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Missouri court limits tax exemptions for construction

The Missouri Supreme Court this week issued some important, if not somewhat confusing, opinions. Here’s the story with comments from Ray McCarty from the Associated Press.

By MARIE FRENCH ~ Associated Press

JEFFERSON CITY, Mo. — The Missouri Supreme Court on Tuesday issued three rulings limiting some sales tax exemptions for construction activities by businesses.

The high court barred businesses from claiming sales tax breaks on cranes, asphalt and steel beams used in constructing buildings and paving roads. Business groups quickly vowed to pursue legislation that would effectively reverse those rulings, the latest in a series of court and Department of Revenue decisions that companies have opposed.

The cases involved the rental of cranes to install manufacturing machinery, the purchase of asphalt and other materials for paving and steel beams modified for use in construction. The cranes were rented to install steel supports and manufacturing equipment, which Alberici Constructors Inc. claimed qualified as materials “solely required for the installation or construction of such machinery and equipment” under Missouri statute.

The Supreme Court upheld the director of the Revenue Department’s decision not to grant the sales tax exemption, saying the Legislature used the term “materials” instead of “machinery” in that section of the statute, and cranes were not intended to be included under “materials.”

Businesses have expected to claim sales tax exemptions for large machinery used to install manufacturing equipment in the past, Associated Industries of Missouri President Ray McCarty said.

“This was kind of a shift in position,” McCarty said. “This follows a long line of cases where, just like of the Department of Revenue seems to need constant clarification of what the Legislature means, the Missouri Supreme court seems to be going along with the strange interpretation by the Department of Revenue and backing them up.”

The other two cases pertained to a section of state law that exempts supplies used in “manufacturing,” “processing,” “compounding” or “producing” from sales tax. The court ruled paving materials and steel beams did not qualify.

Legislators previously have sought to clarify the law after decision that limited sales tax exemptions. Last year, Democratic Gov. Jay Nixon vetoed bills that would have exempted utilities used by restaurants and grocery stores for food processing and that would have exempted supplies and utilities used by commercial laundries and dry cleaners.

McCarty said those bills would also be pushed by his group again this year.

The Supreme Court also ruled that Southwestern Bell Telephone Company, an AT&T subsidiary, is responsible for paying a franchise tax charged to businesses outside of Missouri doing business in the state. That franchise tax will be fully phased out in 2016.