487 S.W.3d 470
Mo.2016Background
- Bartlett bought a grain dryer and conveyor from GSI and separately contracted with CR Conveying, Inc. (CRC) to fabricate support structures and install the conveyor at Bartlett’s St. Joseph elevator. Only the Bartlett–CRC transaction is disputed.
- The CRC contract (≈ $590,000) itemized labor, materials, rentals, engineering, and fabrication across five interconnected items. Bartlett paid use tax on certain materials, rentals, and on fabrication for the first item, but did not pay use tax on about $330,000 of engineering and generic labor charges.
- The Director audited Bartlett and assessed use tax on the disputed engineering and labor charges; Bartlett appealed to the Administrative Hearing Commission (AHC).
- The AHC ruled for Bartlett, concluding the disputed charges were primarily for services (installation) and not taxable; the Director sought review in the Missouri Supreme Court.
- The Supreme Court reviewed statutory text and contract intent and concluded the parties intended a single sale that included services as part of the sale of tangible personal property; the Court reversed the AHC and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether disputed engineering and labor charges are part of the "sales price" of tangible personal property under §144.605(8) and thus subject to use tax | Bartlett: charges were separately stated and reflect payment for nontaxable services (installation); true object was service | Director: the charges are part of the sale of tangible personal property because the contract treated materials, fabrication, and services as a single sale | Held: Charges are part of the sale and taxable; parties intended a single sale including services |
| Whether separately stating service charges makes them nontaxable | Bartlett: separate line items show intent to exclude services from sales price | Director: separate statements are not dispositive given the transaction’s complexity; intent controls | Held: Separate statement is a relevant factor but not dispositive; here it does not show exclusion |
| Whether a de minimis or ancillary materials exception applies where services predominate | Bartlett: materials were negligible compared to labor, so the transaction was essentially a nontaxable service | Director: statute contains no de minimis exception; materials and fabrication were substantial | Held: No de minimis exemption; materials and taxable fabrication were significant and not ancillary |
| Applicability of the "true object" test to characterize the transaction as a service | Bartlett: true object was installation—use tax shouldn’t apply | Director: transaction included substantial fabrication and tangible property creation; statute controls | Held: True object test is inapplicable here; the statute’s plain language governs and makes services part of sales price when parties intended a unified sale |
Key Cases Cited
- Alberici Constructors, Inc. v. Director of Revenue, 452 S.W.3d 632 (Mo. banc 2015) (services that are part of sale of tangible personal property are included in sales price)
- Sneary v. Director of Revenue, 865 S.W.2d 342 (Mo. banc 1993) (no de minimis exemption where services predominate)
- Western Blue Print Co. v. Director of Revenue, 311 S.W.3d 789 (Mo. banc 2010) (application of true object test where tangible item had little independent value)
- May Department Stores Co. v. Director of Revenue, 791 S.W.2d 388 (Mo. banc 1990) (separately stated freight charges showed intent to exclude them from sales price)