2007 Senate Bill 30 Exemptions

1. 2007 Senate Bill 30 Exemptions Matt Blunt, Governor Trish Vincent, Director

2. Matt Blunt, Governor Trish Vincent, Director Omnibus Bill • What’s contained in SB 30? Children’s services Mass transit Annexation and detachment Tax credits Local taxes Rental and leasing facilities Tourism Motor carriers Local business licenses Exemptions Coin-operated amusement devices Police services Youth and senior services

3. Matt Blunt, Governor Trish Vincent, Director How did SB 30 come to be? • Governor Blunt identified the expansion of manufacturing as a priority. • The tax exemption on manufacturing is a tool to aid in that expansion. • “Manufacturing is a vital part of our diverse economy, and this legislation will help level the playing field for Missouri manufacturers.” – Governor Matt Blunt, June 13, 2007 • Senator Nodler sponsored SB 30 and was instrumental in its passage.

4. Matt Blunt, Governor Trish Vincent, Director What does SB 30 do? • How does SB 30 change current statute with regard to exemptions? • It expands the qualifying uses for some exemptions. • It creates new exemptions in some circumstances. • SB 30 only applies to state sales tax (4.225%), so the local/county sales/use tax still applies.

5. Matt Blunt, Governor Trish Vincent, Director Where are the manufacturing exemptions? • The exemptions outlined in today’s presentation are in section 144.054, RSMo. • Subsection 1 contains definitions. • Subsection 2 contains provisions related primarily toward manufacturing and the processing of recovered materials. • Subsection 3 contains provisions related to broadcasting, defense contracts, chapter 100 bonds, and railroad infrastructure.

6. Matt Blunt, Governor Trish Vincent, Director 144.054.1 Definitions • Processing – any mode of treatment, act, or series of acts performed upon materials to transform or reduce them to a different state or thing, including treatment necessary to maintain or preserve such processing by the producer at the production facility • Recovered materials – those materials which have been diverted or removed from the solid waste stream for sale, use, reuse, or recycling, whether or not they require subsequent separation and processing

7. What is exempt? “Electrical energy and gas (natural, artificial, or propane), water, coal, energy sources, chemicals, machinery, equipment, and materials” When is it exempt? When it is “used or consumed in the manufacturing, processing, compounding, mining, or producing of any product” Matt Blunt, Governor Trish Vincent, Director 144.054.2 Manufacturing Exemptions

8. What is exempt? “Electrical energy and gas (natural, artificial, or propane), water, coal, energy sources, chemicals, machinery, equipment, and materials” When is it exempt? When it is “used or consumed in the processing of recovered materials” Matt Blunt, Governor Trish Vincent, Director 144.054.2 Manufacturing Exemptions (continued)

9. What is exempt? “Electrical energy and gas (natural, artificial, or propane), water, coal, energy sources, chemicals, machinery, equipment, and materials” When is it exempt? When it is “used in research and development related to manufacturing, processing, compounding, mining, or producing any product” Matt Blunt, Governor Trish Vincent, Director 144.054.2 Manufacturing Exemptions (continued)

10. Matt Blunt, Governor Trish Vincent, Director 144.054.2 Manufacturing Exemptions (IMPORTANT!) • Important Note • As mentioned previously, the exemptions outlined to this point do not apply to local sales or use taxes.

11. Matt Blunt, Governor Trish Vincent, Director 144.054.2 Manufacturing Exemptions • Biggest Changes from Current Statute • All energy becomes exempt from state sales and use tax if it’s used for a qualifying purpose. • Previously, the electricity exemptions didn’t apply to all manufacturers. Now they will. • The research and development language outlined in 144.054.2 expands the qualifying uses for some exemptions. • The “line” for qualifying exemptions has been moved.

12. Utilities, machinery, and equipment used or consumed directly in television or radio broadcasting Sales and purchases of tangible personal property, utilities, services, or any other transaction subject to state or local sales or use tax when such sales are made to or purchases made by a contractor for use in fulfillment of any obligation under a defense contract with the U.S. government Sales and leases of tangible personal property by any county, city, incorporated town, or village when it is authorized under chapter 100, RSMo, and such transaction is certified for sales tax exemption by the Missouri Dept. of Economic Development Tangible personal property used for railroad infrastructure when it is brought into this state for processing, fabrication or other modification for use outside the state in the regular course of business Matt Blunt, Governor Trish Vincent, Director 144.054.3 Other Exemptions

13. Matt Blunt, Governor Trish Vincent, Director Implementation Timeline • SB 30 was signed by Governor Blunt on June 13, 2007. • Department of Revenue implementation/legal meetings began on June 18, 2007. • These exemptions will apply to purchases made on or after August 28, 2007. • During the course of the summer, the department’s implementation/legal team will continue to meet and will receive the input you provide here.

14. Matt Blunt, Governor Trish Vincent, Director Rulemaking Process • Department of Revenue writes the rule and files it. • The rule is published by the Secretary of State in the Missouri Register 30-45 days later. • Following publication, there is a 30-day comment period. After which, the department compiles information from public comments and writes the final rule. • A copy of the final rule is filed with the Joint Committee on Administrative Rules for a 30-day review period. • After that period, the department files the final rule for publication in the Missouri Register by the Secretary of State.

15. Matt Blunt, Governor Trish Vincent, Director Rulemaking Process (continued) • At the end of each month, all new final rules are published by the Secretary of State in the Code of State Regulations (CSR). • Rules become effective 30 days after publication in the CSR unless the agency chooses a later date or an earlier date is set by statute. At that point they have the force and effect of law. • The entire process takes about six months. • Emergency rules may become necessary in the implementation of SB 30.

16. Matt Blunt, Governor Trish Vincent, Director What if I still have questions? • As we conduct these meetings, the input we receive from you will be shared with our implementation/legal team. • As we get closer to August 28th, we will try to have more answers. • Ultimately, if you are unsure of whether your process qualifies as a manufacturing process, you may submit a letter to the Department of Revenue along with a specific set of facts pertinent to your situation and request a letter ruling.

17. Matt Blunt, Governor Trish Vincent, Director Letter Rulings • Letter rulings issued pursuant to section 536.021.10, RSMo, are binding on the Department of Revenue with respect to the taxpayer requesting the ruling for three years from the issue date of letter. • Letter rulings apply only to the particular fact situation stated in the letter ruling request. • Letter rulings are not binding on the Department of Revenue with respect to any other taxpayers. • Binding Letter Rulings www.dor.mo.gov/tax/rulings • Regulation 12 CSR 1.020 outlines the process for requesting a letter ruling

18. Matt Blunt, Governor Trish Vincent, Director Requests for letter rulings must state the following • “letter ruling is requested pursuant to section 536.021.10, RSMo” • Applicant’s: • Complete, clear, and concise statement of all relevant facts related to the letter ruling request • Desired result and the legal basis for that result • Whether the issue, as it relates to the applicant, is presently under investigation by the Department of Revenue • Name • Address and phone number • Social Security or federal identification number • Missouri tax identification number • Tax type at issue • Issue(s) on which a letter ruling is requested

19. Matt Blunt, Governor Trish Vincent, Director Discussion

20. Matt Blunt, Governor Trish Vincent, Director Where do we go from here? • The Department of Revenue is developing an implementation plan as we speak. This exemption will be in effect beginning August 28, 2007. • If you would like more information, please visit the department’s website www.dor.mo.gov

21. 2007 Senate Bill 30 Exemptions Matt Blunt, Governor Trish Vincent, Director