Guidelines on When Title Passes (Rescinded May 30, 2003)

AUTHORITY: section 144.270, RSMo 1994. This rule was previously filed as rule no. 13 Jan. 22, 1973, effective Feb. 1, 1973. S.T. regulation 010-68 was last filed Dec. 31, 1975, effective Jan. 10, 1976. Refiled March 30, 1976. Amended: Filed Aug. 13, 1980, effective Jan. 1, 1981. Rescinded: Filed Nov. 15, 2002, effective May 30, 2003. Kaiser Aluminum & Chemical Sales v. Director of Revenue, Case No. RS-82-0303 (A.H.C. 10/28/83). The issue in this case was whether or not certain bricks shipped from a Missouri plant were subject to Missouri sales tax. It was necessary for the commission to determine where the sale took place. When no specific provision for the passage of title is contained in the agreement between the parties, the commission must look to other evidence such as industry practice, passage of risk of loss, party paying transportation costs and method and time of payment. The commission cited Kurtz Concrete, Inc. v. Spradling, 3560 SW2d 858 (Mo. banc 1978) and Frontier Bag, Inc. v. Director of Revenue, Case No. R-80-0073 (A.H.C. 11/12/81). Finding that the goods were shipped FOB from Mexico, Missouri, the commission held that petitioner manifested an intent to have title pass to the buyer at the time and place of shipment. The commissioner looked to section 400.2-401(2)(a), RSMo 1978 Uniform Commercial Code (UCC) in reaching this conclusion. Therefore, the sale did take place in Missouri and tax was applicable. In Kurtz Concrete, Inc. v. Spradling, 560 SW2d 858 (Mo. banc 1978) the court held while title ordinarily will not pass until property is delivered to buyer or reaches agreed place but title will pass notwithstanding that seller is to make delivery if such is the intention of the parties, the intention of the parties to control. Centrifugal and Mechanical Industries, Inc. v. Director of Revenue, Case No. RS-85-1810 (A.H.C. 9/21/87). The taxable moment in Missouri is generally the moment of passage of title from seller to buyer. The parties may control this occurrence by their clearly expressed intent. This is best shown by a written agreement. Failing this, the taxpayer may show compelling evidence of industry practice. Taxpayer admitted no written agreement existed other than the invoice which said FOB-St. Louis. There was also no industry-wide practice shown. Patton Tully Transportation Company v. Director of Revenue, Case No. RS-85-1594 (A.H.C. 11/25/87). The parties intended that title to the rock would not pass to petitioner unless and until the stone was approved by the Army Corps of Engineers. It is the intent of the parties, by whatever means shown, that determines passage of title. The Administrative Hearing Commission determined no Missouri sales tax due on these transactions as title passed outside Missouri. Tower Rock Stone Co. v. Director of Revenue, Case No. RS-861011 (A.H.C. 4/7/88). The taxpayer contested the final decision of the director of revenue that its sales of stone were subject to Missouri sales tax. The Administrative Hearing Commission held that it was “industry practice” for the sale of the stone to be subject to approval by the Army Corps of Engineers. Citing 400.2–400.327, RSMo (1986) (UCC), the Administrative Hearing Commission stated that the sale of the stone was a “sale on approval” and therefore, title did not pass to the purchaser until the stone was inspected and accepted at the out-of-state job site.