt func-tions and activities, to a contractor or otherentity purchasing for the exempt entity pur-suant to the requirements of section 144.062,RSMo, are exempt from tax. To claim theexemption, the exempt entity must provide aproject exemption certificate to all contrac-tors, subcontractors or other entities. Suchcontractors, subcontractors and other entitiesmust provide a copy of the project exemptioncertificate to sellers when purchasing tangiblepersonal property or materials for such facil-ities. See 12 CSR 10-112.010.

(4) Examples.(A) A nonprofit, fraternal benefit organiza-

tion supports several local youth activities.An Exemption Letter for the organization wasobtained from the Department of Revenue.The organization operates a lounge that isopen to the public. A substantial amount ofits revenue is derived from beverage sales inits lounge. All revenue from the lounge isdeposited into the organization’s generalaccount and is not separately accounted for.All operational expenses, as well as costs ofthe local youth activities, are paid from thegeneral account. Although the organizationhas an Exemption Letter, all beverage salesare subject to tax as the net proceeds frombeverage sales are not separately accountedfor and used solely for the organization’scivic activity of supporting local youth activ-ities.

(B) A nonprofit fraternal benefit organiza-tion will hold a chili feed to buy public parkplayground equipment. All net proceeds ofthe direct sales of chili will go to the purchaseof the playground equipment. The organiza-tion may purchase the chili ingredients andserving equipment exempt from tax andshould not charge a sales tax on the chilisales.

(C) A nonprofit charitable organizationoperates a gift shop located within a nonprof-it hospital. The hospital serves both payingand indigent patients. All profits remainingafter paying for expenses of the gift shop goto benefit the hospital. Customers of the giftshop are primarily the hospital’s patients and

visitors and not the general public. All salesto and by the organization are exempt fromtax because its sales are limited to hospitalpatients and visitors and all profits are for thecharitable purpose of the hospital, to providemedical care for all who may seek its ser-vices.

(D) A Missouri contractor purchases mate-rials and supplies in Missouri to perform aconstruction contract in a neighboring statefor a public secondary school. The purchasesare exempt providing the public secondaryschool in the other state is exempt from asimilar tax in its own state.

(E) A Missouri contractor purchases mate-rials and supplies in Missouri to perform aconstruction contract for a Missouri schooldistrict. The school district is an exemptentity listed in section 144.062, RSMo. Priorto making its purchases, the contractorobtains an authorized exemption certificatefrom the district. The contractor’s purchasesare exempt from tax because it obtained acopy of the authorized exemption certificateprior to making its purchases.

(F) A Missouri charitable organization isauthorized and operates a Missouri fee officefor the Department of Revenue. The profits ofthe organization are used to purchase clothingand books for indigent families. Purchases ofequipment and supplies for operating its feeoffice are not exempt from tax as these pur-chases are not for its charitable purpose. Pur-chases of clothing and books for indigentfamilies are exempt from tax as these pur-chases are for its charitable purpose.

AUTHORITY: section 144.270, RSMo 2000.*Original rule filed July 31, 2001, effectiveFeb. 28, 2002.


St. John’s Medical Center, Inc. v.Spradling, 510 S.W.2d 417 (Mo. 1974). Non-profit hospitals and a county hospital servedpaying and indigent patients. The hospitaloperated cafeterias and other nonprofit char-itable organizations operated gift shop withineach hospital. The cafeterias and gift shopsserved primarily staff, patients and visitors,as there was no intent to serve the generalpublic. All profits from the cafeterias and giftshops were given to the hospitals. The prima-ry purpose of operating the cafeterias and giftshops was not to make profits, but to use anyincome from those operations for the opera-tion of the hospitals for benefit of each hospi-tal's patients whether paying or indigent.Sales by the cafeterias and gift shops wereexempt from tax.



Anheuser-Busch Employees’ Credit Union v.Director of Revenue, Case No. 90-001646 RS(A.H.C. 1992). A credit union that was amember-owned and controlled not-for-profitMissouri credit union organized with the pur-pose to encourage thrift and to educate itsmembers in the prudent and responsible useof money was not exempt from tax as a char-itable or educational organization as itsactivities were not charitable or educationalin nature. The credit union was also notexempt as a civic, social or service organiza-tion as sales made by or to the credit unionwere not within its civic or charitable func-tions and activities.

Benevolent and Protective Order of the Elksv. Director of Revenue, Case No. 92-000138RV (A.H.C. 1992). The Elks Club was a not-for-profit fraternal organization that receivedan Exemption Letter from the department ofrevenue. The Elks operated a bar and soldsoft drinks, alcoholic drinks and snack foodsto its members and guests and used these rev-enues to pay for its costs of operation, and tomake charitable and civic donations. The rev-enues from the bar were not exempt from taxas the profits were not used solely for exemptpurposes and the bar was primarily operatedfor fraternal and social reasons and not sole-ly to raise money for charitable and civic pur-poses.

Godwin v. Director of Revenue (AHC 1991).A city contracted with taxpayer to manageand operate a golf course owned and main-tained by the city. The taxpayer deposited allreceipts from fees for use of golf carts and thecourse and fees for separate driving rangeand pro shop owned and operated by the tax-payer in a single bank account controlled bythe taxpayer. Each week, the taxpayer remit-ted the contractual percentage of the cart andcourse fees to the city. The taxpayer retainedall the other fees. The Commission held thatall proceeds of the cart and course fees wereexempt from tax under section 144.030.2(17),RSMo because the course was owned by thecity and operated through a contract with thetaxpayer. The Commission also held the feesfrom the pro shop and driving range were notexempt because these activities were the tax-payer’s own enterprise and all proceeds wereretained by the taxpayer.

Zoological Park v. Director of Revenue(AHC 1991). The AHC held that the exemp-tion provided by section 144.020.2(17),RSMo for charges in or for a place of amuse-ment owned or operated by a municipalityincludes all sales made by the municipalplace of amusement, including sales of tangi-

ble personal property.

National Organization of Black LawEnforcement Executives, St. Louis Chapterv. Director of Revenue, Case No. RV-85-1244(A.H.C. 1988). The organization was a Mis-souri not for profit corporation exempt fromfederal tax under Internal Revenue Code Sec-tion 501(c)(3). Its membership criteria wasvery general with the only requirement that amember have an interest in the goals of theorganization. Its primary purposes were toevaluate legislation, form a network of sup-port for minorities in law enforcement, dis-courage racism in the field of criminal justiceand give financial assistance to the less for-tunate. Its purposes were accomplished bymonitoring legislation, donating funds tolocal community service projects and provid-ing a social forum for those interested in thearea of law enforcement. All of its activitieswere open to the public. It derived its fundsthrough dues and fundraisers. The organiza-tion qualified as a charitable organizationexempt from tax.

St. John’s Regional Medical Health Centerv. Director of Revenue, Case No. RS-88-0054(A.H.C. 1988). Sales made by and to a hos-pital’s fitness center were exempt as sales toa service organization in its educational func-tion. The fitness center’s various exerciseprograms and exercise instructors assigned toeach member taught and motivated individu-als to think and act properly as it relates tohealthy lifestyles.

St. Louis Calligraphy Guild v. Director ofRevenue, Case No. RS-86-1517 (A.H.C.1987). The Guild was a Missouri not for prof-it chartered organization. Its purposes wereto encourage co-operation and free inter-course among calligraphers, calligraphyteachers, calligraphy students, craftsmen,publishers and other in calligraphic activi-ties, to hold competitions and exhibitions, tofurther the education and appreciation of cal-ligraphy and to promote the improvement,advancement and excellence of calligraphy.Membership in the Guild was open to thepublic and only limited by one’s interest incalligraphy. The Guild did not qualify to beexempt from tax, as it did not relieve govern-ment of the burden of providing a service thatwould otherwise be a governmental responsi-bility.

Humanalysis, Inc. v. Director of Revenue,Case No. RS-85-2289 (A.H.C. 1987). Hum-analysis was a not for profit corporationqualified as a tax-exempt organization underInternal Revenue Code Section 501(c)(3).

Humanalysis was created to conduct researchstudies for federal, state and local govern-ments with an emphasis on social welfare.Humanalysis is fully compensated on a costbasis by the agency that grants it money forits research. Humanalysis did not qualify as acharitable organization exempt from tax as itdid not relieve government of the burden ofproviding a service which would otherwise bea governmental responsibility because it waspaid for by its research service. However,Humanalysis qualified as a not for profit civicorganization exempt from tax as its researchwas conducted on a not for profit basis, wasavailable to the public and served the publicas it was conducted with a special emphasison problems regarding social welfare.

12 CSR 10-110.990 Tax—Sales of Food

PURPOSE: Section 144.014, RSMo providesfor a reduced tax rate for certain sales offood. This rule explains when the reducedrate applies.

(1) In general, qualified sales of food by aqualified business are taxed at a reduced staterate of 1.225% plus any applicable local tax.All other sales of food are taxed at the fullstate rate of 4.225% plus any applicable localtax.

(2) Basic Application of Rule.(A) Sales of food subject to the reduced

rate include food that qualifies under the Fed-eral Food Stamp Program. This includes foodor food products for home consumption andseeds and plants for use in gardens to producefoods for personal consumption. Alcoholicbeverages, tobacco and hot food items readyfor immediate consumption do not qualify forthe reduced rate. Food items refrigerated orat room temperature qualify for the reducedrate, even if the purchaser elects to heat theitem on the business’ premises. Bakery items,even if still warm from baking, are qualifiedfoods.

(B) A business whose gross receipts fromsales of food and drink prepared by the busi-ness for immediate consumption, either on oroff premises, are 80% or less of its total grossreceipts must remit tax on its qualifying foodsales at a reduced state tax rate of 1.225%plus any applicable local tax.

(C) Sales of qualifying food through vend-ing machines are subject to the reduced taxrate.

(3) Examples.(A) A grocery store sells nonfood items

and qualifying food items. The store will

charge the regular tax rate on the nonfooditems and the reduced tax rate on the qualify-ing food items.

(B) A vending machine company providestwo vending machines to a business. Onemachine is for cold items and one machinekeeps items hot. Only the cold items are eli-gible for the reduced tax rate. The hot itemsare subject to the regular tax rate.

(C) A convenience store sells burritos fromits freezer. The convenience store provides amicrowave so the purchaser can heat it. Thesale of the burrito is taxed at the reduced ratebecause it is a qualifying food item.

(D) A vending machine company sellspopcorn and soup in microwave pouches andcontainers. These items are sold at room tem-perature and are heated by the purchaser in amicrowave provided in the vending area.These items are eligible for the reduced taxrate.

(E) A fast food restaurant sells cold saladsand cold soft drinks. These cold items repre-sent approximately 10% of total grossreceipts. Because the restaurant’s total foodsales of items prepared for immediate con-sumption are more than 80% of the totalsales, the restaurant should charge the regulartax rate on all its food sales.

(F) A convenience store sells preparedcold sub sandwiches, ice cream and colddrinks. The store also prepares and sells hotdogs and chili. All items are sold “to go.”The store should charge the reduced tax rateon the cold items, but should charge the reg-ular tax rate on the hot items.

(G) A company sells pre-packaged icecream bars made by an unrelated ice creammanufacturer to neighborhood families fromtrucks. The ice cream truck driver shouldcharge the reduced rate of tax because theseller does not prepare the ice cream bars andare not consumed on the premises of the sell-er.

(H) An ice cream vendor sells soft conesand pre-packaged ice cream bars made by anunrelated ice cream manufacturer at a foot-ball game. The gross receipts from the salesof soft cones are less than 80% of the icecream vendor’s total gross receipts. None ofthe ice cream qualifies for the reduced ratebecause it is consumed on the premises.

AUTHORITY: section 144.270, RSMo 1994.*Original rule filed June 29, 2000, effectiveJan. 30, 2001.



Secretary of State


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