Missouri: Text Messaging Services Are Subject to Sales Tax
- May 28, 2015 | Gail Cole
The Missouri Department of Revenue has ruled that an out-of-state corporation (the Applicant) must apply Missouri sales tax to in-state sales of cloud-based text messaging service.
The Applicant’s Missouri customers are in the hospitality service industry, such as coffee shops, hotels and restaurants. They pay a small fee when signing up for the service and then a monthly service fee. They may also separately purchase or lease a printer from the Applicant, who buys them tax-free for resale.
The service provided runs on cloud-based computer networks accessible to customers and their patrons through both public telecommunication lines and customers’ internal Internet networks. Further details are explained as follows in the letter ruling (LR 7561):
“Applicant's customers' patrons are not charged any fee for using Applicant's service other than standard text messaging charges the patrons pay separately (if applicable) to their cell phone service provider. Applicant currently does not have any server located in Missouri. Applicant plans to enter and do business in Missouri in the near future.”
According to the department letter ruling, “Charges for Applicant’s text messaging service are subject to sales tax” based on the following sections of Missouri Revised Statutes:
- 144.020.1(1): Tax is imposed “upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state.”
- 144.020.1(4): A 4% tax is imposed on “the basic rate paid or charged on all sales of local and long distance telecommunications service to telecommunications subscribers and to others through equipment of telecommunications subscribers for the transmission of messages and conversations and upon the sale, rental or leasing of all equipment or services pertaining or incidental thereto[.]”
- 144.010.1(14): Telecommunications service is defined as “the transmission of information by wire, radio, optical cable, coaxial cable, electronic impulses, or other similar means. As used in this definition, ‘information' means knowledge or intelligence represented by any form of writing, signs, signals, pictures, sounds, or any other symbols."
In addition, the department concludes that the Applicant must charge sales tax on usage rental fees of the printers purchased for resale. Alternatively, the Applicant could pay sales tax on the initial purchase of the printers.
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