ALEXANDRIA, VIRGINIA (May 9, 2001) – Missouri printers’ long-standing contention that they should not be taxed on components used in producing a final product came to a resolution April 24, when the Missouri Supreme Court ruled in favor of the industry by deciding these materials are exempt.
Printing Industries of America (PIA), Incorporated, affiliate, the Printing Industries of St. Louis (PISTL) supported the industry’s claim in the case by using funds from its political action committee to file an amicus curiae—or friend to the court—brief.
" This was a case about which we had strong feelings and by lending the support of PISTL, we hope to have demonstrated the industry’s unity on issues of common concern," said Bob Tyler, PISTL president. "We have been opposed to Missouri’s practice of effectively double-billing members of our industry for a long time and we are all thankful this matter has come to a close."
The issue reached the Missouri Supreme Court when Ovid Bell Press, Incorporated, Fulton, Missouri, and Walsworth Publishing Company, Incorporated, Marceline, Missouri, sought exemptions from sales and use tax for "items used in making their products," according to the court opinion. Both are PISTL and PIA members.
Both firms appealed the assessments with the Missouri Administrative Hearing Commission (AHC), which ruled against the two. They then sought relief before the Missouri Supreme Court, which rendered a unanimous decision in favor of the printing companies’ claims.
The court opinion holds "Section 144.030.2(2) exempts from sales tax, and section 144.61.5(3) exempts from use tax, materials that, when used in manufacturing, becomes parts of the new personal property that is sold for final use and consumption. The court examines each claimed product, such as opaquing pens, adhesive labels, film, red litho tape, etc. to determine which parts meet these criteria. The negatives are the largest part of the claim. Their cost is included in the total consideration that customers paid; title is transferred by the agreements’ express terms, despite the taxpayers’ continued possession; and customers control the negatives, thereby constituting a sale, unlike the match prints and proof corrections. The AHC decision is reversed and the cases remanded for proceedings consistent with this opinion."
PISTL also noted other key findings about the court opinion, which include the following:
1. The exemption will not apply unless the printer can prove that the customer owns the negative. In both Ovid Bell and Walsworth, it was clear from the record that the customer owned the negatives and controlled the ultimate disposition of the negatives. In order to make certain the exemption will apply, it is important that printers provide in their agreements with customers that the film is the property of the customer. (Plates are already exempt by Missouri statute.)
2. It is helpful to note that the Court found the film exempt despite the fact that the printer did not itemize the cost of the film or the sale of the negatives to customers. One price was charged for the entire job. It is now clear, therefore, that the film does not have to be broken out separately on an invoice.
3. Finally, note that the exemption will not help pre-press houses, which are considered to be service industries. These companies do not charge sales tax to their customers because they are providing a service, and therefore must pay tax on their purchases.
PISTL and Missouri state Department of Revenue met May 11 to begin working out the details following the court opinion. If you have any specific questions or feel guidance is needed, please feel free to call Bob Tyler at 314/962-6780.
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