Missouri Internet Sales Tax

If you are selling goods or products over the Internet and have customers located in Missouri, you should be aware of Missouri’s Internet sales tax rules.

The General Rule: Physical Presence in the State

The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence.” The physical-presence rule is based on a 1992 United States Supreme Court decision, Quill Corp. v. North Dakota, that addressed the obligations of mail-order businesses to collect sales tax on out-of-state sales; the decision has been extended to include online retailers. Generally speaking, a physical presence means such things as:

• having a warehouse in the state
• having a store in the state
• having an office in the state, or
• having a sales representative in the state.

For basic guidance on how physical presence is determined specifically under Missouri law, consult Section 144.605(3) of the Missouri Revised Statutes (RSMo), which defines the phrase “maintains a place of business in this state." Note that the definition covers various places of business that are controlled “directly or indirectly, or through a subsidiary, or agent.”

For additional guidance, review the standards published by the Missouri Department of Revenue (DOR) as 12 CSR 10-144.100, “Determining When a Vendor Has Sufficient Nexus for Use Tax.” (“CSR” stands for “Code of State Regulations;” the Regulations are prepared by state agencies to interpret and explain the state’s laws). Use tax, further discussed below, is a companion tax to the sales tax, and “nexus” in this context is essentially a synonym for physical presence. The Regulation discusses when an out-of-state vendor is responsible for collecting use tax; the standard is essentially identical to the federal standard for collecting sales tax. As stated in the first sentence of the Regulation, “Sufficient nexus exists when the vendor has a physical presence in Missouri.” While not specifically mentioning Internet sales, one of the examples in the Regulation does state that a business that has sales “which are delivered either by common carrier [e.g., UPS, Fedex] or U.S. mail” but “has no other contacts with the state . . . is not required to collect Missouri tax.”

As you might expect, the corollary to the physical-presence rule is that, if you do not have a physical presence in the state, you generally are not required to collect sales tax for an Internet-based sale to someone in that state.

Examples

Example 1: You are operating solely out of a store in Tacoma, Washington and make a sale to a customer in Independence, Missouri—a state where your business has no physical presence: You are not required to collect sales tax from the Independence customer.

Example 2: You are operating solely out of an office in Columbia, Missouri and make a sale to a customer in Saint Louis, Missouri: You are required to collect sales tax from the Saint Louis customer.

Example 3: After several years of operating solely out of a store in Tacoma, Washington, you open a one-room satellite office just outside of Kansas City, Missouri—a state where previously you had no physical presence. A day later, you make a sale to a customer in Springfield, Missouri: You are required to collect sales tax from the Springfield customer.

Non-Taxable Items

Some items sold via the Internet to Missouri customers may be exempt from sales tax under Missouri law. For example, RSMo Section 144.030.22 states that farm machinery and equipment used exclusively for agricultural purposes are exempt from sales tax. For further information on most tax-exempt items, you can consult RSMo Section 144.030 generally; or, as a more readable option, review the various sections of 12 CSR 10-110.

Missouri also has an annual Back to School Sales Tax Holiday which runs from the first Friday through the first Sunday in August. For more information, check the DOR’s webpage on sales tax holidays.

The Customer’s Responsibility

In cases where the online retailer does not have to collect sales tax, it is the customer’s responsibility to pay the tax—in which case it is known not as a sales tax but, rather, a “use tax.” More information is available on a Missouri DOR webpage covering both sales tax and use tax. As the webpage’s section on the use tax states, “Missouri cannot require out-of-state companies that do not have nexus or a ‘direct connection’ with the state to collect and remit use tax. If an out-of-state seller does not collect use tax from the purchaser, the purchaser is responsible for remitting the use tax to Missouri.” Also, the DOR publishes a very detailed set of use tax regulations as 12 CSR 10-4.005 through 12 CSR 10-4.634.

Final Words

While you might not know it from looking solely at Missouri’s sales tax statute, the issue of whether to require online retailers to collect sales tax in states where they have no physical presence has been a matter of significant debate in many states and at the federal level. However, at this time Missouri has not enacted any law that would require out-of-state retailers to collect sales tax from Missouri customers.

In Missouri, the physical-presence rule applies for Internet retailers. However, because the issue is hotly debated in various quarters, you should consider checking in periodically with the Missouri Department of Revenue to see if the rules have changed. For more general information on taxes on Internet sales, see Nolo's article Sales Tax on the Internet. And, for information on the rules about collecting sales tax for Internet sales in any other state, see Nolo’s article, 50-State Guide to Internet Sales Tax Laws.

September 2012