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Source: Ryan LLC, Dallas

Missouri provides contrasting outcomes regarding the application of sales tax to purchases of concrete for foundations. The Missouri Department of Revenue’s mid-February Letter Ruling 7780 concludes that a taxpayer's purchase of ready mixed and rebar used to construct wind turbine tower foundations qualifies for the sales tax exemption covering 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 to machinery and equipment plus "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 turbine tower foundation concrete and rebar purchase qualified for the sales tax exemption.

In contrast to Letter Ruling 7780, notes tax services provider Ryan, the Missouri Administrative Hearing Commission issued an early-January decision (case number 16-2120 RS) upholding the Department's denial of a refund on sales tax paid on concrete used to construct grain bin foundations. In Potter Farms, Inc. v. Director of Revenue, the taxpayer engaged contractors to construct three large grain bins. Potter Farms’ refund claim for payment of contractors tax on the concrete was denied by the Department of Revenue, prompting an appeal 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...."

The Commission ruled the concrete foundations were not “part” of the grain bins and, therefore, do not quality for the exemption, despite what Ryan tax specialists note are formal Finding of Facts that: a) "[g]rain bin foundations are made of concrete due to the weight they must be able to sustain"; b) 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, c) the "manufacturer's warranty on the grain bins would be terminated if the grain bins were not erected in accordance with the installation manuals."