Missouri: The Taxability of Bartering and Gift Certificates
- Nov 30, 2012 | Gail Cole
Bartering is an ancient practice, and one that continues to flourish today. Rather than purchasing goods or services with cash, people exchange goods and services with each other. Anything can be exchanged in this way, so long as everyone involved agrees on the value of the goods and services involved. Things can get really fun when there is disagreement on the value and haggling begins. Think Monty Python and The Life of Brian.
The case involves an Applicant who operates 20 radio stations in Missouri. In exchange for radio advertising for community businesses, the Applicant receives git certificates for those businesses, for varying amounts. The Applicant then sells those gift certificates at a reduced rate to other people, who presumably use them to make purchases at the community businesses.
The issue examined by the Missouri DOR is this: "Are Applicant's sales of the gift certificates to individuals to purchase goods and services at the community businesses subject to tax?"
Tangible v Intangible
The response is an unequivocal "no." The gift certificates are considered intangible, not tangible. According to relevant Missouri Revised Statutes:
"A tax is hereby levied and imposed upon all sellers … in the business of selling tangible personal property or rendering taxable service at retail in this state." (144.020.1) Since the gift certificates are not tangible, they cannot be taxed.
However, the people who use the gift certificates to purchase goods and services at the businesses must pay sales tax on the value of those transactions. Those goods and services are tangible, so they can be taxed.
Additionally, the Department of Revenue reminds that bartering arrangements such as the one in this case should be reported on income tax returns.