Determining Taxable Gross Receipts

PURPOSE: Section 144.021, RSMo, imposes a tax on a seller’s gross receipts. Section 144.083, RSMo, addresses the application of tax involving third party payments. This rule provides guidance for reporting gross receipts. (1) In general, all gross receipts resulting from the sale of tangible personal property and taxable services should be reported to the department. When filing a return, the taxpayer should deduct nontaxable receipts from gross receipts to arrive at taxable sales. (2) Definitions. (A) Buydown payments—payments received by a seller under an agreement with a manufacturer or wholesaler to lower the cost of inventory sold to consumers for a stated sales price. (B) Gross receipts—the total amount of the sale price of taxable services and tangible personal property including any services, other than charges incident to the extension of credit, that are a part of such sale and are capable of being valued in money, whether received in money or otherwise. (C) Rebate—a return of part of an amount given in payment. (D) Store coupons—coupons issued by the seller to reduce the stated price of a product to the purchaser. (E) Taxable sales—the total amount of gross receipts plus or minus any adjustments permitted or required by law. (F) Third party coupons—coupons issued by a manufacturer or other third party to apply to the purchase of the product. (3) Basic Application of Tax. (A) Tax is imposed on the total amount of the sale price received for the sale of tangible personal property and taxable services. The total amount of each sale should be reported as gross receipts even if the seller separately states to the customer the various components of the sale. Exempt sales should be deducted from gross receipts to arrive at taxable sales. Tax collected as a part of a sale should not be included in gross receipts. (B) When a taxpayer receives consideration other than money, the full market value of the item exchanged should be included in gross receipts. (C) When the seller accepts third party coupons, only the price paid by the purchaser is included in the gross receipts subject to tax. (D) The value of a store coupon issued and redeemed by a seller is not subject to tax. Store coupons are not included in gross receipts. (E) When the seller accepts federal food stamp coupons, the value of the federal food stamp coupons is not included in gross receipts. (F) Rebates from sellers or manufacturers do not reduce taxable sales unless they are offered instantly at the time of sale, except for rebates on motor vehicles, boats, trailers and outboard motors. (G) A taxpayer accepting an article in trade as a credit or part payment on the purchase price should include the value of the article in gross receipts. The value of the article should be deducted from gross receipts when calculating taxable sales. (H) Money received in advance, such as down payments, layaways or gift certificates, are not included in gross receipts until the sale has been consummated. (I) Charges to customers for the extension of credit, such as late fees or financing charges are excluded from gross receipts. (J) A seller’s expenses associated with utilizing the service of credit card companies are not excluded from gross receipts. (K) If the taxpayer’s inventory is stolen or destroyed by fire or other casualty, the insurance receipts are not subject to tax and should not be included in gross receipts. (L) When tangible personal property is subject to a federal manufacturer’s excise tax imposed by sections 4041, 4061, 4071, 4081, 4091, 4161, 4181, 4251, 4261, or 4271 of Title 26, United States Code, the amount of the tax is not included in gross receipts if the retail seller collects the excise tax from the purchaser and remits it to the federal government. (M) Gross receipts from the sale of cigarettes do not include the amount of the sale price that represents the state tax on the cigarettes under Chapter 149, RSMo. Gross receipts from the sale of other tobacco products include the amount of the sale price that represents the state tax on the other tobacco products under Chapter 149, RSMo. Local cigarette taxes authorized by law and imposed and paid in the manner of the state tax under Chapter 149, RSMo, are not included in gross receipts. All other local cigarette taxes are included in gross receipts. (N) Buydown payments are not gross receipts subject to tax. Buydown payments serve to reduce the sales price to all purchasers by reducing inventory cost to the seller. Buydown payments are not payments for the retail price of the product. (4) Examples. (A) A grocery store accepts manufacturer’s coupons from its customers on purchases of various goods. The store sells aluminum foil for $1.50. The customer presents to the store a $.50 manufacturer’s coupon and pays the remaining balance of $1.00. The store submits the $.50 coupon to the manufacturer for payment of the $.50. The gross receipts from the sale of the aluminum foil are $1.00 and total taxable sales are $1.00. Tax should be charged on $1.00. (B) On Tuesdays, the same grocery store in Example (A) doubles all manufacturers’ coupons. The store then receives $.50 from the customer and $.50 from the manufacturer. Gross receipts are $.50, and total taxable sales are $.50. Tax should be charged on $.50. (C) An appliance manufacturer offers a $100 cash rebate on an $800 refrigerator. Tax is due on $700, if the rebate is received by the customer at the time of purchase. If the customer must request the rebate from the manufacturer at a later date, tax is due on $800 because that is the sale price paid at the time of purchase. (D) A furniture retailer allows customers to “layaway” their purchases until they have paid the full sale price. When the customer has paid the full sale price, the retailer completes the sale and transfers the furniture to the customer. The furniture dealer should not include the layaway amount in its gross receipts until the sale is complete. At that time the total sale price should be reported as gross receipts. (E) A construction company purchases a new bulldozer. The equipment dealer agrees to sell it a new machine for $50,000 and give a trade-in allowance of $10,000 for the old one. The equipment dealer should report $50,000 in gross receipts. The equipment dealer should then deduct the $10,000 trade-in value to arrive at taxable sales. (F) A retailer sells a chair for $100 to a customer who uses his credit card to pay for the purchase. The seller should charge tax on the full $100 sales price of the chair. The seller should report $100 in gross receipts, even though it must pay the credit card company a transaction fee. (G) A retailer ordinarily sells a brand of cigarettes for $4 per pack. The manufacturer of that brand of cigarettes agrees to a “buydown” with the retailer. Under the buydown agreement, the manufacturer will reimburse the retailer $.50 per pack if the retailer sells the cigarettes for $3.50 for a month. The gross receipts and taxable sales from the sales of the cigarettes are $3.50 per pack, which includes the buydown, less any amount attributable to the state tax imposed pursuant to Chapter 149, RSMo. (H) A retailer ordinarily sells a brand of cigarettes for $4 per pack. The manufacturer of that brand of cigarettes agrees with the retailer to reduce the purchase price to the retailer by $.50 per pack if the retailer sells the cigarettes for $3.50. The gross receipts from the sales of the cigarettes are $3.50 per pack, less any amount attributable to the state tax imposed pursuant to Chapter 149, RSMo. AUTHORITY: section 144.270, RSMo 2000, and 144.083, RSMo Supp. 2007.* Original rule filed Aug. 21, 2000, effective Feb. 28, 2001. Emergency amendment filed Aug. 14, 2007, effective Aug. 28, 2007, expired Feb. 23, 2008. Amended: Filed Aug. 14, 2007, effective Feb. 29, 2008. *Original authority: 144.270, RSMo 1939, amended 1941, 1943, 1945, 1947, 1955, 1961 and 144.083, RSMo 1961, amended 1965, 1986, 2004, 2007. Central Hardware Company, Inc. v. Director of Revenue, 887 S.W.2d 593 (Mo. banc 1994). The taxpayers were not entitled to a refund of the sales tax paid on the percentage of their credit sales they paid as fees to credit card companies. The fees were not excludable from the sales price as charges incident to the extension of credit. The fees were an expense paid by the taxpayers to the credit card companies and were not a charge to their customers incident to the extension of credit. They charged their customers the same sales price irrespective of the mode of payment and there was no charge to a customer who paid by credit card. The taxpayers cannot alternatively claim that because they never actually received the fees, they were not part of the gross receipts. The transactions on which the gross receipts were based and on which the sales tax should be calculated were the retail sales that occurred between the taxpayers and their customers and not the transactions between the taxpayers and the credit card companies. The fact that the taxpayers chose to pay the fees out of the credit draft proceeds did not decrease the amount of their gross receipts. Oakland Park Inn v. Director of Revenue, 822 S.W.2d 425 (Mo. banc 1992). Hotel was liable for sales tax on amounts paid as mandatory gratuities. Under the hotel’s banquet contracts, customers were obligated to pay a 16% gratuity. The gratuities were part of the sale price of the food and drink because they were mandatory. The fact that the gratuities were separately stated and served to equalize employee wages does not affect taxability of the gratuity. Golde’s Department Stores, Inc. v. Director of Revenue, 791 S.W.2d 478 (Mo. App. 1990). A department store that paid sales tax on gross sales was entitled to refund of sales tax that was overpaid. Under gross sales reporting method, it reported credit sales for which no payment was ever received. It was entitled to compute its liability under gross receipts reporting method because the law imposes the sales tax based on gross receipts, not gross sales.