Facts in a given situation and interpretation of the sales tax laws can be confusing to taxpayers, and can result in different tax treatment in seemingly similar circumstances.

Some “services” that initially appear not to be taxable may be taxable. E.g., a series of cases has held that separate “sitting” fees charged by photographers are taxable because those services are integral to sale of the photographs that the consumer seeks to purchase.

Delivery fees may or may not be taxable depending on whether they are an integral part of the sale of taxable goods, and if not integral are separately stated. For example, delivery is integral to the purchase of mixed concrete.

Certain professionals, e.g., dentists, are by definition the “users” of items “consumed” in their practice, such as crowns and other dental appliances, so the dentist pays sales or use tax on the purchase and does not charge sales tax to their patient. [§ 144.010.1(10)]

Contractors are typically consumers of taxable goods they use to build a building or which they “permanently affix” to a building. Contractors are required to pay sales tax, and do not charge the building owner for sales tax. The items cease to be “tangible personal property” on which sales tax is charged and become part of the real property. If a cabinet shop delivers cabinets and “screws the cabinets to the wall”, the shop acts as a contractor. The shop is converting the cabinets from personal to real property and pays sales tax on its purchase of the components (wood, hardware, etc.) used to make the cabinets and does not charge the purchaser sales tax. If the customer instead picks up the same cabinet at the shop, rather than the shop installing it at the customer’s house, it is a sale of “tangible personal property”. The shop is to charge the customer sales tax, and the shop should purchase the component parts used to build the cabinet exempt from tax.

Businesses may be “dual users“, being both users and sellers of the same goods. Missouri regulations 12 CSR 10-112.010 contain an example of a taxpayer who purchases materials and supplies for both consumption as a contractor and resale as a retailer. When a dual operator purchases materials that are specifically identified for use in a contracting job, it should pay tax on the purchase of the materials. Dual operators should present a resale exemption certificate when purchasing materials for inventory that may be used either for resale or contract jobs. When materials are removed from inventory for use in a contracting job, the dual operator should pay sales tax if purchased in-state, or use tax if purchased out-of-state based on the original purchase price of the material.

If a business having inventory, part of which the business will use (rather than sell) partly within the state and partly in other states (see “export“), it must segregate the inventory for its in-state use from the inventory destined for out-of-state use, or the business will pay sales or use tax on all of the inventory. This was the result in US Sprint Communications Co. v. Director of Revenue, No. 90-001285RS (AHC August 20, 1991).

As example of different state law and interpretations in similar circumstances, in McNamara v. D.H. Holmes Co., Ltd., 505 So.2d 102 (La.App. 4 Cir.,1987), the Louisiana Appeals Court found that Holmes was liable for use tax on catalogs it had printed out of state and mailed to Louisiana residents. Despite similar circumstances in The May Department Stores Company d.b.a. Famous-Barr Co. v. Director of Revenue, 748 SW2d 174 (Mo. 1988), the Missouri Supreme Court reversed the Administrative Hearing Commission and held that use tax did not apply because the taxpayer did not exercise the privilege of storing, using, or consuming the catalogs in Missouri. The catalogs were never in taxpayer’s possession after printing was completed; they went from the printer to the post office to the addressees; nor did the catalogs come to rest in Missouri or become commingled with the general mass of property in Missouri until they were delivered to the various addresses.