Understanding Missouri Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Missouri.
In Missouri sales tax is levied on all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable services at retail. The sales tax is imposed on the following sales or charges (including leases or rentals):
- tangible personal property,
- admission to places of amusement, recreation, games and athletic events,
- basic rate paid or charged for electricity, water and gas,
- basic rate paid or charged for telephone services and telegraph transmissions,
- rooms, meals, and drinks from places regularly offering such to the public,
- intrastate tickets for railroads, sleeping, dining and express cars, boats, airplanes, and buses and trucks licensed by the Department of Economic Development engaged in transportation of persons, and
- renting or leasing tangible personal property, unless the lessor or renter paid the tax when originally leasing the property.
Leases. In Missouri, the lease or rental of tangible personal property is subject to sales tax. However, no tax is imposed if the lessor or renter paid sales tax when the property was purchased or if the sale of the property would be exempt from sales and use taxes.
Sales and use tax rate. The state sales tax rate is 4.225 percent. Cities, counties and certain districts may also impose local sales taxes as well, so the amount of tax sellers collect from the purchaser depends on the combined state and local rate at the location of the seller. The state and local sales taxes are remitted together to the Department of Revenue. Once the seller remits sales tax to the department, the department then distributes the local sales taxes remitted by the sellers to the cities, counties and districts.
Sellers Bear Primary Responsibility Paying Over Sales
In Missouri sellers are subject to and are primarily responsible for collecting and remitting the sales tax. However, purchasers must pay the amount of sales tax to the sellers.
Absorbing the tax is not permitted. In Missouri it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Obtaining tax permits in Missouri
In Missouri every person required to collect the sales tax must obtain a license from the Missouri Director of Revenue. There is no charge for the sales tax license.
Many Transactions May Not Be Subject to Tax
Missouri has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Missouri sales tax. You'll want to check and see if you are exempt from the sales tax. An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
No Tax Is Due When Item Is Purchased for Resale
The seller or vendor has the burden of proving that a sale was not subject to sales or use tax. The seller must obtain exemption certificates from the purchaser and keep them as proof. Each invoice or bill of sale must indicate purchaser from whom an exemption certificate was obtained.
Requirements for resale exemption certificates. Retail certificates may be obtained from the state. As an alternative, Missouri also accepts the multistate exemption certificate that includes the following information:
- the purchaser's name and address;
- the name of the seller to whom it is given;
- the reason for the exemption;
- an authorized signature of the purchaser;
- the purchaser's license or registration number;
- the date and
- your good faith as the purchaser.
Blanket Resale Certificates Are Permitted
The seller or vendor has the burden of proving that a sale was not subject to sales or use tax. Sellers may accept blanket certificates from a purchaser that repeatedly purchases the same type of property or service for processing or resale. The seller must obtain exemption certificates from the purchaser and keep them as proof. Each invoice or bill of sale must indicate your name as the purchaser from whom an exemption certificate was obtained. Only one exemption certificate needs to be obtained from the buyer, provided the character of your operation doesn't change and the purchases are claimed under that exemption certificate. However, exemption certificates must be updated every five years.
Physical Presence Triggers Sales Tax Liability
Missouri has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Missouri. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Missouri? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Missouri for purposes of taking and transmitting orders from Missouri? If your employee or independent contractor goes into Missouri to take or transmit orders, your business may have physical presence in Missouri. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Missouri for purposes of delivering property? Frequent deliveries in Missouri by your trucks will give you physical presence in Missouri.
Missouri Allows Use of Sales Tax "Bracket System"
The bracket system may be followed by sellers in computing the sales tax. The 4.225 percent sales and use tax is computed on each dollar and/or fraction of a dollar according to the following table:
|Amount of Sale ||Tax |
|$0.00 to $0.11 ||no tax |
|0.12 to 0.35 ||$0.01 |
|0.36 to 0.59 ||0.02 |
|0.60 to 0.82 ||0.03 |
|0.83 to 1.06 ||0.04 |
|and so forth |
How to Recoup Excess Payments
If you included the refunded amounts in a sales tax return you may deduct the refunded amount from the gross receipts required to be stated in your next sales tax return. However, you must return to the purchaser any sales tax paid by the purchaser. If a credit can't be taken on the next filed sales tax return, you can apply for credit from the Department of Revenue. Before a refund will be made, you must show that arrangements have been made for the return of taxes paid by purchasers. Claims for refund must be filed within three years from the date of overpayment.
Missouri Imposes Use Tax on Out-of-State Purchases
A compensating use tax is imposed for the privilege of storing, using, or consuming within Missouri any article of tangible personal property. Use tax is not imposed on receipts that were subject to sales tax or on sales that would be exempt from the sales tax if made in Missouri. The liability for the use tax is imposed on persons storing, using, or consuming tangible personal property in the state.However, property brought into the state on which a sales or use tax has been paid in another state that is equal to, or in excess of, the Missouri tax is not subject to tax in Missouri.