12 CSR 10-110.955 - Sales and Purchases- Exempt Organizations
PURPOSE: Sections 144.030.1, 144.030.2(6), 144.030.2(17), 144.030.2(19), 144.030.2(20), 144.030.2(21), 144.030.2(22), 144.030.2(27), 144.030.2(36) and 144.062, RSMo exempt certain types of organizations from tax on certain transactions. This rule clarifies which transactions are exempt for each type of organization.
(1) In general, some organizations are exempt
from tax on all or certain sales and purchases, while other organizations are
only exempt on all or certain purchases. An exemption from federal income tax
does not necessarily exempt an organization from state sales or use
tax.
(2) Definition of Terms.
(A) Exempt organization-one (1) of the
following types of organizations:
1. United
States government or agency;
2.
Political subdivisions of the state of Missouri;
3. Missouri Department of
Transportation;
4. Rural water
districts;
5. Religious
organizations and institutions;
6.
Charitable organizations and institutions;
7. Public elementary and secondary
schools;
8. Not-for-profit civic,
social, service or fraternal organizations;
9. Eleemosynary, penal institutions and
industries of the state of Missouri;
10. Public and private not-for-profit
post-secondary educational institutions;
11. State of Missouri relief
agencies;
12. Benevolent,
scientific and educational agricultural associations;
13. Nonprofit summer theater
organizations;
14. Missouri state
fair and county agricultural and mechanical societies;
15. Private not-for-profit elementary and
secondary schools;
16. Interstate
compact agencies.
(B)
Charitable-to benefit the common good and welfare of the people of a community
while relieving government of a financial burden that it would otherwise be
required to meet.
(C)
Civic-concerned with and related to the citizenry at large and benefiting the
community it serves on an unrestricted basis.
(D) Direct sales-sales of tangible personal
property or taxable services to an organization for use in its exempt functions
and activities or sales by an organization where the net proceeds from such
sales are for its charitable purpose.
(E) Direct costs-costs directly incurred in
making direct sales. Direct costs do not include indirect costs such as
overhead costs.
(F) Educational-to
provide with knowledge or training.
(G) Net proceeds-the proceeds remaining from
direct sales after deducting direct costs.
(H) Exemption letter-a document issued by the
Department of Revenue recognizing an organization's exemption from sales or
purchases or both.
(3)
Basic Application of Rule.
(A) All sales of
tangible personal property or taxable services to the United States government
or its agencies and all sales of tangible personal property used exclusively in
the manufacturing, processing, modification or assembling of products that are
sold to the United States government or its agencies are exempt from tax. See
12
CSR 10-112.300.
(B) All sales of tangible personal property
or taxable services to the state of Missouri or its political subdivisions are
exempt from tax. Except for school districts and the Missouri Department of
Transportation, sales by the state of Missouri and its political subdivisions
are subject to tax. Sales by school districts and the Missouri Department of
Transportation are exempt from tax. Amounts paid in or for any place of
amusement, entertainment or recreation, games or athletic events, including
museums, fairs, zoos and planetariums, owned or operated by a political
subdivision are exempt from tax, if all the proceeds benefit the political
subdivision. Sales to other states and their political subdivisions are not
exempt from tax.
(C) All sales of
tangible personal property to Missouri rural water districts are exempt from
tax. Sales by such organizations are subject to tax, unless otherwise
exempt.
(D) All sales made to or by
any religious and charitable organizations and institutions in their religious,
charitable or educational functions and activities are exempt from tax. All
sales by the same type of organizations and institutions of other states are
exempt from tax providing such organizations and institutions are exempt from a
similar tax in their own states.
(E) All direct sales made to or by Missouri
not-for-profit civic, social, service or fraternal organizations, including
qualified fraternal organizations exempt under Internal Revenue
Code Section 501(c)(8) and (10), solely in their civic or charitable
functions and activities are exempt from tax providing the net proceeds are
designated for civic or charitable functions and activities. Sales to or by
not-for-profit civic, social, service or fraternal organizations of other
states are exempt from tax if such organizations are exempt from a similar tax
in their own states and otherwise qualify for the exemption in
Missouri.
(F) All sales made to or
by public elementary and secondary schools in their educational functions and
activities are exempt from tax. School districts are also exempt from all sales
by or to the district. All sales to or by public elementary and secondary
schools of other states are exempt from tax providing such public elementary
and secondary schools are exempt from a similar tax in their own
states.
(G) All sales to
eleemosynary, penal institutions and industries of the state of Missouri are
exempt from tax. Sales by such organizations are subject to tax, unless
otherwise exempt.
(H) All sales to
public and private not-for-profit post-secondary education institutions are
exempt from tax. Sales by such organizations are subject to tax, unless
otherwise exempt. Sales made to or by public and private not-for-profit
post-secondary education institutions of other states are exempt from tax if
such organizations are exempt from a similar tax in their own states.
(I) All sales to state of Missouri relief
agencies are exempt from tax. Sales by such organizations are subject to tax,
unless otherwise exempt.
(J) All
ticket sales by benevolent, scientific and educational agricultural
associations which are formed to foster, encourage, and promote progress and
improvement in the science of agriculture and in the raising and breeding of
animals are exempt from tax. All ticket sales by the same type of associations
of other states are exempt from tax providing such associations are exempt from
a similar tax in their own states.
(K) All ticket sales by nonprofit summer
theater organizations exempt from federal income tax under the provisions of
the Internal Revenue Code are exempt from tax. All ticket
sales by the same type of organizations of other states are exempt from tax
providing such organizations are exempt from a similar tax in their own
states.
(L) All admission charges
and entry fees to the Missouri state fair and any fair conducted by a county
agricultural and mechanical society organized and operated pursuant to sections
262.290
to
262.530,
RSMo are exempt from tax.
(M) All
sales to private not-for-profit elementary and secondary schools are exempt
from tax. All sales to private not-for-profit elementary and secondary schools
of other states are exempt from tax if such organizations are exempt from a
similar tax in their own states.
(N) All sales to an interstate compact agency
created pursuant to sections
70.370
to 70.430, RSMo ("Bi-State Development Agency") and sections
238.010
to
238.100,
RSMo ("Kansas City Area Transportation Authority") in the exercise of the
functions and activities of such agencies as provided by compact are exempt
from tax.
(O) For exempt entities
listed in 144.062, RSMo, all sales of tangible personal property and materials,
for the purpose of constructing, repairing or remodeling facilities that are
related to the entity's exempt functions and activities, to a contractor or
other entity purchasing for the exempt entity pursuant to the requirements of
section
144.062,
RSMo, are exempt from tax. To claim the exemption, the exempt entity must
provide a project exemption certificate to all contractors, subcontractors or
other entities. Such contractors, subcontractors and other entities must
provide a copy of the project exemption certificate to sellers when purchasing
tangible personal property or materials for such facilities. See
12 CSR
10-112.010.
(4) Examples.
(A) A nonprofit, fraternal benefit
organization supports several local youth activities. An Exemption Letter for
the organization was obtained from the Department of Revenue. The organization
operates a lounge that is open to the public. A substantial amount of its
revenue is derived from beverage sales in its lounge. All revenue from the
lounge is deposited into the organization's general account and is not
separately accounted for. All operational expenses, as well as costs of the
local youth activities, are paid from the general account. Although the
organization has an Exemption Letter, all beverage sales are subject to tax as
the net proceeds from beverage sales are not separately accounted for and used
solely for the organization's civic activity of supporting local youth
activities.
(B) A nonprofit
fraternal benefit organization will hold a chili feed to buy public park
playground equipment. All net proceeds of the direct sales of chili will go to
the purchase of the playground equipment. The organization may purchase the
chili ingredients and serving equipment exempt from tax and should not charge a
sales tax on the chili sales.
(C) A
nonprofit charitable organization operates a gift shop located within a
nonprofit hospital. The hospital serves both paying and indigent patients. All
profits remaining after paying for expenses of the gift shop go to benefit the
hospital. Customers of the gift shop are primarily the hospital's patients and
visitors and not the general public. All sales to and by the organization are
exempt from tax because its sales are limited to hospital patients and visitors
and all profits are for the charitable purpose of the hospital, to provide
medical care for all who may seek its services.
(D) A Missouri contractor purchases materials
and supplies in Missouri to perform a construction contract in a neighboring
state for a public secondary school. The purchases are exempt providing the
public secondary school in the other state is exempt from a similar tax in its
own state.
(E) A Missouri
contractor purchases materials and supplies in Missouri to perform a
construction contract for a Missouri school district. The school district is an
exempt entity listed in section
144.062,
RSMo. Prior to making its purchases, the contractor obtains an authorized
exemption certificate from the district. The contractor's purchases are exempt
from tax because it obtained a copy of the authorized exemption certificate
prior to making its purchases.
(F)
A Missouri charitable organization is authorized and operates a Missouri fee
office for the Department of Revenue. The profits of the organization are used
to purchase clothing and books for indigent families. Purchases of equipment
and supplies for operating its fee office are not exempt from tax as these
purchases are not for its charitable purpose. Purchases of clothing and books
for indigent families are exempt from tax as these purchases are for its
charitable purpose.
Notes
*Original authority: 144.270, RSMo 1939, amended 1941, 1943, 1945, 1947, 1955, 1961.
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
PURPOSE: Sections 144.030.1, 144.030.2(6), 144.030.2(17), 144.030.2(19), 144.030.2(20), 144.030.2(21), 144.030.2(22), 144.030.2(27), 144.030.2(36) and 144.062, RSMo exempt certain types of organizations from tax on certain transactions. This rule clarifies which transactions are exempt for each type of organization.
(1) In general, some organizations are exempt from tax on all or certain sales and purchases, while other organizations are only exempt on all or certain purchases. An exemption from federal income tax does not necessarily exempt an organization from state sales or use tax.
(2) Definition of Terms.
(A) Exempt organization-one (1) of the following types of organizations:
1. United States government or agency;
2. Political subdivisions of the state of Missouri;
3. Missouri Department of Transportation;
4. Rural water districts;
5. Religious organizations and institutions;
6. Charitable organizations and institutions;
7. Public elementary and secondary schools;
8. Not-for-profit civic, social, service or fraternal organizations;
9. Eleemosynary, penal institutions and industries of the state of Missouri;
10. Public and private not-for-profit post-secondary educational institutions;
11. State of Missouri relief agencies;
12. Benevolent, scientific and educational agricultural associations;
13. Nonprofit summer theater organizations;
14. Missouri state fair and county agricultural and mechanical societies;
15. Private not-for-profit elementary and secondary schools;
16. Interstate compact agencies.
(B) Charitable-to benefit the common good and welfare of the people of a community while relieving government of a financial burden that it would otherwise be required to meet.
(C) Civic-concerned with and related to the citizenry at large and benefiting the community it serves on an unrestricted basis.
(D) Direct sales-sales of tangible personal property or taxable services to an organization for use in its exempt functions and activities or sales by an organization where the net proceeds from such sales are for its charitable purpose.
(E) Direct costs-costs directly incurred in making direct sales. Direct costs do not include indirect costs such as overhead costs.
(F) Educational-to provide with knowledge or training.
(G) Net proceeds-the proceeds remaining from direct sales after deducting direct costs.
(H) Exemption letter-a document issued by the Department of Revenue recognizing an organization's exemption from sales or purchases or both.
(3) Basic Application of Rule.
(A) All sales of tangible personal property or taxable services to the United States government or its agencies and all sales of tangible personal property used exclusively in the manufacturing, processing, modification or assembling of products that are sold to the United States government or its agencies are exempt from tax. See 12 CSR 10-112.300.
(B) All sales of tangible personal property or taxable services to the state of Missouri or its political subdivisions are exempt from tax. Except for school districts and the Missouri Department of Transportation, sales by the state of Missouri and its political subdivisions are subject to tax. Sales by school districts and the Missouri Department of Transportation are exempt from tax. Amounts paid in or for any place of amusement, entertainment or recreation, games or athletic events, including museums, fairs, zoos and planetariums, owned or operated by a political subdivision are exempt from tax, if all the proceeds benefit the political subdivision. Sales to other states and their political subdivisions are not exempt from tax.
(C) All sales of tangible personal property to Missouri rural water districts are exempt from tax. Sales by such organizations are subject to tax, unless otherwise exempt.
(D) All sales made to or by any religious and charitable organizations and institutions in their religious, charitable or educational functions and activities are exempt from tax. All sales by the same type of organizations and institutions of other states are exempt from tax providing such organizations and institutions are exempt from a similar tax in their own states.
(E) All direct sales made to or by Missouri not-for-profit civic, social, service or fraternal organizations, including qualified fraternal organizations exempt under Internal Revenue Code Section 501(c)(8) and (10), solely in their civic or charitable functions and activities are exempt from tax providing the net proceeds are designated for civic or charitable functions and activities. Sales to or by not-for-profit civic, social, service or fraternal organizations of other states are exempt from tax if such organizations are exempt from a similar tax in their own states and otherwise qualify for the exemption in Missouri.
(F) All sales made to or by public elementary and secondary schools in their educational functions and activities are exempt from tax. School districts are also exempt from all sales by or to the district. All sales to or by public elementary and secondary schools of other states are exempt from tax providing such public elementary and secondary schools are exempt from a similar tax in their own states.
(G) All sales to eleemosynary, penal institutions and industries of the state of Missouri are exempt from tax. Sales by such organizations are subject to tax, unless otherwise exempt.
(H) All sales to public and private not-for-profit post-secondary education institutions are exempt from tax. Sales by such organizations are subject to tax, unless otherwise exempt. Sales made to or by public and private not-for-profit post-secondary education institutions of other states are exempt from tax if such organizations are exempt from a similar tax in their own states.
(I) All sales to state of Missouri relief agencies are exempt from tax. Sales by such organizations are subject to tax, unless otherwise exempt.
(J) All ticket sales by benevolent, scientific and educational agricultural associations which are formed to foster, encourage, and promote progress and improvement in the science of agriculture and in the raising and breeding of animals are exempt from tax. All ticket sales by the same type of associations of other states are exempt from tax providing such associations are exempt from a similar tax in their own states.
(K) All ticket sales by nonprofit summer theater organizations exempt from federal income tax under the provisions of the Internal Revenue Code are exempt from tax. All ticket sales by the same type of organizations of other states are exempt from tax providing such organizations are exempt from a similar tax in their own states.
(L) All admission charges and entry fees to the Missouri state fair and any fair conducted by a county agricultural and mechanical society organized and operated pursuant to sections 262.290 to 262.530, RSMo are exempt from tax.
(M) All sales to private not-for-profit elementary and secondary schools are exempt from tax. All sales to private not-for-profit elementary and secondary schools of other states are exempt from tax if such organizations are exempt from a similar tax in their own states.
(N) All sales to an interstate compact agency created pursuant to sections 70.370 to 70.430, RSMo ("Bi-State Development Agency") and sections 238.010 to 238.100, RSMo ("Kansas City Area Transportation Authority") in the exercise of the functions and activities of such agencies as provided by compact are exempt from tax.
(O) For exempt entities listed in 144.062, RSMo, all sales of tangible personal property and materials, for the purpose of constructing, repairing or remodeling facilities that are related to the entity's exempt functions and activities, to a contractor or other entity purchasing for the exempt entity pursuant to the requirements of section 144.062, RSMo, are exempt from tax. To claim the exemption, the exempt entity must provide a project exemption certificate to all contractors, subcontractors or other entities. Such contractors, subcontractors and other entities must provide a copy of the project exemption certificate to sellers when purchasing tangible personal property or materials for such facilities. See 12 CSR 10-112.010.
(4) Examples.
(A) A nonprofit, fraternal benefit organization supports several local youth activities. An Exemption Letter for the organization was obtained from the Department of Revenue. The organization operates a lounge that is open to the public. A substantial amount of its revenue is derived from beverage sales in its lounge. All revenue from the lounge is deposited into the organization's general account and is not separately accounted for. All operational expenses, as well as costs of the local youth activities, are paid from the general account. Although the organization has an Exemption Letter, all beverage sales are subject to tax as the net proceeds from beverage sales are not separately accounted for and used solely for the organization's civic activity of supporting local youth activities.
(B) A nonprofit fraternal benefit organization will hold a chili feed to buy public park playground equipment. All net proceeds of the direct sales of chili will go to the purchase of the playground equipment. The organization may purchase the chili ingredients and serving equipment exempt from tax and should not charge a sales tax on the chili sales.
(C) A nonprofit charitable organization operates a gift shop located within a nonprofit hospital. The hospital serves both paying and indigent patients. All profits remaining after paying for expenses of the gift shop go to benefit the hospital. Customers of the gift shop are primarily the hospital's patients and visitors and not the general public. All sales to and by the organization are exempt from tax because its sales are limited to hospital patients and visitors and all profits are for the charitable purpose of the hospital, to provide medical care for all who may seek its services.
(D) A Missouri contractor purchases materials and supplies in Missouri to perform a construction contract in a neighboring state for a public secondary school. The purchases are exempt providing the public secondary school in the other state is exempt from a similar tax in its own state.
(E) A Missouri contractor purchases materials and supplies in Missouri to perform a construction contract for a Missouri school district. The school district is an exempt entity listed in section 144.062, RSMo. Prior to making its purchases, the contractor obtains an authorized exemption certificate from the district. The contractor's purchases are exempt from tax because it obtained a copy of the authorized exemption certificate prior to making its purchases.
(F) A Missouri charitable organization is authorized and operates a Missouri fee office for the Department of Revenue. The profits of the organization are used to purchase clothing and books for indigent families. Purchases of equipment and supplies for operating its fee office are not exempt from tax as these purchases are not for its charitable purpose. Purchases of clothing and books for indigent families are exempt from tax as these purchases are for its charitable purpose.
Notes
*Original authority: 144.270, RSMo 1939, amended 1941, 1943, 1945, 1947, 1955, 1961.