Section 40 Leases of Tangible Personal Property Other Than Motor Vehicles, Trailers, Boats, and Outboard Motors

• Library: Tax Law 2009

In general, the sales tax applies to gross receipts from lease transactions. The definition of the term “gross receipts” includes lease or rental consideration when the right to continuous possession or use of any article of tangible personal property is granted under a lease or contract and the transfer of possession would be taxable if an outright sale were made and considered as a sale of the article. Section 144.010.1(3), RSMo Supp. 2007; see also Mo. Ltr. Rul. 8900 (Apr. 22, 1996) (property tax reimbursements by lessee not taxable).

If a person purchases tangible personal property in a “sale at retail” and pays sales tax at the time of purchase, subsequent rental
receipts from the property are not subject to sales tax. Section 144.020.1(8), RSMo Supp. 2007. See, e.g., Mobile Radio Commc’ns, Inc. v. Dir. of Revenue, No. RS-79-0199, 1982 WL 12037 (Mo. Admin. Hearing Comm’n, Dec. 16, 1982) (receipts derived from the rental of mobile radio pagers and mobile radios held exempt from sales tax because lessor paid sales tax on the mobile pagers and radios when the items were purchased). Conversely, the sales tax rules provide that the gross receipts derived from a lease of tangible personal property on which Missouri sales tax was not paid at the time of purchase are subject to sales tax. 12 C.S.R. § 10-108.700. Thus, a lessor of tangible personal property can choose to pay sales tax when the property is purchased or to collect sales tax on the subsequent rental receipts. See:

• Westwood Country Club v. Dir. of Revenue, 6 S.W.3d 885
  (Mo. banc 1999) (rentals of golf carts by a country club to its members were not subject to Missouri sales tax because the country club had remitted sales tax on the initial...