“Missouri Supreme Court Interprets 2007 Manufacturer’s Sales Tax Exemption” by Frank C. Carnahan
The Missouri Supreme Court decision in E & B Granite, Inc. V. Director of Revenue, No. SC 91010, Feb. 8, 2011, granted a refund of sales and use tax paid under protest by E & B Granite, Inc. (“E & B”) pursuant to section 144.054.2, RSMo Supp.2007.
Section 144.054.2 provides sales and use tax exemptions for:
[E]lectrical energy and gas, whether natural, artificial, or propane, water, coal, and energy sources, chemicals, machinery, equipment, and materials used or consumed in the manufacturing, processing, compounding, mining, or producing of any product ….”
The Supreme Court found that granite countertops manufactured by the taxpayer business were a “product” as required for application of exemption to taxpayer’s purchaser of granite slabs for use in manufacture of countertops, even though countertops were eventually installed on customers’ real property, and that the statutory language did not limit application of exemption to personal property sold ultimately for final consumption or tangible personal property, as compared with earlier enacted sales and use tax exemption statute.
This changed the prior treatment under Blevins v. Dir. of Revenue, 938 S.W.2d 899, 901 (Mo. banc 1997). The asphalt company in that case sought tax exemptions under section 144.030.2(2), which exempts sales and use taxes on purchases of:
Materials, …which when used in manufacturing … become a component part or ingredient of the new personal property resulting from such manufacturing … and which new personal property is intended to be sold ultimately for final use or consumption, …
The Court noted that although sections 144.054.2 and 144.030.2(2) both relate to sales and use tax exemptions for manufacturers, there are two notable differences in the sections: (1) section 144.030.2(2) applies to “personal property … sold ultimately for final consumption,” and the legislature chose not to include this phrase in section 144.054.2; rather, section 144.054.2 broadly applies to “any product.”; and (2) section 144.030.2(2) uses the phrase “new tangible personal property,” and the legislature did not include any reference to “tangible personal property” in section 144.054.2. Moreover, section 144.054.2 exemptions are “in addition to any state and local sales tax exemption provided in section 144.030,” indicating that the legislature intended to provide additional exemptions that are not allowed by section 144.030. In short, section 144.054.2 is broader than 144.030.2(2) and is not restricted by the phrases “personal property … sold ultimately for final consumption” and “tangible personal property.”
Manufacturers and contractors should review if they are entitled to a refund of taxes previously paid and tax due on returns going forward.