A Missouri citizen who has entered into a contract with a contractor for a home addition requested a letter ruling from the Missouri Director of Revenue to determine if the contractor’s invoices to the homeowner for the cost of sales tax paid on purchases of materials was correct. The contractor and homeowner entered into a lump sum contract where the contractor purchases the necessary materials including paying sales tax and then sends an invoice to the homeowner for the cost of sales tax paid by the contractor. The homeowner wants to know if the homeowner or the contractor is the final user and consumer under the agreement.
The Missouri Director of Revenue found that contractors who purchase materials are indeed considered the final user, pointing to 12 CSR (Code of State Regulations) 10-112.010(1) which states that a contractor is the final user of materials used and consumed in a real property improvement. As a result, sales of materials to contractors are subject to tax because the purchases are not sold for resale as tangible personal property. Contractors should not charge tax then on the lump sum contract price for the real property additions but are not prohibited from adding the cost of sales tax for materials into the contract price.
Taxpayers need to be aware of when tax is charged and by whom. In this case, the contractor was specifically not taxing the lump sum contract and was charging the client to recuperate sales tax paid by the contractor, which is allowed under Missouri code. Since the contractor was not charging tax on the services, the cost of the tax can be factored into the materials cost for the project and passed along to the homeowner. Service providers should be alert and take extra care to ensure they are paying correct sales tax when they are considered the consumer of items and to correctly get repayment for the cost of their materials. (Letter Ruling No. LR 8374, Signed Vincent, Trish, Missouri Department of Revenue, November 24, 2025)