On February 24, 2014, the Missouri Department of Revenue released a letter ruling on the taxability of separately-stated delivery charges for products used in heavy-duty equipment and industrial applications.  (In that situation, the charges were taxable because the parties intended for delivery to be part of the sale.)

Since we’ve seen several recent class actions claiming that the customers/plaintiffs paid tax on delivery charges that shouldn’t have been taxed, we thought we’d review the key Missouri Supreme Court cases analyzing taxability of delivery charges.  Bottom line, the fundamental question is whether the parties to these transactions intended the delivery charge to be part of the sale:

  • Alberici Constructors, Inc. v Director of Revenue, No. SC93771 (Mo. Jan. 13, 2015) (affirming administrative agency’s finding that delivery charge was taxable based on “substantial and competent evidence . . . that it was [the parties’] intention that the delivery service be a part of the crane rental”)
  • Southern Red-E-Mix Co. v. Director of Revenue, State of Mo.  894 S.W.2d 164, 167 (Mo. 1995) (“As explained in Brinson, the appropriate consideration is whether the parties intended the delivery charge to be part of the sale. From our review of these cases, it is clear that a number of factors are relevant in that determination. Those factors include when title passes from the seller to the buyer, whether delivery charges are separately stated, who controls the cost and means of delivery, who assumes the risk of loss during delivery, and whether the seller derives financial benefit from the delivery. The Court does not mean to suggest that this is an exclusive list of factors. The weight to be given any factor in determining what the parties intended is largely a function of the fact finder.”)
  • Brinson Appliance, Inc. v. Director of Revenue 843 S.W.2d 350, 352 (Mo. 1992) (holding that delivery charges were not subject to sales tax because neither Brinson Appliance nor its customers intended that delivery be a part of the sale of the appliances; among the factors weighing against taxability were that the cost and means of delivery were entirely up to the customer, the seller had not undertaken to assume the risk for damage or loss during delivery, and the seller derived no financial benefit from deliver: “The fundamental question . . . [is] whether the parties to these transactions intended the delivery charge to be part of the sale.”)
  • Oakland Park Inn v. Director of Revenue of State of Mo.  822 S.W.2d 425, 426 (Mo. 1992) (gratuity charge on hotel banquet services was taxable, since it was an oxymoronic “mandatory gratuity”: “The applicable statute defines “gross receipts” as the “total amount of the sale price of the sales at retail, including any service that is a part of the sale.”Section 144.010(3), RSMo 1986. The mere fact that a charge is stated separately is not conclusive as to whether or not it is a part of the sale and taxable. The fact that the separate charge (tip) will eventually be paid to servers does not distinguish it from the fixed costs to prepare the food contained in the price of the meals. Both are equally taxable under the contract created by appellant.”)
  • May Dept. Stores Co. v. Director of Revenue, 791 S.W.2d 388, 389 (Mo. 1990) (“At no time were shipping costs billed as part of the merchandise price. Clearly, the parties to the transactions did not intend to include freight charges. Consequently, the Court concludes the cost of shipping was not a part of the taxable sales price as defined by 144.605(6), and the delivery charges cannot be subject to the use tax. This decision is consistent with a uniform line of Missouri Administrative Hearing Commission decisions on this issue. See, K–Mart Corporation v. Director of Revenue, No. RS–88–0804, Missouri Tax Reports (CCH) 12,799 (Mo. Admin. Hearing Comm., June 29, 1989); Golde’s Department Stores, Inc. v. Director of Revenue, Nos. RS–88–0940 and RS–88–1273, Missouri Tax Reports (CCH) 12,767 (Mo. Admin. Hearing Comm., June 29, 1989);Builders Sand Co. v. Director of Revenue, No. RS–85–1959, Missouri Tax Reports (CCH) 11,990 (Mo. Admin. Hearing Comm., August 19, 1987).”)
  • Kurtz Concrete, Inc. v. Spradling, 560 S.W.2d 858, 860 -861 (Mo. 1978) (concrete delivery charge held not taxable, but only because parties intended title to pass before delivery; otherwise, taxable: “If [delivery] services are rendered before title passes and these services are included in the amount of the sale price, then the charge for these services is taxable.”)
  • Con Agg of MO LLC v. Dir. of Revenue, 2010 WL 4656571 (Mo. Admin. Hr’g Comm’n Oct. 5, 2010) (good summary of relevant cases discussing when a delivery charge is taxable)
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