Sales Tax Exemption on Utilities for Missouri Manufacturers
Under the provisions of Missouri Senate Bill No. 30 (SB 30), utilities (electricity, water, gas) and chemicals will be exempt from state (but not local) sales taxes when used or consumed by Missouri manufacturers for manufacturing, materials recovery or research and development purposes. This new law is effective August 28, 2007, so manufacturers may want to postpone significant purchases of qualified chemicals, for example, until after that date. With Missouri’s 4.225% state sales tax rate, postponing a $100,000 purchase will save a company $4,225.
Signed into law June 13, 2007, SB 30 also includes exemptions for state and local taxes on utilities used or consumed in radio or television broadcasting, or in fulfilling a defense contract with the U.S. government. The exemption also applies to Chapter 100 bonds and railroad property.
Gary Marble, president of Associated Industries of Missouri (AIM) and Ray McCarty, executive director of the Taxpayers Research Institute of Missouri (TRIM), hail SB 30 as landmark legislation that will greatly benefit Missouri manufacturers. The Missouri Department of Revenue (MDR) has yet to announce how it intends to administer it, but many states with a utilities exemption require an energy usage study be performed to obtain the exemption. For example, exempt and sometimes non-exempt equipment—including manufacturing equipment, lights in the manufacturing area and computers—must be listed along with their amounts of use.
MDR Deputy Director Lowell Pearson says he does not want the Missouri exemption to become a burden for businesses: “The Department is considering a safe harbor rule for the first year of the law in lieu of determining actual utility usage.” This would provide an automatic exemption percentage based on a company’s industry classification.
The new law expands the existing manufacturing exemption to include non-exempt materials and equipment, and it also benefits interstate and intrastate common carriers by exempting each from sales taxes. Missouri law previously applied this exemption only if the common carrier operated solely in interstate commerce. SB 30 authorizes transit providers a tax exemption for motor fuel sold to operate public, mass transportation facilities. This is important to transit providers statewide, including the Kansas City Area Transportation Authority, which expects to save $450,000 in taxes on fuel.
For More Information
Contact your BKD advisor or:Robert L. Mandel
Partner
816.221.6300
