Current through Register Vol. 49, No. 18, September 16, 2024
PURPOSE: Section 144.054.2, RSMo, exempts machinery,
equipment, materials, and chemicals used or consumed in manufacturing,
processing, compounding, mining or producing any product, or used in research
and development related to manufacturing, processing, compounding, mining or
producing any product from state tax and local use tax, but not local sales
tax. This rule explains what elements must be met in order to qualify for these
exemptions.
(1) In general,
the purchase of machinery, equipment and materials used or consumed in
manufacturing, processing, compounding, mining or producing any product or used
in research and development related to manufacturing, processing, compounding,
mining or producing any product is exempt from state tax and local use tax, but
not local sales tax.
(2) Definition
of Terms.
(A) Equipment-See
12 CSR
10-111.010.
(B) Fabrication-See
12 CSR
10-111.010.
(C) Machinery-See
12 CSR
10-111.010.
(D) Manufacturing-See 12 CSR
10111.010.
(E) Mining-See
12 CSR
10-111.010.
(F) Producing-See
12 CSR
10-111.010.
(3) Basic Application of Exemption.
(A) Pursuant to section 144.054.2, RSMo,
purchases of machinery, equipment, materials and chemicals used or consumed in
manufacturing, processing, compounding, mining or producing any product or used
in research and development related to manufacturing, processing, compounding,
mining or producing any product is exempt from state tax and local use tax, but
not local sales tax.
(B) The
exemptions do not require that the owner of the facility be the purchaser to
qualify for the exemption or that the purchaser be the one who uses the
machinery, equipment and materials in an exempt fashion. All that is required
is that the machinery, equipment and materials are used in a tax-exempt
manner.
(4) Exempt
Examples.
(A) A manufacturing company
purchases various pieces of equipment to perform research and development on
potential future products. The equipment for research and development is exempt
from state tax and local use tax, but not local sales tax, because it is used
or consumed in research and development related to manufacturing a
product.
(B) A commercial photo
developer uses "crop cards" to hold individual negatives in the film developing
process; they are discarded after a single use. The developer also uses tape to
connect negative strips so that the negatives may be fed through its automatic
film developing machinery and equipment. The crop cards and tape are exempt
from state tax and local use tax, but not local sales tax, as materials used
and consumed in producing a product.
(C) A manufacturer purchases materials to
develop models for research and development for use in designing a new product.
The manufacturer may purchase the materials exempt from state tax and local use
tax, but not local sales tax, because they are used in research and development
related to manufacturing.
(D)
Workers in a manufacturing plant are required to wear safety equipment while
producing a product. The safety equipment is exempt from state tax and local
use tax, but not local sales tax, because it is used to produce a
product.
(5) Nonexempt
Examples.
(A) A taxpayer operates a concrete
manufacturing plant. The taxpayer purchases dump trucks to haul, to customers,
concrete slabs that had been manufactured in its plant. The dump trucks would
not qualify for exemption because they are not used in the manufacturing
process, but rather in the shipping process.
(B) A taxpayer creates and sells a
nontax-able information service. To develop its service, the taxpayer purchases
computer hardware and software. The computer hardware and software do not
qualify for the state tax exemption pursuant to section 144.054.2, RSMo,
because they are machinery and equipment used in producing a service and not a
product.
*Original authority: 144.054, RSMo 2007 and 144.270, RSMo
1939, amended 1941, 1943, 1945, 1947, 1955,
1961.
