Section 30 Government Contractor

• Library: Tax Law 2009

Section 144.030.2(6), RSMo Supp. 2007, provides that sales tax does not apply to tangible personal property used exclusively in the manufacturing, processing, modification, or assembly of products sold to the United States government or to any of its agencies. If the property in question is not used exclusively in the named activities or if the relevant products are not sold exclusively to the United States government or its agencies, the exemption is not available. See, e.g., Rosiek Constr. Co. v. Dir. of Revenue, No. R-79154, 1980 WL 5119 (Mo. Admin. Hearing Comm’n, July 11, 1980).

Government contractors are not subject to taxation on sales to the United States or its agencies. McDonnell-Douglas Corp. v. Dir. of Revenue, 945 S.W.2d 437 (Mo. banc 1997) (a federal defense contractor was entitled to a refund of Missouri use taxes paid on overhead materials and supplies that were purchased to fulfill federal government contracts; under the terms of the contracts, the title to the property was transferred to the government before the property was used or consumed, and thus, the resale exemption applied); Olin Corp. v. Dir. of Revenue, 945 S.W.2d 442 (Mo. banc 1997) (Olin, an operator of a federal government ammunition plant, was not liable for sales or use tax on purchases made in its name for operation of the plant because the operator did not gain title, control, or ownership in the property).

Section 144.054, RSMo Supp. 2007, exempts from all sales and use tax:

all sales and purchases of tangible personal property, utilities, services, or any other transaction that would otherwise be subject to the state or local sales or use tax when such sales are made to or purchases are made by a contractor for use in fulfillment of any obligation under a defense contract with the United States government

Section 144.054.3.

As discussed in §9.42 below, construction contractors are generally regarded as consumers of tangible personal property they purchase that becomes part of the completed project, subjecting them to sales tax on those purchases. With the exception now provided by § 144.054.3 for defense contractors, MoDOR applies this principle, declaring that sales to persons contracting with the United States, its agencies, the state of Missouri, or its political subdivisions are subject to sales tax, regardless of to whom title is to pass under the sale contract. See State ex rel. Thompson- Stearns-Roger v. Schaffner, 489 S.W.2d 207 (Mo. 1973). Under the...