Tax Computation

PURPOSE: Section 144.020, RSMo imposes a four percent sales tax. Section 144.610, RSMo imposes the state’s use tax at the same rate as the sales tax. The Missouri Constitution, Article IV, section 43(a) imposes a one-eighth of one percent tax for conservation purposes and Article IV, Section 47(a) imposes a one-tenth of one percent tax for soil and water conservation and for state parks. Missouri law also provides authority for counties, cities and other political subdivisions to enact local taxes. Sections 144.021, 144.080 and 144.285, RSMo require sellers to collect the correct amount of tax. This rule explains how to determine the correct rate of tax. (1) In general, the seller should charge the rate of state and local tax in effect on the date of the sale. (2) Basic Application of Rule. (A) The state tax rate is 4.225 percent. This is comprised of: Four percent state tax, one-eighth of one percent conservation tax, and one-tenth of one percent soil and water conservation tax. (B) Local political subdivisions may impose local taxes in addition to the state tax rate. The local tax rate is available from the local jurisdiction or on the department’s website. (C) Tax is calculated at the rate in effect on the date of the sale. (D) When a change in the tax rate becomes effective, all gross receipts from sales made by the retailer before the effective date of the rate change are subject to the old tax rate. A taxpayer reporting sales on a cash basis should report gross receipts from credit or time sales on a separate line on the return, showing the tax rate in effect when the sales were made. When following this procedure, the entry on the return should specifically state the rate in effect at the time of sale. All gross receipts from sales made on or after the effective date are subject to the new tax rate. (E) Amounts charged to and received from purchasers as tax are not included in gross receipts. (3) Examples. (A) A retailer located in an area with city and county taxes totaling two percent must charge and collect a total sales tax of 6.225% on all sales. (B) The same retailer as in (3)(A) incorrectly charges its customers 5.225% tax. The retailer is responsible for the additional tax. AUTHORITY: section 144.270, RSMo 1994.* Original rule filed Aug. 21, 2000, effective Feb. 28, 2001. *Original authority: 144.270, RSMo 1939, amended 1941, 1943, 1945, 1947, 1955, 1961. Associated Industries of Missouri v. Lohman, 114 S.Ct. 1815 (1994). The U.S. Supreme Court ruled that a local use tax rate greater than the local sales tax rate is unconstitutional. May Department Stores Co. v. Director of Revenue (AHC 1985). The issue was whether credit sales made in 1982 and reported as gross receipts in 1983 were subject to Proposition C, which increased the state sales tax rate from three percent to four percent, effective January 1, 1983. A cash basis taxpayer had filed its February 1983 sales tax return at the three percent rate on credit sales made to its customers from September 1, 1982 to December 31, 1982. The Commission concluded that the increased rate only applied to those gross receipts attributable to sales made on or after the effective date of the law change.