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TAX NEWS - may 2010

Sales/Use Tax - Missouri: New law overturns earlier State Supreme Court case involving resale exclusion limitation

S.B. 928, signed by gov. 5/12/10. Effective immediately, new law clarifies that Missouri's resale exemption applies for state sales/use tax purposes when the subsequent sale is:

- Subject to tax in Missouri or another state,
- For resale,
- Excluded from tax in Missouri,
- Subject to tax but is exempt in Missouri, or
- Exempt from the sales tax laws of another state if the subsequent sale is in such other state.

The law attempts to supersede court interpretations of state statutes (specifically, the Missouri Supreme Court's 2009 decision in ICC Management) that arguably resulted in double taxation by imposing Missouri sales taxes on businesses that sold products to tax exempt entities such as schools, churches, electric cooperatives, and state/local governments. Note that in ICC Management, the Court held that a private jail operator could not claim the State's resale exemption on purchases of consumable goods that it subsequently provided to the inmates of the municipalities/counties with which it contracted, because:

- These governmental entities will not pay sales tax on the goods, and
- The exemption only applies to purchased items that are subsequently taxed as a retail sale to avoid double taxation.
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