Cities or Counties May Impose Sales Tax on Domestic Utilities (Rescinded February 28, 2011)

AUTHORITY: section 144.270, RSMo 1994. Original rule filed Sept. 7, 1984, effective Jan. 12, 1985. Rescinded: Filed Aug. 16, 2010, effective Feb. 28, 2011. Richard A. King v. Laclede Gas Co., 648 SW2d 113 (Mo. banc 1983). The director of revenue appealed from the decision of the Administrative Hearing Commission which held that the electricity which taxpayer used to operate its storage facility for natural gas and liquid propane was exempt from sales tax on the grounds that it was being used in a noncommercial, nondomestic, nonindustrial manner. The commission relied on the decision in State ex rel. Kansas City Power and Light Co. v. Smith, 111 SW2d 513 (1938) to find that the electricity in question was being used in internal operations and was thus noncommercial. The court chose to broaden the definition of commercial as it is used in section 144.020, RSMo to include those activities which are an integral part of the commercial activities of the taxpayer. Thus, the electricity used to operate the storage facilities was taxable because it was an integral part of the taxpayer’s commercial utility operation. The court overruled the Smith case, but only insofar as it conflicts with the holding in the case at hand.