12 CSR 10-103.220 - Resale

PURPOSE: This rule interprets the resale exemption in section 144.615(6), RSMo, and the resale exclusion in section 144.010.1(9), RSMo.

(1) In general, purchases of tangible personal property or taxable services are not subject to sales or use tax if purchased for ultimate sale at retail.

(2) Definition of Terms.

(A) Purchase for resale-a purchase for ultimate sale at retail.

(B) Sale-any transfer of title or ownership to tangible personal property or rendering of taxable service for consideration.

(C) Sale at retail-a sale of tangible personal property or services for use or consumption by the purchaser that is taxable under section 144.020, RSMo.

(3) Basic Application of Tax.

(A) A taxpayer may purchase tangible personal property or taxable services for resale if the purchase is for subsequent sale at retail. Purchases of tangible personal property or taxable services that are not subsequently transferred in transactions that constitute sales at retail are taxable at the time of purchase.

(B) When tangible personal property is given away, tax must be paid at the time of purchase, unless there is a bargained for exchange between the seller and buyer and a direct quantitative connection between the giveaway and actual sales at retail.

(C) The purchase of tangible personal property resold as real property or incidental to the rendering of a non-taxable service is taxable.

(D) If a purchaser makes more than a nominal use of the tangible personal property before the resale takes place, the purchase is subject to tax.

(4) Examples.

(A) A grocery store purchases bread and other food items from a wholesaler. Because the food items will be resold, the grocery store may purchase them without paying tax.

(B) A grocery store purchases grocery bags. The grocery bags are provided only to customers who purchase merchandise. The grocery bags can be purchased exempt from tax because they are transferred to the customer as part of the sale of the merchandise.

(C) An appliance store purchases a refrigerator for its own use. Tax is due on the purchase of the refrigerator even if the refrigerator is ultimately sold at retail after its use.

(D) A taxpayer selling building materials purchases boxes and other packaging materials. These purchases are used to ship its products to its customers. The boxes and other packaging materials can be purchased exempt from tax as a purchase for resale.

(E) A taxpayer sells custom software. The taxpayer's purchases of compact discs and related packaging materials are subject to tax because custom software is the sale of a non-taxable service. Consequently, the compact discs and packing materials do not qualify as purchases for resale.

(F) A taxpayer purchases boxes to store merchandise within the taxpayer's warehouse. The boxes are not shipped to a customer. The purchase of the boxes is subject to tax.

(G) A business advertises a buy one, get one free sale. The business does not have to pay tax at the time of purchase of the "free" item because it is subsequently resold as part of the sales transaction.

(H) A professional baseball team gives promotional baseballs to the first 10,000 customers. The team should not pay tax on the purchase of the baseballs because tax is collected and remitted on the sale of the tickets.

Notes

12 CSR 10-103.220

AUTHORITY: sections 144.010(9) and 144.615(6), RSMo Supp. 2004 and 144.150, 144.270 and 144.705, RSMo 2000.* Original rule filed Sept. 27, 2000, effective March 30, 2001. Amended: Filed Aug. 26, 2005, effective Feb. 28, 2006.

AUTHORITY: sections 144.010(9) and 144.615(6), RSMo Supp. 2004 and 144.150, 144.270 and 144.705, RSMo 2000.* Original rule filed Sept. 27, 2000, effective March 30, 2001. Amended: Filed Aug. 26, 2005, effective Feb. 28, 2006.