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Taxpayers win resale exemption challenge


November 20, 2023 - AIM member, Thompson Coburn LLP, through amicus curiae, aided in briefing an important victory for Missouri taxpayers across Missouri industries in Walmart Starco LLC v. Director of

Revenue, No. SC99998, handed down on November 7, 2023.


In Walmart Starco, the Supreme Court of Missouri ruled in favor of the taxpayer, Walmart Starco LLC (“Walmart”), finding that Missouri’s resale exemption, § 144.615(6), RSMo., applies to equipment that is resold with the addition of software, hardware, and testing to the equipment. The Court also held that the equipment was exempt from Missouri’s use tax because the purchasers paid use tax to the jurisdictions where the products were delivered and sold, thereby prohibiting the likelihood of “double taxation.”


In a unanimous decision of all participating judges, the Supreme Court held that Walmart’s transactions “fit squarely within” the resale exemption because the “sole purpose” for the equipment at issue was to resell it to Walmart’s stores and clubs. The addition of the software or hardware, according to the Court, only further showed that the sole purpose of the equipment was to resell it. (Judge George Draper, had retired, and his replacement, Judge Ginger Gooch, did not participate because she had not been sworn in.)


In reaching this conclusion, the Court reiterated that “resale” as used in the exemption is based on the definition of a “sale” found in § 144.605(7), RSMo. As explained by the Court, Missouri’s resale exemption applies if a taxpayer can show a “subsequent transaction,” which satisfies the definition of “sale.” Here, the Court found that Walmart’s subsequent taxable sales fit the definition of a “sale,” and consequently, were found to be a “resale” for purposes of the exemption.


Importantly, the Court also found that the equipment was exempt from use tax because the purchasers of the equipment remitted use tax to the jurisdictions where the equipment was delivered and sold—i.e., correctly paying the tax based on the products’ ultimate use location—under § 144.018.1, RSMo. The Court recognized any contrary holding “would result in prohibited double taxation by taxing Equipment when it was used and again when it was resold.” In reaching this well-reasoned conclusion, the Court also found that Custom Hardware Engineering & Consulting, Inc. v. Director of Revenue, 358 S.W.3d 54 (Mo. banc 2012), which declined to apply the resale exemption to equipment purchased for use on large computer systems, was the “polar opposite of this case” relating to subsequent taxable sales. The Supreme Court affirmed the decision of Administrative Hearing Commissioner Katie Jo Wheeler in whole.


AIM member Thompson Coburn LLP, through Janette Lohman, Matt Landwehr, and Kristen Sanocki, represented amicus curiae (“friend of the court”) Council On State Taxation (COST) and provided an amicus brief for the Supreme Court’s consideration in this important win for the taxpayer. The amicus brief offered additional argument on the policy and tax implications of the Court’s ultimate decision and addressed many of the arguments the Court relied upon, including the prohibition of double taxation and distinguishing Custom Hardware from the case. Matt is a member of the AIM Board of Directors and Chairman of the AIM Tax Committee, and Janette has been actively involved with AIM for many years.


The Court’s decision in favor of the taxpayer on the resale exemption and application of the exemption from use tax where tax is already paid on the products’ ultimate use location is an important win for Missouri industries.


The case is Walmart Starco LLC v. Director of Revenue, No. SC99998. You can read the Supreme Court’s Opinion here. You can read COST’s amicus curiae brief here.

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