Section 40 ?Good Faith? Condition

• Library: Tax Law 2009

As indicated in §11.39 above, a vendor can generally meet its burden of proof for an exemption or exclusion claim by either:

• receiving and holding “in good faith” an exemption certificate signed by its customers or their agents; or

• evidentiary (e.g., documentary or testimonial) proof of compliance with the factual and substantive conditions underlying the claim (see, e.g., Jones v. Dir. of Revenue, No. 96-000341 RV, 1997 WL 797613 (Mo. Admin. Hearing Comm’n, Dec. 31, 1997) (names of noncertificated purchasers consisted of churches and other exempt entities, so exemptions were recognized))

In the former situation, Article V, § 2, of the Compact relieves a vendor of liability for a sales or use tax with respect to a transaction when the vendor “receives and accepts in good faith from a purchaser a resale or other exemption certificate.” For this purpose, a certificate signed by the purchaser and provided to the seller specifying the basis for the purchaser’s exemption claim or a copy of an exemption letter issued by MoDOR to an exempt entity and delivered to a seller is treated as an exemption certificate. 12 C.S.R. § 10-107.100(2)(A).

A like “good faith” condition is imposed when the purchaser delivers an exemption certificate. 12 C.S.R. §§ 10-3.522(2) and 10-3.534(1). “A seller who accepts, in good faith, a signed exemption certificate from the purchaser . . . is relieved of all liability on account of any erroneous claim of exemption and the purchaser or other person claiming exemption will be solely responsible for all taxes, interest and penalty due.” 12 C.S.R. § 10-3.192(5). Likewise, § 144.210.1, RSMo 2000, authorizes MoDOR to collect sales tax, interest, and penalties from a purchaser issuing an improper exemption claim. See also:

• § 144.620, RSMo 2000

• 12 C.S.R. § 10-3.536(2)

• Overland Steel, Inc. v. Dir. of Revenue, No. RS-79-0037, 1982 WL 12025 (Mo. Admin. Hearing Comm’n, June 25, 1982), aff’d on other issues, 647 S.W.2d 535 (Mo. banc 1983) (vendor not liable for tax arising from erroneous claim of exemption)

• 12 C.S.R. § 10-3.536(1) (purchaser or other persons claiming improper exemption will be solely responsible to MoDOR for all taxes and related penalties and interest)

• 12 C.S.R. §§ 10-4.140 and 10-3.522(1)

While a vendor remains liable for the tax (joint liability with the purchaser), MoDOR may proceed against the purchaser. 12 C.S.R. § 10-107.100(3)(F). If MoDOR collects the tax from the purchaser,
the vendor is entitled to a credit against the...