Sales, Use and International Tax Activity Update - July 2009

Missouri Manufacturing Taxability – A Refreshing Refresher

There have been no recent legislative changes regarding manufacturing, a refresher of the rules is always good to keep at the top of our research review. Below are two tax regulations which generally describe how to apply the state level sales & use tax exemption. Keep in mind that while Missouri provides an exemption at the state level, local sales tax (not use tax) still applies.

10-111.011. Machinery, Equipment, Materials, and Chemicals Used or Consumed in Manufacturing, as Defined in Section 144.054 , RSMo

“(1) In general, the purchase of machinery, equipment, materials and chemicals used or consumed in manufacturing, processing, compounding, mining or producing any product or is used in research and development related to manufacturing, processing, compounding, mining or producing any product is exempt from state sales and use tax and local use tax, but not local sales tax….”

…”(3) Basic Application of Exemption. (A) Pursuant to section 144.054.2 , RSMo purchases of machinery, equipment, materials and chemicals used or consumed in manufacturing, processing, compounding, mining or producing any product or used in research and development related to manufacturing, processing, compounding, mining or producing any product is exempt from state sales and use tax and local use tax, but not local sales tax.

(B) The exemptions do not require that the owner of the facility be the purchaser to qualify for the exemption or that the purchaser be the one who uses the machinery, equipment and materials in an exempt fashion. All that is required is that the machinery, equipment and materials are used in a tax-exempt manner…”

…” (3) Basic Application of Exemption.

(A) Materials, manufactured goods, machinery, and parts that become a component part or ingredient of new personal property to be sold ultimately for final use or consumption are not subject to tax. Purchases of ingredients or component parts are exempt from tax if they are intended to and do become a part of the finished product. The exemption does not apply to materials that are totally consumed and are not intended to and do not become a part of the final product. In order to qualify for this exemption, the material in question must be intended to remain in the finished product in at least trace amounts for a specific purpose.

(B) Materials, including without limitation, slagging materials and firebrick, which are consumed in the manufacturing process by blending, reacting or interacting with or by becoming, in whole or in part, component parts or ingredients of steel products to be sold ultimately for final use or consumption are exempt from tax.

(C) If any portion of purchased material qualifies as an exempt ingredient or component part; the entire purchase is exempt from tax. The material is exempt even if a significant portion is consumed in the manufacturing process.

Materials purchased to be used as an ingredient or component part to repair existing property does not qualify for these exemptions because the property produced from the repair work does not constitute “new personal property.”…”

This regulation may be viewed at the Missouri Secretary of State website.

Mo. Code Regs. 10-110.200 Ingredient or Component Part Exemption, as Defined in Section , RSMo.

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