Missouri Sales Tax Guide
Chapter 8: Understanding Missouri sales tax rules for shipping & handling
When it comes to sales tax, Missouri is a complicated state. While the statewide sales tax is only 4.225 percent, additional local taxes mean that the rate can go as high as 9.6 percent in some areas of the state. The state also adds on special taxes such as a Transactional Privilege Tax, requiring sellers to pay taxes on all gross receipts for their business.
Understandably, sellers in Missouri want to avoid paying sales tax whenever possible. When sales tax remittance isn’t required, businesses can skip the complicated calculations and simply charge the customer for the cost of the item. While businesses will be forced to pay sales tax on most goods sold in the state, they can get a break on delivery, shipping, and handling when they meet certain requirements.
Is Shipping Taxable in Missouri?
Like most states (and most everything in the world of sales and use tax), the answer is…it depends. There are a number of factors that impact whether the Missouri Department of Revenue will require you to collect sales tax on shipping and handling. We’ll outline some of those situations below. As is always the case, specific questions on shipping in Missouri and sales tax should be taken directly to a tax professional familiar with Missouri tax laws.
When are Shipping and Handling Charges Exempt?
The first step to exempting sales tax on the cost of delivery is to separately state the cost on the invoice. If the shipping is bundled in with the purchase price, sales tax must be paid on the entire amount. This also applies to handling.
If a purchaser is not required to pay the delivery charges as part of the sale price of tangible personal property, the amount paid for the delivery charges is not subject to sales tax if the charge for such service is separately stated.
What About Out-of-State Vendors?
Whether an out-of-state business pays sales tax on shipping to customers located in Missouri depends on whether that business has nexus in the state. A business qualifies as having nexus if it has a “direct connection” with the state. A letter ruling was issued refining the state’s nexus laws to include businesses that hold seminars and meetings in an effort to educate resellers about their products so that they can sell them.
A business also has nexus in Missouri if it maintains a physical location in the state, delivers maintenance services within the state, or sells a similar product in the state under a similar name. If a business has nexus in Missouri, it must register with the Department of Revenue and collect sales tax on purchases under the same laws that apply to Missouri-based businesses.
Calculating Sales Tax on Shipping
While Missouri’s sales tax laws can be complex, the Missouri Department of Revenue has a website designed to help business owners. The department has developed a section of its site to answer any questions businesses may have about exemptions. The site has a search box in the top-right corner that allows visitors to search by category or keyword. They can also scroll down and read specific statues and special bulletins.
In Missouri, the rule is that unless it is stated specifically as an exemption in the laws, a business must pay sales tax on products or services. Freight charges are listed as an exemption as long as the charge is stated separately.