Share this e-Alert:

Polsinelli - Construction, Energy and Real Estate Litigation Construction, Energy and Real Estate Litigation
         

  

January 2015

  

New This Month: MO Supreme Court Limits the Construction Industry's Use of Certain Sales and Use Tax Exemptions

  

 
 

  

     

  

 
 

For more information about this alert, please contact:

  

G. Edgar James

Author

Practice Area Vice Chair

816.395.0661

ejames@polsinelli.com

  

Catherine R. Bell

Author

816.374.0512

cbell@polsinelli.com

  

S. Patrick O'Bryan

Author

816.360.4237

pobryan@polsinelli.com

  

Additional Construction, Energy and Real Estate Litigation Leadership:

  

Roy Bash

Practice Area Chair

816.395.0633

rbash@polsinelli.com

  

To view a full list of our Construction, Energy and Real Estate Litigation Professionals, click here.

  

To learn more about our Construction, Energy and Real Estate Litigation practice, click here.

  

To learn more about our Tax practice, click here.

  

  


View Polsinelli documents on JD Supra  
LinkedIn Twitter Facebook Inside Law Podcast Connect with us on LinkedIn. Connection with us on Twitter. Connect with us on Facebook. Connect with us on LinkedIn. Connection with us on Twitter. Connect with us on Facebook.

SUBSCRIBE

   

On January 13, 2015, the Missouri Supreme Court issued three decisions on sales and use tax that have limited the construction industry's ability to utilize certain exemptions in those areas. Companies that utilize such exemptions should examine whether tax exemptions they enjoyed in the past still apply, and the potential effects that the limitation will have on the profitability of any current projects or outstanding bids.

Limitation #1: Machinery and equipment are not "materials"

RSMo 144.030.2(5) includes an exemption for materials and supplies required for the installation or construction of machinery, and equipment purchased for new or expanded manufacturing, mining or fabricating plants in the state, if such machinery and equipment is used directly to produce a product intended to be sold for final use or consumption. In Alberici Constructors, Inc. v. Director of Revenue, the plaintiffs jointly contracted with a concrete supplier to build a large cement plant. Plaintiffs rented cranes and welders as part of the project, and asserted that the rentals were materials required for its execution. The Court disagreed, finding that the cranes and welders are machinery/equipment and not materials, and thus do not qualify for the exemption.

Limitation #2: "Construction" is not the same as "manufacturing", "processing", "compounding", or "producing"

RSMo Section 144.054(2) includes an exemption from sales and use taxes for materials used or consumed in the manufacturing, processing, compounding, or producing of a product. In both Fred Weber, Inc. v. Director of Revenue, and Ben Hur Steel Worx, LLC v. Director of Revenue, the Court held that this exemption is intended to apply to "large-scale industrial activities" and not to construction activities. In these two cases, (i) resurfacing roads and parking lots with asphalt and (ii) the provision of labor, materials, and equipment necessary to furnish and install structural beams, plates, angles, and other components in the process of constructing large scale commercial buildings and structures were held to be construction activities, and are therefore ineligible for the exclusion.

If your company utilizes either of these exemptions (or utilizes similar exemptions that rely on the same language), then it would be prudent to review your eligibility for the exemptions. The failure to properly account for the tax cost when bidding on a project could significantly impact the profitability of a project if the exemption were subsequently determined not to apply. Please contact the authors or a member of the Construction or Tax practices for more information.

For More Information

For more information, please contact the authors of this alert or your Polsinelli attorney.

 
 

  

     

  

 

 

  

     

  

 
 

Atlanta  Chattanooga  Chicago  Dallas  Denver  Edwardsville  Jefferson City  Kansas City  Los Angeles  New York
Overland Park  Phoenix  St. Joseph  St. Louis  San Francisco  Springfield  Topeka  Washington, D.C.  Wilmington
polsinelli.com

 
             
 

  

ABOUT POLSINELLI

real challenges. real answers.SM  
Polsinelli is a first generation Am Law 100 firm serving corporations, institutions, entrepreneurs and individuals nationally. Our attorneys successfully build enduring client relationships by providing practical legal counsel infused with business insight, and with a passion for assisting General Counsel and CEOs in achieving their objectives. Polsinelli is ranked 18th in number of U.S. partners* and has more than 740 attorneys in 19 offices. Profiled by The American Lawyer and ranked as the fastest growing U.S. law firm over a six-year period**, the firm focuses on healthcare, financial services, real estate, life sciences and technology, energy and business litigation, and has depth of experience in 100 service areas and 70 industries. The firm can be found online at www.polsinelli.com. Polsinelli PC. In California, Polsinelli LLP.

* Law360, March 2014
** The American Lawyer 2013 and 2014 reports

  

 
 

  

     

  

 
 

Polsinelli provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. The choice of a lawyer is an important decision and should not be based solely upon advertisements.

Copyright © 2015 Polsinelli PC.

 
             
Connect with us on LinkedIn. Connection with us on Twitter. Connect with us on Facebook. Polsinelli