I sell building materials wholesale into Missouri from out of state and my customers give me resale certificates -- do I have to register and collect Missouri use tax?

Plain-English summary

The Missouri Department of Revenue ruled on whether an out-of-state building materials broker that sells wholesale to Missouri customers -- with no physical locations or employees in Missouri, shipping through unrelated third-party carriers, and receiving a resale or exemption certificate on every Missouri sale -- must register with the Department and collect Missouri use tax.

On registration: Section 144.605.14, RSMo, defines a "vendor" broadly to include anyone selling tangible personal property by mail order, advertising, agent, or by soliciting orders for use, storage, or consumption in Missouri. Sections 144.650 and 144.655.1, RSMo, generally require such vendors to register with the Director of Revenue and to file returns. Applicant is a "vendor" under this definition, but the Department concluded Applicant does not have to register unless it exceeds the economic nexus threshold described below.

On the duty to collect use tax: Section 144.635, RSMo, requires a vendor making sales for use, storage, or consumption in Missouri to collect use tax from the purchaser -- but only once the vendor has "substantial nexus" with the state. Missouri Code of State Regulations 12 CSR 10-114.100 explains that an out-of-state vendor has substantial nexus if it has "economic nexus," defined in 12 CSR 10-114.100.2(C) as gross receipts from Missouri-delivered taxable sales exceeding $100,000 in the current or previous calendar year. The regulation's own examples illustrate the line: an Alabama seller with more than $100,000 in Missouri sales must register and collect; an Indiana seller under $100,000 with no other Missouri contacts does not have to collect. On top of that threshold question, Applicant separately receives a valid resale or exemption certificate for every Missouri sale, meaning none of those particular sales is taxable to begin with. So Applicant is not required to register or collect use tax unless and until its Missouri taxable sales exceed $100,000 in a calendar year.

What this means for you

For out-of-state wholesalers selling into Missouri

If you sell tangible personal property wholesale to Missouri customers from outside the state -- with no Missouri offices, employees, or other physical presence -- you are a "vendor" under Missouri law, but you don't automatically have to register with the Missouri Department of Revenue or collect use tax. Registration and collection duties only kick in once you have "substantial nexus" with Missouri, which for a seller with no physical presence means crossing the $100,000 economic nexus threshold.

For sellers tracking the $100,000 threshold

Watch your gross receipts from Missouri-delivered taxable sales on a rolling basis: if they exceed $100,000 in either the current or the previous calendar year, you cross into economic nexus and must register with the Department and begin collecting and remitting use tax. Until then, if you have no other Missouri contacts, you have no registration or collection obligation. Keep good records of your Missouri-delivered sales so you can tell exactly when (or whether) you cross the line.

For sellers relying on resale or exemption certificates

Collecting a valid resale certificate, sales tax exemption certificate, or similar exemption certificate on a sale means that particular sale isn't taxable -- but it does not, by itself, excuse you from registering once you cross the $100,000 economic nexus threshold. Nexus and taxability are separate questions: you can have a duty to register and collect use tax on future non-exempt sales even while every sale you've made so far has been backed by a valid certificate.

Common questions

Q: I'm an out-of-state seller with no Missouri offices or employees -- do I have to register with the Missouri Department of Revenue?
A: Not automatically. Section 144.605.14, RSMo, would classify you as a "vendor," but under this ruling you only have to register once you exceed the $100,000 economic nexus threshold described in 12 CSR 10-114.100.2(C). Below that threshold, with no other Missouri contacts, there's no registration duty.

Q: What happens once I cross $100,000 in Missouri sales?
A: Once your gross receipts from Missouri-delivered taxable sales exceed $100,000 in the current or previous calendar year, you have "economic nexus" and "substantial nexus" with Missouri under 12 CSR 10-114.100. At that point you must register with the Department under Sections 144.650 and 144.655.1, RSMo, and collect and remit use tax on taxable sales under Section 144.635, RSMo.

Q: If every one of my Missouri sales is backed by a valid resale or exemption certificate, do I still need to worry about the $100,000 threshold?
A: Yes. The certificates mean those specific sales aren't taxable, but the $100,000 threshold is about gross receipts from Missouri-delivered sales generally, not just taxable ones triggering a collection duty. If you cross the threshold, you'd need to register and be prepared to collect use tax on any future sales that aren't covered by a valid certificate.

Q: Does the $100,000 threshold count sales from the current year, the previous year, or both?
A: Both. Under 12 CSR 10-114.100.2(C), economic nexus exists if your gross receipts from Missouri-delivered taxable sales exceed $100,000 in either the previous calendar year or the current calendar year.

Citations and references

Statutes and cases:

• Section 144.605.14, RSMo (defines "vendor" to include anyone selling tangible personal property by mail order, advertising, agent, or soliciting orders for use/storage/consumption in Missouri)
• Section 144.650, RSMo (requires every vendor selling for storage, use, or consumption in Missouri to register with the Director of Revenue)
• Section 144.655.1, RSMo (requires every vendor to file returns showing total sales price of taxable property sold)
• Section 144.635, RSMo (requires a vendor making sales for storage, use, or consumption in Missouri to collect use tax from the purchaser)
• 12 CSR 10-114.100 (defines "substantial nexus," including economic nexus, that triggers an out-of-state vendor's duty to register and collect use tax)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8279

Original ruling text

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 October 25, 2023.

The facts as presented in your letter ruling request are summarized as follows:

Applicant is a building materials broker located in another state that sells materials wholesale to customers located in Missouri. The items sold are shipped from Applicant's location in another state to customers in Missouri through unrelated third-party carriers. Applicant does not have any physical locations or employees in Missouri.

For each sale to Missouri customers, Applicant receives resale certificates, sales tax exemption certificates, or similar exemption certificates.

ISSUE 1 :

Is Applicant required to register and file with the Missouri Department of Revenue?

RESPONSE 1 :

No.  Applicant is not required to register and file with the Missouri Department of Revenue.

Section 144.605.14, RSMo, defines "Vendor" as "every person engaged in making sales of tangible personal property by mail order, by advertising, by agent or peddling tangible personal property, soliciting or taking orders for sales of tangible personal property, for storage, use or consumption in this state."

Section 144.650, RSMo, provides "[e]very vendor selling tangible personal property for storage, use or consumption in this state shall ... register with the director of revenue and give the names and addresses of all agents operating in this state, the location of all distribution or sales houses or offices or other places of business in this state and other information that the director of revenue requires."

Further, Section 144.655.1, RSMo, explains "[e]very vendor ... shall file with the director of revenue a return of all taxes collected ... showing the total sales price of the tangible personal property sold by the vendor, the storage, use or consumption of which is subject to the tax levied by this law, and other information the director of revenue deems necessary."

Applicant is a vendor that sells tangible personal property for storage, use or consumption in Missouri. However, Applicant is not required to register with the Missouri Department of Revenue unless Applicant exceeds the economic nexus threshold described in Response 2.

ISSUE 2 :

Is Applicant liable for collecting Missouri use tax as a vendor pursuant to section 144.635, RSMo?

RESPONSE 2 :

No. Applicant is not liable for collecting use tax as a vendor, as long as Applicant does not have a substantial nexus with Missouri.

Section 144.635, RSMo, provides "[e]very vendor making a sale of tangible personal property for the purpose of storage, use or consumption in this state shall collect from the purchaser an amount equal to the percentage on the sale price imposed by the sales tax law in section 144.020 and give the purchaser a receipt therefor."

Missouri Code of State Regulations 12 CSR 10-114.100 titled: Determining When a Vendor has Substantial Use Tax, provides guidance on when a vendor is liable for use tax pursuant to section 144.635, RSMo.

12 CSR 10-114.100(1) provides:

In general, an out-of-state vendor must register with the department, and collect and remit use tax when the vendor has substantial nexus with Missouri. Substantial nexus exists when the vendor has ... economic nexus in Missouri.

12 CSR 10-114.100.2(C) defines "Economic Nexus" as:

Selling tangible personal property for delivery into this state, provided the seller's gross receipts from taxable sales from delivery of tangible personal property into this state in the previous calendar year or current calendar year exceeds one hundred thousand dollars ($100,000).

12 CSR 10-114.100.4(A-B) provide relevant examples:

A) A taxpayer is located in Alabama. The taxpayer makes taxable sales of over one hundred thousand dollars ($100,000) into Missouri. The taxpayer has economic nexus and should register with the department and collect and remit use tax.

(B) A taxpayer is located in Indiana. The taxpayer makes less than one hundred thousand dollars ($100,000) of taxable sales into Missouri. The taxpayer has no other contacts with the state. The taxpayer is not required to collect Missouri tax.

Applicant will be liable to collect use tax as a vendor pursuant to section 144.635, RSMo, if they make over $100,000 of Missouri taxable sales in a calendar year. However, Applicant has stated that tax exemption certificates are received for each sale to a Missouri customer. Therefore, as long as Applicant does not exceed the threshold of taxable sales, Applicant does not need to collect and remit use 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 Michael C. Reed General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford