The Missouri Supreme Court has issued a decision that may present sales tax refund opportunities for contractors operating in Missouri. On February 8, 2011, in E & B Granite, Inc. v. Director of Revenue, the supreme court held that the Missouri sales tax did not apply to a contractor’s purchases of raw materials that were later used by the contractor in completing construction projects.
The taxpayer in E & B Granite produced and installed granite countertops. The taxpayer initially paid Missouri sales tax when it puchased the raw granite slabs used to produce the countertops. The taxpayer later sued for a refund of the sales tax paid on these purchases, arguing that the purchases were exempt from tax under a Missouri statute that exempts purchases of “materials used or consumed in the manufacturing, processing, compounding, mining, or producing of any product.” The supreme court held that the taxpayer was entitled to the refund, even though the purchased materials were later installed by the taxpayer in a construction project (rather than being resold at retail as items of tangible personal property).
The E & B Granite decision presents an opportunity for contractors to file refund claims with respect to sales taxes paid on purchases of virtually all raw materials used to create products that were installed in Missouri construction projects. Refunds may be available for sales taxes paid within the past three years.