Is a separately stated fuel surcharge on a product sale invoice exempt from Missouri sales tax the same way a separately stated delivery charge is?

Subject

Taxability of Fuel Surcharges

Plain-English summary

The Missouri Department of Revenue ruled that a manufacturer's separately stated fuel surcharge on product sales is fully taxable -- it does not get the same treatment as a delivery charge, even though it appears as its own line item on the invoice right alongside one.

Applicant makes aggregates, cement, ready mix, and asphalt, and delivers these products to customers. Rising fuel costs led Applicant to add a fuel surcharge to product sales, billed as a separate line item in addition to (not combined with) a separate delivery charge line item.

Missouri taxes the "gross receipts" from retail sales of tangible personal property under Section 144.021.1, RSMo. Section 144.010.1(4), RSMo, defines "gross receipts" to exclude "usual and customary delivery charges that are stated separately from the sale price" -- meaning a properly itemized delivery charge escapes sales tax. But the Department drew a clear line between that delivery-charge carve-out and a fuel surcharge: because the fuel surcharge is not itself a usual and customary delivery charge, and because it is mandatory, it does not qualify for the exclusion and is subject to sales tax, regardless of it being stated separately.

What this means for you

Delivery, freight, and trucking-adjacent sellers who bill fuel surcharges

If your business adds a mandatory fuel surcharge to invoices as its own separate line item -- distinct from your delivery charge -- this ruling indicates that surcharge is taxable in Missouri, even though your delivery charge itself may not be. Separately stating a charge on an invoice is not enough to make it exempt; the charge itself has to actually be a "usual and customary delivery charge" under Section 144.010.1(4), RSMo. A fuel surcharge, as its own mandatory add-on, does not meet that description.

Manufacturers and distributors setting delivery/surcharge invoice line items

Businesses selling bulky, delivered goods (here, aggregates, cement, ready mix, and asphalt) commonly split delivery-related costs into multiple invoice lines when fuel prices rise. This ruling is a reminder that only the actual delivery charge benefits from the separately-stated exclusion -- bolting on an additional "fuel surcharge" line does not extend that exemption to the surcharge amount.

Accountants and tax professionals

When reviewing whether a separately stated charge escapes Missouri sales tax under Section 144.010.1(4), RSMo, look past the fact that it is itemized separately and ask whether it is genuinely a usual and customary delivery charge. A mandatory fuel surcharge billed apart from the delivery charge is not treated as part of that exclusion and should be included in taxable gross receipts.

Common questions

Q: Is a fuel surcharge treated the same as a delivery charge for Missouri sales tax purposes?
A: No. The Department ruled that the Applicant's fuel surcharge is not a "usual and customary delivery charge" under Section 144.010.1(4), RSMo, even though it was billed as its own separate line item next to the delivery charge. Only usual and customary delivery charges stated separately from the sale price are excluded from taxable gross receipts.

Q: Does stating the fuel surcharge as a separate line item on the invoice make it exempt?
A: No. Separately stating a charge is necessary but not sufficient for the delivery-charge exclusion. The charge also has to actually be a usual and customary delivery charge, and the Department found the fuel surcharge here did not qualify.

Q: Why did the mandatory nature of the surcharge matter to the outcome?
A: The ruling specifically notes the fuel surcharge is taxable "because it is mandatory." A charge customers cannot avoid is harder to characterize as separate from the taxable sale price of the goods themselves.

Q: What products were involved in this ruling?
A: Applicant manufactures aggregates, cement, ready mix, and asphalt, and imposed the fuel surcharge on sales of these products in addition to a separately stated delivery charge.

Q: Can another business in a different industry rely on this ruling?
A: Not automatically. This is a Missouri letter ruling, binding on the Department only with respect to the requesting Applicant, only for three years from its date, and only so long as the facts and law remain unchanged. Any change in or deviation from the facts as presented renders the ruling inapplicable, so another business should confirm its own facts match and consult a tax professional before relying on this result.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8228

Original ruling text

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 November 9, 2022.

The facts as presented in your letter ruling request, along with research into your operations, are summarized as follows:

Applicant makes products such as aggregates, cement, ready mix, and asphalt.  The Applicant has found it necessary to impose a fuel surcharge on product sales.  The surcharge is a separate line item on customer invoices in addition to the separate line item of delivery charge.

ISSUE :

Are the Applicant's separately stated fuel surcharges taxable?

RESPONSE :

Yes, the fuel surcharge is taxable.

Section 144.021.1, RSMo, imposes a tax upon the gross receipt for the privilege of engaging in the business of selling tangible personal property.

Section 144.010.1(4), RSMo, defines "gross receipts" to include the total amount of the sale price of the sales at retail including services other than usual and customary delivery charges that are stated separately from the sale price, and charges related to the extension of credit.

In this instance, the fuel surcharge is not a usual and customary delivery charge, and because it is mandatory, it is subject to sales tax.

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 Nathan Jefferson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford

WW:MAS:CRF:NJ:km