In line with its similar ruling in November 2022, the Missouri Department of Revenue determined that a business with no physical or economic nexus was nonetheless liable for collecting and remitting sales tax on sales drop-shipped by a third party into Missouri.
“... the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties ...”
facts presented
As part of the current ruling request, the business asserted that it is an out-of-state vendor who does not have nexus in the state of Missouri and that it sells a manufacturer's products into Missouri. Further, they stated that all of their products are drop-shipped directly from a manufacturer to the business' customers located within Missouri.
law as written
The issue hinges on Missouri’s statute that imposes sales tax on “all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state." §144.020.1, RSMo.
In an effort to clarify whether a retail sale is in Missouri, regulations provide that a sale of tangible personal property is subject to sales tax if title to or ownership of the property transfers in Missouri. Pertaining to when title actually transfers for out-of-state sellers in Missouri, it is when it delivers tangible personal property to a third-party common or contract carrier for delivery into Missouri.
DROP SHIPMENT
As explained in the ruling, a “drop shipment is a sale in which the seller accepts an order from a customer, places the order with a third-party supplier such as a manufacturer or wholesaler, and directs the third-party supplier to deliver the item directly to the customer. On delivery of the order to the customer, title to the item sold passes from the third-party supplier to the seller and then title to the item passes from the seller to the customer.”
no nexuS nonsense
Of note, not only did the business not have physical presence, its sales into Missouri were less than the state’s economic nexus threshold of $100,000.
Tax translation
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