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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


Practice Area Vice Chair



Catherine R. Bell




S. Patrick O'Bryan




Additional Construction, Energy and Real Estate Litigation Leadership:


Roy Bash

Practice Area Chair



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.



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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.











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* Law360, March 2014
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