Manufacturing tax exemption takes effect tomorrow

Part of Senate Bill 30, the legislation exempts energy sources – such as electricity, gas and coal – water, chemicals, machinery, equipment and materials from state sales taxes and state and local use taxes when used or consumed in manufacturing, mining, compounding, processing or producing any product. The bill also exempts these items when used in research and development related to manufacturing. The previous tax exemption for manufacturers covered only materials that ended up in the final manufactured product.

With Missouri’s 4.225 percent sales tax rate, the exemption will save a manufacturer $4,225 on a $100,000 purchase. The exemption extends only to state sales and use taxes and local use taxes; local sales taxes will continue to apply.

Gov. Matt Blunt signed the measure into law on June 13.

In writing the new rules, the Missouri Department of Revenue worked with various organizations, including Associated Industries of Missouri, six utilities and thousands of manufacturers. Officials said they held more than 20 public meetings.

“We spent a lot of time trying to figure out how to do that in a way that gave us a level of precision that is appropriate but did not have our auditors out there counting light-bulbs or require taxpayers to hire some expensive energy consultant and fill out a bunch of paperwork in order to get the exemption,” said Lowell Pearson, deputy director of the Missouri Department of Revenue.

AIM plans to address the new law during two tax conferences: the 2007 Tax Conference, Oct. 18–19 at Lodge of the Four Seasons in Lake Ozark, and the 2007 Manufacturing Conference, Nov. 14–15 at the Courtyard Marriott in Columbia. More information is available at www.aimo.com by clicking on conference/seminars.

See SBJ’s Sept. 3 issue for more on this story.