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Missouri Reverses Course on Delivery Charges
Missouri Senate Bill 16, which exempts usual and customary delivery charges that are separately stated from Missouri sales and use tax, was recently passed through the Missouri legislature and signed into law by Gov. Eric Greitens. The new law goes into effect August 28, 2017.
Historically, taxpayers would regularly treat separately stated delivery charges as exempt, and the Missouri Department of Revenue (DOR) seemed to agree. Taxpayers looked to regulatory language stating, “When a sale involves both tangible personal property and a nontaxable service, the sale of the tangible personal property will be subject to tax, and the service will not be subject to tax, if the sale of each is separate,” and “If the purchaser is not required to pay the service charge as part of the sale price of tangible personal property, the amount paid for the service is not subject to tax if the charge for such service is separately stated.”1
A Missouri Supreme Court decision in Alberici Constructors, Inc. v. Director of Revenue on January 13, 2015, caused a seismic shift in the taxability of delivery charges. The case focused on statutory language, which trumps regulatory language, and found if the parties intended the delivery service to be part of the transaction, it didn’t matter whether such charges were separately stated—they were taxable.
The DOR responded by sending letters to sellers of tangible personal property, putting them on notice that it intended to follow the new interpretation as a result of the Alberici case. If parties intended delivery to be part of the sale of tangible personal property, the delivery charge would be taxable, even when separately stated.
The number and types of businesses potentially affected were significant, ranging from florists to restaurants to lessors of construction equipment. Those businesses, in turn, contacted legislators, who passed the new law. Now the definitions of “sales price” and “gross receipts” for sales tax purposes specifically state that it “shall not include usual and customary delivery charges that are separately stated,”2 which, in effect, returns the law to the way it had been interpreted for years.
1Mo. Code Regs. 10-103.600
2Senate Bill No. 16, 99th General Assembly, 2017