Missouri SB 30 (http://dor.mo.gov/tax/business/sales/manuexempt/) became effective August 28th, 2007. This bill seems to move Missouri into one of the top slots in terms of granting sales tax exemptions for manufacturing concerns and research and development activities that occur in Missouri. The expanded exemption is currently for the state tax (4.225%) only, however the local tax exemption is slated to be introduced during the 2008 legislative session. The law exempts all electricity, water, gas, tools, machinery, and chemicals that are consumed in production of new property or in research and development.
If you have followed the evolution of the manufacturing sales tax exemption in Missouri at all, this new legislation should not be a surprise. Over the past couple of decades, the Missouri courts have defined the manufacturing process to include the production of both tangible and intangible property. They have also adopted integrated plant theory and some other generous provisions. As such, the production of cars and the transmission of telephone calls are each treated equally in terms of the Missouri sales tax exemption when it comes to being treated as a manufacturer.
Few states have exemptions for research and development, so Missouri’s move is fairly progressive. The link above takes you to the new rules and regulations as they apply to Missouri’s new law. They are pretty basic and only have a few examples. If you have any type of manufacturing, processing, or research facility in the state of Missouri, you need to evaluate these new provisions. If you did not otherwise meet the existing Missouri sales tax exemptions for manufacturers, then this bill should apply to you.
In addition to being a nice tax savings for the manufacturers that still exist in Missouri, this bill will likely be considered the state tax consultants full employment act of 2007 (not that I am opposed to this in anyway). The consultants I’ve spoken with are poised to provide a wide range of consulting to assist their clients with these provisions. If you have any questions about this exemption, please contact me at ned@taxconnex.com.
