What is the taxability of delivery charges in Missouri?
As a general rule, services are exempt from sales and use tax in Missouri unless specifically taxable by law. Delivery and freight services are not specifically identified as taxable services. Therefore, they are exempt from sales and use tax as standalone services.
In January 2015, the Missouri Supreme Court added some complexity to this area of law when it issued a decision in Alberici Constructors, Inc. v. Director of Revenue, 452 S.W.3d 632 (Mo. banc 2015) (“Alberici”). In Alberici, the Court examined the taxability of delivery charges. The decision, in part, examined whether separately stated freight/delivery charges are considered part of the sales transaction.
The Court stated that taxability depends on whether the parties intended the provision of the services to be part of the sales transaction. In determining whether the charges are part of the sale, the Court stated the primary factor is the intention of the parties, but listed a number of other factors, including:
- When title passes from the seller to the purchaser;
- Whether the delivery charges are separately stated;
- Who controls the cost and means of delivery;
- Who assumes the risk of loss during delivery; and
- Whether the seller derives financial benefit from delivery
Ultimately, the Court held that charges for the delivery of a rented crane are subject to use tax because the parties intended for delivery of the crane to be part of the crane rental. This was a rather unexpected conclusion from the Court.
What happened next?
In August 2016, the Missouri Department of Revenue (“DOR”) issued notices to all registered businesses informing them of the decision. The DOR also published an FAQ bulletin on its website discussing the case and issue. The bulletin, in accordance with Alberici, states that, “In general, if parties intend delivery to be part of the sale of the tangible personal property, the delivery charge is subject to tax even when the delivery charge is separately stated.”
Furthermore, the notice states that, conversely, if shipping and handling charges are not part of the sale of tangible personal property, they are not subject to tax if separately stated.
So, are delivery charges taxable or not in Missouri?
Well, it depends. The answer is not as clear as it may have been prior to Alberici. The decision in Alberici and the subsequent DOR bulletin have created a gray area regarding the taxability of delivery charges.
The general rule as it currently stands is that delivery charges are taxable if parties intend delivery to be part of the sale of the tangible personal property. In addition, and most importantly, a thorough analysis of the aforementioned factors is necessary to truly conclude whether delivery charges are taxable.
We at Sovos are continuing to monitor this situation as it develops in Missouri!
The post Special Delivery: Missouri and the Taxability of Delivery Charges appeared first on Sovos Compliance.