Does a grocery store have to charge sales tax when it sells small propane cylinders and small bundles of firewood to customers?

Plain-English summary

The Missouri Department of Revenue ruled that a grocery store chain must collect sales tax on both of the products at issue: small propane cylinders sold or exchanged at checkout, and small bundles of firewood. Missouri does have a narrow exemption for "domestic use" of propane gas, wood, coal, and home heating oil, but the Department found nothing in the Applicant's facts that put these particular sales inside that exemption.

The Applicant operates supermarkets across Missouri. It sells 10-pound propane cylinders, either as a new "purchase" or as an "exchange" of a customer's empty cylinder for a full one, at differing prices, without separately stating the amount or value of propane in the cylinder. It also sells small bundles of 8 to 10 pieces of 16-inch split firewood, typically bought one or two bundles at a time, and has never been told customers intended to use them to heat their homes -- which the Applicant itself noted would be unlikely given how little wood is in each bundle.

The Department explained that Missouri taxes retail sales of tangible personal property under Section 144.020.1(1), RSMo, and that both propane and firewood fit the broad definition of a "retail sale" in Section 144.010.1(13), RSMo. Section 144.030.2(23), RSMo, carves out an exemption for "domestic use" of propane gas, wood, coal, or home heating oil, but the Department construes "domestic use" narrowly, as nonbusiness, noncommercial, or nonindustrial use by "an individual occupant of a residential premises." Because the Applicant did not track or verify whether any given sale was for that kind of residential heating use, sales tax must be collected on the full sale amount of both the propane cylinder transactions and the firewood bundles.

Importantly, the Department did not say the domestic-use exemption can never apply -- it told the Applicant that if it wants to claim the exemption on some sales, it "should create and maintain a system to determine whether or not a purchase is exempt and non-exempt." Absent such a system, the default is that tax applies to everything.

What this means for you

Grocery and convenience store owners selling propane or firewood

If you sell propane cylinders (whether as new purchases or cylinder exchanges) or small firewood bundles at your store, you should charge and collect sales tax on the full sale price unless you have a reliable way to confirm a specific sale is for a residential customer's home heating use. Simply not knowing, or assuming most customers are residential shoppers, is not enough -- the exemption is about the customer's actual use, not your store type.

If you want to claim the domestic-use exemption

The ruling suggests that to support any exempt sales, you would need a documented system -- something that lets you identify and record which purchases are genuinely for an individual's residential heating needs as opposed to recreational, commercial, or other non-domestic purposes (e.g., camping, grilling, or small recreational fires). Without that kind of system, the Department's default position is that the exemption doesn't apply and tax is due on the whole transaction.

Accountants and tax professionals

This ruling is a useful illustration of how narrowly Missouri reads the Section 144.030.2(23), RSMo, "domestic use" exemption for fuel and heating materials. The burden is effectively on the seller to substantiate exempt sales; absent documentation, the safe default under this ruling is to tax the full sale amount on cylinder purchases/exchanges and firewood bundles alike.

Common questions

Q: Does Missouri ever exempt propane or firewood sales from sales tax?
A: Yes, but only for "domestic use" -- Section 144.030.2(23), RSMo, exempts propane gas, wood, coal, and home heating oil sold for nonbusiness, noncommercial, or nonindustrial use by an individual occupant of a residential premises. The exemption exists; it just wasn't shown to apply on these facts.

Q: Why did the small size of the firewood bundles matter?
A: The Applicant itself noted that customers buying 8 to 10 pieces of split firewood at a time were unlikely to be heating an entire residence with it, and it had never been told the wood was bought for that purpose. That made it hard to treat those sales as qualifying "domestic use" heating fuel.

Q: Does it matter whether a customer purchases a new propane cylinder or exchanges an empty one?
A: Not for tax purposes here -- the ruling treats both the "purchase" and "exchange" transactions the same way, taxing the full sale amount because the propane's separate weight or value was not stated in either case.

Q: Can this store, or another grocery chain, rely on this ruling going forward?
A: Only in a limited way. The ruling is binding on the Department only with respect to this specific Applicant, only for three years from its date, and only as long as the facts and the underlying law don't change. No other taxpayer can rely on it, and even this Applicant loses the protection if its facts change or if the law is changed by the legislature or the courts.

Citations and references

Statutes and regulations:

• Section 144.020.1(1), RSMo (imposition of sales tax on retail sales)
• Section 144.010.1(13), RSMo (definition of retail sale)
• Section 144.030.2(23), RSMo (exemption for domestic use of propane gas, wood, coal, or home heating oil)
• Section 536.021.10, RSMo (statutory authority for letter rulings)
• 12 CSR 10-1.020 (letter ruling procedure regulation)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8381

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 December 4, 2025.

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

Applicant operates supermarkets with multiple locations in Missouri.  It sells small cylinders (10 pounds) filled with liquid propane.  Customers may purchase either full cylinders ("purchase") or return and exchange previously used empty cylinders ("exchange").  The price varies depending on whether it is a purchase or an exchange.  Applicant does not show either by weight or value the amount of propane in the differing cylinders.  Because applicant does not separately state the amount of propane in the cylinder either by weight or value, applicant charges and collects sales tax on the full sale amount of either the purchase or exchange transaction.

Applicant offers small bundles of firewood for sale, usually 8 to 10 pieces of 16-inch split firewood.  Generally, customers purchase one or two bundles at a time.  Applicant has never been informed that the purchases would be for heating customer residences, and such would be unlikely given the small amount of wood purchased.  Applicant charges and collects sales tax on the full sale amount of the small wood bundles.

ISSUE 1:

Must sales tax be collected on sales of propane cylinders?

RESPONSE 1:

Yes. Sales tax must be collected on the sale of propane cylinders.

Section 144.020.1(1), RSMo, imposes "[u]pon every retail sale in this state of tangible personal property, ... a tax equivalent to four percent of the purchase price paid or charged..."

Section 144.010.1(13), RSMo, defines retail sale to mean "... any transfer made by any person engaged in business as defined herein of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale..."

Section 144.030.2(23), RSMo, exempts "all sales of metered water service, electricity, electrical current, natural, artificial or propane gas, wood, coal or home heating oil for domestic use."

Section 144.030.2(23), RSMo, refers to "domestic use" as "nonbusiness, noncommercial, or nonindustrial purposes" by "an individual occupant of a residential premises."

To qualify for the exemption the sale must be for domestic use.  Applicant should create and maintain a system to determine whether or not a purchase is exempt and non-exempt.

ISSUE 2:

Must sales tax be collected on sales of small bundles of firewood?

RESPONSE 2:

Yes. Sales tax must be collected on sales of small firewood bundles.

See Response 1.

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

Sincerely,

Trish Vincent