What does Missouri LR 8183 conclude about Artwork Sold by Non-profit is Subject to Sales Tax?

Plain-English summary

A Missouri nonprofit art club asked the Department of Revenue whether artwork sold at its planned community art event would be subject to sales tax. The club's plan: invite artists from around central Missouri to paint scenes in a Missouri city, then sell the finished pieces (plus up to two additional paintings each artist brought along) to club sponsors and the public at a central location. The club would keep a 25% commission from each sale to fund its own operations and community art programs.

The Department answered two questions, both "yes." First, artwork is tangible personal property -- it has "physical substance apparent to the senses," meaning it can be seen, touched, and carried, which is all the law requires to qualify. Second, the artists' sales of that artwork at the event are subject to Missouri state and local sales tax. The Department reasoned that each sale was a "sale at retail" under Section 144.010.1(13), RSMo: an artist in the business of creating and selling art transferred ownership of a painting to a buyer for use, not for resale, in exchange for money.

Crucially, the nonprofit exemption in Section 144.030.2(20), RSMo -- which excuses sales "by or to" qualifying not-for-profit civic, social, service, or fraternal organizations -- did not save these transactions. The Department focused on who was actually selling: the artists, not the club, were the sellers of the artwork. The club's role was limited to collecting a 25% commission and hosting the event; it never took title to the paintings. Because the retail sales were made by the individual artists rather than by the nonprofit itself, the exemption for nonprofit sales didn't apply, and tax was due on the full sales price.

The bottom line for anyone organizing similar events: hosting the sale through a nonprofit, or having the nonprofit take a cut, does not automatically make the underlying retail sales exempt. What matters is who is legally selling the property.

What this means for you

Nonprofit organizations hosting art fairs or similar fundraising sales

If your organization hosts an event where independent artists (or other sellers) bring their own goods to sell directly to the public, the sales tax exemption for nonprofit sales likely will not cover those transactions -- because the sales are being made by the individual artists, not "by" the nonprofit. Your organization's commission or "cut" of the proceeds doesn't change that. If you want your event's sales to qualify as sales "by" the nonprofit under Section 144.030.2(20), RSMo, you may need to restructure so the nonprofit itself takes title to and sells the goods, rather than simply hosting a marketplace and taking a commission. Consult a Missouri tax professional before assuming any nonprofit fundraising sale is automatically tax-exempt.

Artists and individual sellers

If you sell your own artwork at a fair, festival, or fundraising event -- even one organized and partly funded by a nonprofit -- you are generally responsible for collecting and remitting Missouri state and local sales tax on the full sales price of each piece you sell. The fact that the event benefits a nonprofit, or that the nonprofit takes a commission, does not exempt your sales.

Event organizers and accountants

Before an event, identify exactly who is legally transferring title to each item sold: the artist/vendor, or the hosting organization. That distinction determines whether the nonprofit sales exemption in Section 144.030.2(20), RSMo, can apply at all. Also remember this ruling only addresses these specific facts -- a different structure (e.g., consignment where the nonprofit actually takes ownership before resale) could produce a different result.

Common questions

Q: Does it matter that the nonprofit only received a 25% commission and used it for charitable purposes?
A: No. The ruling makes clear that the identity of the seller -- not how the proceeds are used -- determines who owes sales tax. Because the artists, not the nonprofit, sold the paintings, the sales were taxable regardless of the club's nonprofit status or its use of the commission for community art activities.

Q: Is artwork considered tangible personal property in Missouri?
A: Yes. The Department confirmed that artwork has "physical substance apparent to the senses" -- it can be seen, touched, and carried -- so it meets Missouri's definition of tangible personal property under Section 144.020.1, RSMo.

Q: Who is responsible for collecting the sales tax at an event like this?
A: According to the ruling, the artist selling the artwork should collect sales tax on the full sales price at the point of sale, since the artist is the one making the "sale at retail."

Q: Would the result be different if the nonprofit itself owned and sold the artwork?
A: This ruling doesn't address that scenario directly, but its reasoning turns on the fact that the artists -- not the club -- were transferring ownership of the paintings to buyers. A structure where the nonprofit actually took title to the art before reselling it could implicate the Section 144.030.2(20), RSMo, exemption differently, but that would require its own analysis of the facts.

Citations and references

Statutes and regulations:

• Section 536.021.10, RSMo (Director of Revenue's authority to issue letter rulings)
• 12 CSR 10-1.020 (letter ruling procedure)
• Section 144.020.1, RSMo (sales tax imposed on tangible personal property and enumerated services)
• Section 144.021.1, RSMo (purpose and intent of the sales tax statutes)
• Section 144.010.1(13), RSMo (definition of "sale at retail")
• Section 144.030.2(20), RSMo (exemption for sales by/to not-for-profit civic, social, service, or fraternal organizations)

Case law cited by the Department:

• Hyde Park Housing Partnership v. Director of Revenue, 850 S.W.2d 82, 85 (Mo. banc 1993) (plain and ordinary meaning of statutory words)
• SEBA, LLC v. Director of Revenue, 611 S.W.3d 303, 316 (Mo. banc 2020) (dictionary definitions absent statutory definition)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8183

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated January 6, 2022.

The facts as presented in your letter ruling request and a review of your website are summarized as follows:

Applicant is a non-profit organization that works to share its joy of art with others.  Applicant holds monthly meetings and sponsors art exhibits in a Missouri city (City).  Applicant plans on sponsoring an art event in 2022 (Event).  At the Event, artists from around central Missouri will come to City and paint pictures of anything the artists find within the community.  Later the same day, the artists will take the completed pictures to a centralized location in order to sell the paintings.  The artists are also allowed to bring two additional paintings the artists created in order to offer them for sale as well.

The paintings offered for sale will be displayed and club sponsors and the public may purchase the displayed paintings.  Once a piece of art has sold, Applicant will receive a 25% commission from the sale of all pieces.  The commissions Applicant will receive will be used to support community art activities and for Applicant's operations.

ISSUE 1 :

Is artwork tangible personal property?

RESPONSE 1 :

Yes.  Artwork is tangible personal property.

The Missouri Supreme Court has stated "[t]he primary rule of statutory construction is to ascertain the intent of the lawmakers by construing words used in the statute in their plain and ordinary meaning."  Hyde Park Housing Partnership v. Director of Revenue, 850 S.W.2d 82, 85 (Mo. banc 1993).  The Court also stated "[a]bsent statutory definition, words used in statutes are given their plain and ordinary meaning with help, as needed, from the dictionary."  SEBA, LLC v. Director of Revenue, 611 S.W.3d 303, 316 (Mo. banc 2020) ( citing Am. Healthcare Mgmt., Inc. v Dir. of Revenue, 984 S.W.2d 496, 498 (Mo. banc 1999)).  Tangible property is defined as "property having physical substance apparent to the senses."  Webster's Third New International Dictionary, p. 2337 (unabr. 1986).

Artwork has physical substance apparent to the senses.  An individual may look at the artwork, touch it, carry it, and ponder the artist's intent conveyed in the artwork.  Because the artwork is apparent to the senses, artwork is tangible personal property.

ISSUE 2 :

Are the artist's sales of the artwork at the event subject to Missouri state and local sales tax?

RESPONSE 2 :

Yes.  The artist's sales of artwork at the event are subject to Missouri state and local sales tax.

Section 144.020.1, RSMo, imposes a sales tax on sales of tangible personal property and certain enumerated services.  Section 144.021.1, RSMo, provides "[t]he purpose and intent of sections 144.010 to 144.510 is to impose a tax upon the privilege of engaging in the business, in this state, of selling tangible personal property and those services listed in section 144.020[.]"  Section 144.010.1(13), RSMo, defines "sale at retail" as "any transfer made by any person engaged in business as defined herein of the ownership of, or title to, tangible personal property to the purchaser, for use or consumption and not for resale in any form as tangible personal property, for a valuable consideration[.]"  Section 144.030.2(20), RSMo, exempts from sales tax "all sales made by or to not-for-profit civic, social, service or fraternal organizations, including fraternal organizations which have been declared tax-exempt organizations pursuant to Section 501(c)(8) or (10) of the 1986 Internal Revenue Code, as amended, in their civic or charitable functions and activities[.]"

Applicant intends to sponsor an event where artists are invited to come to City and paint scenes the artists see throughout the city.  Later, the completed pieces will be available for sale to the public along with two other art pieces the artists bring in order to sell.  Applicant will receive a 25% commission from every piece or art sold at the event; the proceeds Applicant will use to fund its organization.

The sale of artwork is a sale at retail because the artist, who is in the business of selling artwork the artist creates, transfers the artwork to the purchaser for use or consumption and not for resale.  The artist keeps the majority of the price received when the artwork is sold.  Applicant receives a commission from the artist for each piece of art sold.  The artist will not just sell the pieces the artist painted for the event, the artist is allowed to bring two additional pieces to sell.  The intent of the event is to sell artwork.  Therefore, Applicant's sales of artwork at the event are subject to Missouri state and local sales tax and the artist should collect tax on the full sales price.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Senior Counsel Thomas A. Houdek, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475 (phone 573-751-0961), or me.

Sincerely,

Wayne Wallingford