What does Missouri LR 8191 conclude about Textbooks and Supply Sales for Adult Education are Exempt from Sales Tax?

Plain-English summary

The Missouri Department of Revenue ruled that a public school district does not have to charge state or local sales tax when it sells textbooks and supplies to students enrolled in its adult education courses. The district requires adult education students to buy their textbooks and supplies directly from it -- the district orders the materials and delivers them to students at the start of class, rather than operating a retail bookstore.

The Department's reasoning rests on a specific statutory exemption: Section 144.030.2(19), RSMo, exempts "all sales made by or to all elementary and secondary schools operated at public expense in their educational functions and activities." Even though Section 144.020.1, RSMo generally taxes retail sales of tangible personal property, the Department found that because the Applicant is a public school district and its adult education classes fall within its educational functions and activities, the exemption covers the textbook and supply sales too.

This ruling is a follow-up to an earlier letter ruling the same district received in 2019 addressing the same issue. Because the district's exempt status and the scope of its adult education program had not changed since 2019, the Department reached the same conclusion again in this 2022 ruling.

What this means for you

Public school districts offering adult education

If your district is a public elementary/secondary school operated at public expense and it sells textbooks or supplies directly to students taking adult education classes (rather than through a separate retail operation), this ruling suggests those sales can qualify as exempt "educational functions and activities" under Section 144.030.2(19), RSMo. However, this letter ruling is binding only for the specific Applicant that requested it -- other districts with similar facts should consider requesting their own ruling rather than relying on this one.

Accountants and tax professionals advising school districts

The key distinction the Department drew was between a school district ordering and delivering required course materials directly to students (exempt, as part of educational functions) versus operating something more like an independent retail bookstore. Facts matter here: this Applicant did not run a retail bookstore and required students to buy materials directly from the district as part of enrollment.

Adult education program administrators

The ruling confirms that adult education offered by a public school district can be treated as within the district's core "educational functions and activities" for sales tax purposes, not treated as a separate, taxable commercial activity, at least on the facts presented here.

Common questions

Q: Does this exemption apply to any school selling textbooks, or just public school districts?
A: The exemption in Section 144.030.2(19), RSMo applies specifically to "elementary and secondary schools operated at public expense." This ruling involved a public school district, and the Department tied the exemption to the district's status as a publicly operated school engaged in educational functions.

Q: Would the answer be different if the district ran a retail bookstore open to the public?
A: The ruling doesn't address that scenario directly, but the Department noted as a fact that the Applicant does not operate a retail bookstore -- textbooks and supplies are ordered by the district and delivered to enrolled students. That fact was part of what the Department considered in finding the sales exempt as part of educational functions.

Q: Can another Missouri school district rely on this exact ruling for its own adult education textbook sales?
A: No. The ruling states it is binding on the Department only with respect to the requesting Applicant, only for three years from its date, and only as long as the facts and law don't change. Another district with similar facts would need to request its own letter ruling.

Q: Why does this ruling reference an earlier 2019 ruling?
A: The Applicant had previously received a letter ruling on the same textbook/supply taxability question in June 2019. Because the Applicant's exempt status and business activities hadn't changed, it sought (and received) a renewed ruling reaching the same conclusion in 2022.

Citations and references

Statutes and regulations:

• Section 144.020.1, RSMo (imposes sales tax on retail sales of tangible personal property)
• Section 144.030.2(19), RSMo (exempts sales by/to public elementary and secondary schools in their educational functions and activities)
• Section 536.021.10, RSMo (statutory authority for letter rulings)
• 12 CSR 10-1.020 (regulation governing letter ruling procedure)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8191

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 March 31, 2022.

The facts as presented in your letter ruling request and in a phone conversation with Senior Counsel Thomas A. Houdek are summarized as follows:

Applicant received a previous letter ruling regarding the taxability of textbooks and supplies for adult education on June 5, 2019.  Applicant's exempt status and the scope of its business activities have not changed since that ruling was issued.

Applicant is a public school district providing primary and secondary education.  Additionally, Applicant offers post-secondary adult education classes.  Students in the adult education classes are required to purchase their textbooks and supplies for their courses directly from Applicant.  Applicant does not operate a retail bookstore; instead, the textbooks and supplies are ordered by Applicant and then delivered to the students when they begin their classes.

ISSUE :

Are Applicant's sales of textbooks and supplies to students for its adult education courses subject to Missouri state and local sales tax?

RESPONSE :

No.  Applicant's sales of textbooks and supplies to students for its adult education courses are not subject to Missouri state and local sales tax.

Section 144.020.1, RSMo, imposes a sales tax on retail sales of tangible personal property.  Section 144.030.2(19), RSMo, exempts from sales tax "all sales made by or to all elementary and secondary schools operated at public expense in their educational functions and activities[.]"

Applicant is a public school district providing primary and secondary education.  The adult education classes Applicant offers are within its educational functions and activities.  Therefore, Applicant's sales of textbooks and supplies for its adult education courses are exempt from Missouri state and local sales tax.

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, (573)-751-0961.

Sincerely,

Wayne Wallingford