PURPOSE: This rule indicates to what extent an allowance for defective merchandise will affect state use taxes and interprets and applies section 144.610, RSMo.

1. (1) Where an allowance is made for defective merchandise, the vendor is subject to the use tax upon the amount due after subtracting the allowances from the sales price. When the tax has been paid on the full selling price by the vendor, a credit or refund of the tax attributable to the allowance must be requested on an application for refund/credit (see 12 CSR 10-4.275).
2. (2) If a purchaser returns defective merchandise to the vendor and, in connection with the return, new merchandise is furnished, the vendor is subject to the use tax only on the cost of the new article less the allowance for merchandise returned.

AUTHORITY: section 144.705, RSMo 1994.* U.T. regulation 695-4 originally filed Oct. 28, 1975, effective Nov. 7, 1975. Refiled March 30, 1976. *Original authority: 144.705, RSMo 1959.