If you charge or pay for shipping fees in the state of Missouri, you might be susceptible to a sales tax audit. Karen Stern, Partner in Charge of the Entrepreneurial Services Group, discusses the recent court case that led to the rise in audits, in this month's "Financial Fitness," as featured in Small Business Monthly.
A decision in a recent court case, Alberici Constructors v. Department of Revenue, has led to a rise in sales tax audit activity for businesses that charge or pay for shipping fees in the state of Missouri. The Department of Revenue has begun sending notices to all taxpayers registered with the Department as selling tangible personal property that may be delivered to Missouri customers.
Whether or not you have received a notice, all businesses should be aware of this potential audit risk. Here is what you need to know:
- The decision in this case is inconsistent with prior interpretations regarding the taxability of shipping charges. Historically, shipping charges were not subject to sales/use tax if they were optional and separately stated on the invoice.
- While it is inconsistent, it has not been repealed. Since the Missouri Department of Revenue's regulation for this topic has not been repealed, most practitioners would assume that it is a reliable interpretation of the law.
- What does this mean for your business? Based on the Court's interpretation, shipping charges related to a taxable transaction are subject to sales/use tax, regardless of the misleading guidance provided in the current regulation.
The Department has been identifying this non-compliance in recent audits. Click here to download "6 Key Steps to Navigating Sales and Use Tax Compliance." If your business is susceptible to this ruling, please contact Amy Jackson, Manager, Tax Services, at 314.983.1336 or ajackson@bswllc.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
