Missouri: Tax Applies to Installation of Organizational Product
- Mar 16, 2015 | Gail Cole
A national seller of closet organization products asked the Missouri Department of Revenue if one of its new products would be subject to Missouri sales tax. The seller also asked if separately stated charges to assemble the product would be subject to sales tax. The answer to both questions was yes.
According to a Missouri Department of Revenue letter ruling, the product sold is tangible personal property. It can stand freely in a client’s house or it can be placed up against a wall or closet. If up against a wall, it may be attached with brackets. It is not, said the department, an exempt improvement to real property.
Under Missouri law, sales tax applies to the full price for a product and service if “the purchaser obtains a service as part of a transaction in which the true object is the purchase of tangible personal property.” This is true even when, as in this case, the service charge is separately stated. In this particular case, the seller of the product sends a subcontractor to the client when the product is delivered. The subcontractor assembles the product and, if necessary, attaches it to the wall.
The seller in this situation sells its products nationally. Each state puts its own unique twist on sales tax. In some, like Missouri, sales tax applies to the new product and installation services. Another state may exempt charges for either the product or the service. You never know until you know (and you hope you don't find out during an audit).
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Letter rulings are binding on the Missouri Department of Revenue--only with respect to the applicant--for a period of three years. That said, they can be extremely informative. Additional details about this particular case are available in LR 7513.