By Randy Hilger
Missouri, the “Show-Me State,” has provided contrasting outcomes regarding the application of sales tax to purchases of concrete for foundations. On February 16, 2017, the Missouri Department of Revenue (“Department”) issued Letter Ruling 7780, concluding that a taxpayer’s purchase of concrete and rebar used to construct foundations for wind turbine towers qualifies for the sales tax exemption for machinery and equipment used in manufacturing. The ruling notes that the production of electricity for sale has been determined to be a qualifying manufacturing activity, and the sales tax exemption at issue, Section 144.030.2(6) RSMo applies not only to the purchase of machinery and equipment but also to the “materials and supplies solely required for installation or construction of such machinery and equipment.” Because the wind turbine cannot function properly without a foundation, the Department concluded the taxpayer’s purchase of concrete and rebar to construct a turbine tower foundation qualified for the sales tax exemption.
In contrast to Letter Ruling 7780, the Missouri Administrative Hearing Commission issued a decision in case number 16-2120 RS on January 10, 2017 upholding the Department’s denial of a refund on sales tax paid on concrete used to construct foundations for grain bins. In Potter Farms, Inc. v. Director of Revenue, the taxpayer, Potter Farms, engaged contractors to construct three large grain bins. The provider of the concrete charged Potter’s contractors tax on the concrete, and Potter filed a refund claim that was denied by the Department of Revenue and appealed to the Commission. Section 144.030.2(35) RSMo exempts “[a]ll sales of grain bins for storage of grain for resale,” and Regulation 12 CSR 10-110.900(3)(D) states that “[g]rain bins, including all parts, that are used in production of a farm product and qualify as farm machinery and equipment are exempt....” Despite formal Finding of Facts that “[g]rain bin foundations are made of concrete due to the weight they must be able to sustain”; that the manufacturer’s installation manual detailed the recommended concrete foundation, “including instructions regarding the type of concrete to be used, foundation surface, curing process, elevation and anchoring the grain bins to the concrete”; and that the “manufacturer’s warranty on the grain bins would be terminated if the grain bins were not erected in accordance with the installation manuals,” the Commission ruled the concrete foundations were not “part” of the grain bins and, therefore, did not qualify for the exemption.