Purchaser’s Responsibility for Paying Use Tax

PURPOSE: This rule explains when a purchaser is required to pay use tax pursuant to sections 144.610 and 144.655, RSMo. (1) In general, when a taxpayer purchases tangible personal property from outside the state for use, storage or consumption in this state the taxpayer must pay use tax. Any Missouri tax due is reduced by any sales or use tax properly paid to another state. (2) Basic Application of Tax. (A) Generally, if a taxpayer does not pay use tax to a seller on out-of-state purchases of tangible personal property for use, storage or consumption in this state, the taxpayer must file a use tax return and remit the tax. (B) If a taxpayer’s out-of-state taxable purchases on which tax has not been paid are less than two thousand dollars ($2,000) in a calendar year, the taxpayer is not required to file a use tax return. This is an exclusion from filing, but not a two thousand dollar ($2,000) use tax exemption. Therefore, if the annual taxable purchases on which tax has not been paid equal or exceed two thousand dollars ($2,000) the taxpayer must report and pay on the total taxable purchases (including the first two thousand dollars ($2,000) of taxable purchases). Any amount of tax reported by the taxpayer must be remitted with the return. (C) An out-of-state seller with nexus must collect tax even if the buyer expects to have less than two thousand dollars ($2,000) in out-of-state purchases for the year. (D) The buyer is liable for the tax on its purchases unless the buyer has proof of paying Missouri tax to the seller. When an out-of-state seller has nexus, the seller is also liable for the tax. (3) Examples. (A) A grocery store purchases a freezer for $5,000 from an out-of-state seller. The out-of-state seller did not collect any use tax. The grocery store is required to report and pay tax on this purchase on its next use tax return. (B) Same facts as in (3)(A), except the out-of-state seller invoiced the grocery store and collected Missouri use tax. The grocery store is not required to report this purchase on a use tax return. (C) During the first quarter of the calendar year, a taxpayer registered to pay use tax purchased $1,800 of tangible personal property from an out-of-state seller. The seller did not collect tax and there is no exemption covering these purchases. Because the year-to-date total of out-of-state taxable purchases is less than $2,000, the taxpayer is not required to report the $1,800 on that quarter’s use tax return or pay any tax, even though the department may require a registered taxpayer to file a return. The taxpayer should check the box on the return marked “I do not have cumulative taxable purchases totaling more than $2,000 this calendar year and do not owe Consumer’s Use Tax at this time.” The taxpayer should not enter figures on the consumer’s use tax line on the return. If figures are entered on the return, the tax is due. (D) A taxpayer purchases $1,500 of items during each of the first and second quarters. No purchases were reported for the first quarter. Because the year-to-date total of out-of-state taxable purchases now exceeds $2,000, the taxpayer must report the entire $3,000 ($1,500 from the first quarter plus $1,500 from the second quarter) on the second quarter use tax return and pay the tax. (E) A Missouri business purchases goods from a Kansas distributor and picks up the goods in Kansas. The Kansas distributor properly collects Kansas tax on the transaction. The business brings the goods to Missouri for use. Use tax is due on the goods, but a credit is allowed for the amount of Kansas tax paid on the goods. If the Kansas tax was not properly due under Kansas law on the transaction, no credit is allowed against the Missouri use tax. AUTHORITY: section 144.705, RSMo 2000.* Original rule filed Nov. 9, 2000, effective May 30, 2001. *Original authority: 144.705, RSMo 1959. Rembrandt Restaurant, Inc. v. Director of Revenue (AHC 1995). The fact that an out-of-state seller has nexus with Missouri does not relieve the Missouri purchaser from liability for use tax. Witt & Juckette v. Director of Revenue (AHC 1981). A construction company was charged Iowa tax on materials. The tax was improperly imposed. The commission held no credit was allowed against Missouri tax because the tax was not properly imposed.