12 CSR 10-101.500 - Burden of Proof

        12 CSR 10-101.500 Burden of Proof

        PURPOSE: Section 136.300, RSMo, addresses which party has the burden of proof on any factual issue relevant to ascertaining the liability of a taxpayer. Sections 32.200, article V, section 2; 144.210; and 144.635, RSMo, also address the burden of proof and in particular the use of exemption certificates to meet the burden. Section 621.050, RSMo, addresses which party has the burden of proof in a proceeding before the Administrative Hearing Commission. This rule explains how these rules work together to determine which party has the burden of proof in a dispute involving sales or use tax.

        (1) In general, the taxpayer has the burden of proof except in specific circumstances.

        (2) Definition of Terms.

        (A) Burden of proof̶Burden of persuading the finder of fact that the existence of a fact is more probable than the nonexistence.

        (B) Good faith̶Honesty of intention and freedom from knowledge of circumstances which ought to put the holder upon inquiry.

        (3) Basic Application of Burden of Proof.

        (A) The director always has the burden of proof regarding̶

        1. Whether the taxpayer has been guilty of fraud with attempt to evade tax; and

        2. Whether the taxpayer is liable as the transferee of property of another taxpayer.

        (B) The taxpayer always has the burden of proof on any issue with respect to the applicability of any tax credit.

        (C) The taxpayer has the burden of proof on all other issues unless̶

        1. The taxpayer has produced sufficient evidence establishing there is a reasonable dispute with respect to the issue;

        2. The taxpayer has adequate records of its transactions and provides the Department of Revenue reasonable access to these records; and

        3. If both conditions are met, the director has the burden of proof with respect to any factual issue relevant to ascertaining the liability of a taxpayer.

        (D) A taxpayer can generally meet its burden of proof that a sale of tangible personal property, services, substances, or things was not a taxable sale at retail by obtaining and maintaining an exemption certificate signed by the purchaser or its agent. An exemption certificate that is not obtained in good faith, however, will not satisfy the burden of proof. Even when a taxpayer does not have a valid exemption certificate, it may prove that the transaction is exempt from sales and use tax by proof admissible under the applicable rules of evidence.

        (4) Examples.

        (A) The director alleges that a taxpayer fraudulently fabricated exemption certificates in order to evade sales tax. The director has the burden of proof.

        (B) A person is a donee, heir, legatee, devisee, or distributee of a taxpayer that owes sales tax. The director issues assessments to this person as a transferee. The director has the burden of proof to show the person is a transferee of the delinquent taxpayer.

        (C) An audited taxpayer is assessed unpaid sales tax on unreported sales of meals it provided to customers. The taxpayer has the burden of proof to supply the applicable documentation that it correctly collected and remitted sales tax on the meals provided to its customers. If the taxpayer had adequate records and provided those to the department during the audit, and later produces evidence establishing that the unreported sales of meals were to non-profit customers that presented exemption certificates to the taxpayer at the time of sale, the burden of proof then shifts to the director provided the exemption certificates were received in good faith.

        (D) An out-of-state vendor registered to collect use tax is assessed use tax on the sale of a computer to a Missouri customer. The vendor has the burden of proof to supply the applicable documentation that it correctly collected and remitted use tax on the sales of tangible personal property. If the vendor had adequate records and provided those to the department, the burden of proof then shifts to the director.

        (E) A taxpayer is assessed use tax on its purchase of a wood lathe that it purchased out-of-state. The taxpayer has the burden of proof to supply the applicable documentation that it purchased tangible personal property that was exempt from sales or use tax. If the taxpayer has adequate records which it made available to the department and produces evidence that the lathe is used to manufacture furniture later sold for ultimate use or consumption, the burden of proof then shifts to the director.

        (F) A taxpayer sells tangible personal property and claims that it was a sale for resale. The taxpayer presents a valid resale exemption certificate that was accepted in good faith. The taxpayer has met its burden of proof.

        (G) A jeweler sells an expensive diamond ring to his neighbor, known to the taxpayer not to be in the jewelry business. The neighbor presents an exemption certificate claiming that the ring was purchased for resale and therefore exempt from tax. The jeweler may not accept the exemption certificate without further inquiry.

        (H) A jeweler sells an expensive diamond ring to a purchaser unknown to the jeweler, but does not receive an exemption certificate. If the jeweler fails to collect and remit tax, upon assessment by the director the jeweler has the burden of proof and may prove that the sale was exempt through testimony and documents admissible under the rules of evidence.

        (I) A jeweler sells an expensive diamond ring to a purchaser unknown to the jeweler, but does not receive an exemption certificate. The jeweler presents to the department an invoice for the diamond ring showing it was sold to a wholesale jeweler. The burden of proof shifts to the director.

        AUTHORITY: section 144.270, RSMo 2016.* Original rule filed Nov. 18, 1999, effective June 30, 2000. Amended: Filed Oct. 2, 2018, effective April 30, 2019.

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

        Blevins Asphalt & Construction Co. v. Director of Revenue, 938 S.W.2d 899 (Mo. banc 1997). The taxpayer has the burden of proof in most cases. "Good faith," in the context of exemption certificates, requires honesty of intention and freedom from knowledge of circumstances that ought to put the holder upon inquiry. Accord Conagra Poultry Co. v. Director of Revenue, 862 S.W.2d 915 (Mo. banc 1993); Gammaitoni v. Director of Revenue, 786 S.W.2d 126 (Mo. banc 1990).