Missouri Department of Revenue

Jay Nixon, Governor Alana M. Barragn-Scott, Director

LR 6879
Taxability of Repair Parts & Materials Used With Wooden Roof & Floor Trusses
August 22, 2011 Dear Applicant: This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated June 16, 2011. The facts as presented in your letter ruling request are summarized as follows: Applicant is a manufacturer of wooden roof and floor trusses. Applicant uses a forklift to unload lumber, transport lumber through the cutting and fabrication processes, and to move the finished product. Applicant purchased a fuel pump for the maintenance and repair of its forklift. Applicant purchases framing nailers and cap nailers. The framing nailers and cap nailers are not part of the trusses when they are manufactured, but are delivered with the finished trusses to be incorporated at the time of installation. Applicants customers use the framing nailers and cap nailers to install the trusses. Applicant uses stackers to raise the finished trusses, so that the trusses may be lifted with a forklift for loading into the truck. Applicant purchases paint and repair parts for stackers.

ISSUE 1:
Is Applicants purchase of a fuel pump to repair its forklift exempt from sales tax?

RESPONSE 1:
Yes. Applicants purchase of a fuel pump to repair a forklift is exempt from sales tax.

Section 144.030.2(4), RSMo, provides an exemption from sales and use tax for [r]eplacement machinery, equipment, and parts . . . used directly in manufacturing, mining, fabricating or producing a product which is intended to be sold ultimately for final use or consumption[.] Section 144.030.2(5), RSMo, provides an exemption from sales and use tax for [m]achinery and equipment . . . purchased and used to establish new or to expand existing manufacturing, mining or fabricating plants in the state if such machinery and equipment is used directly in manufacturing, mining, or fabricating a product which is intended to be sold ultimately for final use or consumption. The Supreme Court of Missouri, in Noranda Aluminum, Inc. v. Missouri Department of Revenue, 599 S.W.2d 1, 4 (Mo. 1980), adopted the integrated plant theory of construction of the exemption provisions in Sections 144.030.2(4) and (5), RSMo. The Court held that items which are used in steps or operations that are essential to and comprise an integral part of [the taxpayers] manufacturing process, and are used directly for manufacturing or fabricating a product, are exempt under Sections 144.030.2(4) and (5). Id. Applicants forklift transports lumber after each stage of processing, and constitutes an essential and integral part of Applicants manufacturing process. The fuel pump is a component part of the forklift, and therefore exempt from sales tax under Section 144.030.2(4), RSMo.

ISSUE 2:
Are Applicants purchases of framing nailers and cap nailers that are delivered with and become components of the finished trusses exempt from sales tax?

RESPONSE 2:
Yes. Applicants purchases of framing nailers and cap nailers that are delivered with and become components of the finished trusses are exempt from sales tax. Section 144.020.1(1), RSMo, imposes a sales tax upon every retail sale of tangible personal property in Missouri. Section 144.010.1(10) defines a sale at retail as any transfer made by any person engaged in business as defined herein of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property . . . . For a transaction to constitute a resale, three elements must be satisfied: (1) a transfer, barter, or exchange; (2) of the title or ownership of tangible personal property; (3) for consideration paid or to be paid. Brinker Missouri, Inc. v. Director of Revenue, 319 S.W.3d 433, 439 (Mo. banc 2010).

When Applicants customer purchases trusses, they receive title and ownership of the trusses, framing nailers and cap nailers, and the purchase is subject to sales tax. Applicants customers use the framing nailers and cap nailers to install the finished trusses. Therefore, Applicant purchases the framing nailers and cap nailers for resale to its customers. To claim the exemption, Applicant must provide a certificate of exemption Form 149 to sellers from which Applicant purchases supplies that become components of the final product. Applicant must collect and remit sales tax on its sales of trusses, framing nailers and cap nailers.

ISSUE 3:
Are Applicants purchases of paint and repair parts for stackers exempt from sales tax?

RESPONSE 3:
No. Applicants purchases of paint and repair parts for stackers are not exempt from sales tax. Section 144.054.2, RSMo, provides an exemption from state sales and use taxes and local use tax for electrical energy and gas, whether natural, artificial, or propane, water, coal, and energy sources, chemicals, machinery, equipment, and materials used or consumed in the manufacturing, processing, compounding, mining, or producing of any product. . . . Supplies and parts are not included in the exemption under Section 144.054. Therefore, Applicants purchase of paint and repair parts for stackers are not exempt from sales and use tax or local use tax under Section 144.054. Applicants purchases of paint and repair parts are also not exempt from tax under Section 144.030.2(4) because painting and repairing the stackers is not manufacturing. See Response 1. This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable. Should additional information be needed, please contact Legal Counsel Kati Kiefer, General Counsels Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-7510961), or me. Sincerely, Alana M. Barragn-Scott