Sales tax is imposed by states for the “privilege of selling tangible personal property” (i.e., NOT real estate) and certain taxable services “at retail” (i.e., to the ultimate consumer and not “for resale”). (see [R.S.Mo § 144.020] A handful of states do not have a sales tax and currently there is no national sales tax.
Burden on buyer
While the duty to collect and pay over sales tax is imposed on the seller, the burden of the tax itself is on the buyer. In Missouri, Sellers break the law if they absorb the tax (they can sell at a price “including tax”).
Seller liable to collection
The merchant is required to collect and pay sales tax over to the state, and remains liable for the tax even if they fail to collect it. It is often difficult for the merchant to collect previously uncollected sales tax from the merchant’s customers. There may be many smaller sales; the merchant may not know how to contact the customers; or there may be a continuing relationship with the customer that the merchant does not want to jeopardize.
Rentals and leases
Sales tax is also due on:
- rentals or leases if tax would have applied to a sale of the property [§ 144.010.3], except if the lessor purchased the property at “retail” and paid sale tax on the purchase, there is no tax on rentals [§ 144.020.8 (except motor vehicles, see § 144.070, and motor vehicle leasing companies, § 144.070.5)].
- charges and fees to or in places of amusement, entertainment and recreation, games and athletic events [§ 144.010.1(10)(a)]
- rooms in hotels and meals in restaurants [§ 144.010.1(10)(e)]
Sales and use tax laws are complex and often do not apply in the way it seems they would. Application often depends on specific facts and even slightly different facts can yield different results in seemingly similar cases even within the same state.
Sales taxes apply differently in different states
Because sales and use taxes are imposed by individual state laws and are interpreted and enforced by the individual state’s administrative agencies and courts, there can be significant differences in the provisions and implementation in different states. Businesses must use particular caution when crossing state lines as the statutes and rules differ, e.g., installation of telephone wiring is a taxable service in Arkansas but not in Missouri.
Heightened state concerns with revenue loss, including with the rise of internet commerce, results in continued state efforts to tax transactions partly within the state and to require out-of-state merchants to collect the states sales and or use tax.
Contacts of “nexus”
States can require a merchant to collect the state’s taxes if the merchant has significant connections with the state (“nexus“).
Moratorium on internet taxation
The moratorium preventing states from imposing new taxes on the internet do not impact the application of sales and use taxes to sales over the internet. Sellers who otherwise have an obligation to collect sales or use tax must also collect for internet sales, and consumers still owe use tax on items purchased over the internet.