Section 16 Sale for Resale by Purchaser

• Library: Tax Law 2009

Section 144.010.1(10), RSMo Supp. 2007, in defining the term “sale at retail,” excludes property purchased “for resale in any form as tangible personal property.” Section 32.200, article V, paragraph 2, RSMo 2000, provides that, to qualify for the exemption, a seller must accept, in good faith, a resale exemption certificate from a purchaser who resells tangible personal property in the ordinary course of business. See also 12 C.S.R. §§ 10-103.220 and 10-3.534(1). If the resale exemption certificate is not accepted in good faith, the seller remains liable for the uncollected sales tax. Section 10-3.534(2). Procedural aspects governing the use of exemption certificates are discussed in more detail in Chapter 11 of this deskbook.

Section 144.210.1, RSMo 2000, states that the burden of proving that a sale of tangible personal property, services, substances, or things was not a sale at retail, subject to the sales tax, is on the seller who made the sale. 12 C.S.R. § 10-3.536(1). Although the seller remains liable for the sales tax if a claim of exemption by the purchaser is found to be improper, the Director of MoDOR may collect the tax from the purchaser directly. Section 144.210.1; 12 C.S.R. § 10-3.536(2). Any tax collected from the purchaser is credited against the amount due from the seller on the purchase.

There has been significant litigation regarding whether purchases
of packaging material qualify for the resale exemption. In this regard, the Supreme Court of Missouri adopted the evidentiary standard in Sipco, Inc. v. Director of Revenue, 875 S.W.2d 539 (Mo. banc 1994). Before Sipco, a seller of goods could claim an exclusion from sales or use tax on the purchase of its packaging materials for resale only if it could show that it specifically factored the cost of the packaging material into the price of the merchandise sold. House of Lloyd, Inc. v. Dir. of Revenue, 824 S.W.2d 914 (Mo. banc 1992); King v. Nat’l Super Mkts., Inc., 653 S.W.2d 220 (Mo. banc 1983).

In Sipco, the taxpayer purchased dry ice to preserve its pork products from spoilage during shipping. The Court held that the purchases of dry ice were not subject to use tax despite the fact that there was no extra or explicitly stated charge for the dry ice. The Court remarked that “one need not be an accountant to understand the value of the dry ice was factored directly or indirectly into the total consideration paid for the pork.” Sipco, 875 S.W.2d at 542. With respect to its earlier...