What does Missouri LR 8192 conclude about Items Offered for Donations are Subject to Sales/Use Tax?

Plain-English summary

The Missouri Department of Revenue ruled that a registered Political Action Committee (PAC) must pay sales or use tax on branded promotional gift items — t-shirts and tote bags — that it buys and then gives to supporters who make donations. The PAC had asked whether these giveaway items were subject to tax at all, since they were offered "in exchange for" a donation rather than sold outright.

The Department said yes, the PAC owes the tax, but explained that the tax applies for a different reason than a normal retail sale. The gift items are not "sold at retail" to the supporters — the Department reasoned that donors are not paying for the fair market value of a t-shirt or tote bag; the point of the donation is to support the PAC's activities, not to buy merchandise. Instead, the Department characterized the PAC itself as the one "using or consuming" the tangible personal property, since the PAC hands out the branded items for its own advertising and goodwill benefit.

Because the PAC — not the donor — is treated as the end user of the merchandise, the tax obligation falls on the PAC as a purchaser rather than being collected from supporters as a retail sales tax. If the PAC bought the gift items from a Missouri vendor, it owes sales tax under Section 144.020.1, RSMo. If it bought the items from an out-of-state vendor, it must self-accrue and remit use tax under Section 144.610, RSMo, once the items come to rest in Missouri.

This is a letter ruling, not a regulation or a case decision — it only interprets how the existing sales/use tax statutes apply to the specific facts the PAC described.

What this means for you

Political action committees and nonprofit organizations

If your organization buys branded merchandise (apparel, bags, mugs, etc.) to give to donors as a thank-you or incentive for a donation, expect to pay sales tax on that purchase (if bought from a Missouri seller) or self-report use tax (if bought from an out-of-state seller). You cannot treat the item as tax-free simply because it changes hands alongside a donation rather than a "sale."

Business owners running promotional or loyalty programs

The same logic can extend beyond PACs: if you purchase promotional items and give them away for advertising or goodwill purposes rather than selling them at a stated price, the Department is likely to treat your organization as the taxable user/consumer of those items, not the recipient.

Accountants and tax professionals

The key distinction in this ruling is between a "sale" (subject to tax collection from the buyer) and "use or consumption" by the purchaser who then gives an item away (subject to sales or use tax paid by that purchaser at the time of its own purchase). Watch for this fact pattern with any client that distributes branded goods in connection with donations, memberships, or promotions, and confirm whether the client's vendor purchases were in-state (sales tax) or out-of-state (use tax self-accrual).

Common questions

Q: Does the PAC charge sales tax to the donor when it hands over the t-shirt or tote bag?
A: No. The ruling treats the transaction with the donor as not a retail sale at all — the donation itself is not treated as the price of the merchandise. Instead, the PAC owes tax on its own purchase of the promotional items.

Q: Does it matter whether the items were bought in Missouri or from an out-of-state vendor?
A: Yes. In-state purchases are subject to Missouri sales tax under Section 144.020.1, RSMo. Purchases from out-of-state vendors are subject to Missouri use tax under Section 144.610, RSMo, once the goods come to rest in Missouri.

Q: Can any other taxpayer rely on this ruling?
A: No. Under Section 536.021.10, RSMo, and 12 CSR 10-1.020, the ruling is binding on the Department only as to this Applicant, only for three years from its June 1, 2022 date, and only as long as the facts and law stay the same.

Q: Would the answer change if the PAC sold the items at a stated price instead of giving them away for a donation?
A: The ruling does not address that scenario. It turns specifically on the fact that the gift items were not sold at a price reflecting their fair market value, but instead handed out in appreciation of a donation whose purpose was to support the PAC's activities.

Citations and references

• Section 144.020.1, RSMo (sales tax on retail sellers)
• Section 144.610, RSMo (use tax on tangible personal property stored, used, or consumed in Missouri)
• Section 536.021.10, RSMo (authority for letter rulings; three-year, Applicant-specific binding effect)
• 12 CSR 10-1.020 (letter ruling procedure)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8192

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 April 1, 2022.

The facts as presented in your letter ruling request are summarized as follows:

Applicant is a registered Political Action Committee with the Missouri Ethics Commission (MEC). Applicant accepts donations from supporters that are reported to the MEC along with their expenses. Applicant is planning on offering branded gift items such as t-shirts or tote bags to their supporters in exchange for their donations.

ISSUE :

Are the branded gift items offered to supporters in exchange for their donations subject to tax?

RESPONSE :

Yes, Applicant would be responsible for paying sales tax on their purchases of promotional gift items made in-state in accordance with section 144.020, RSMo, and for accruing and remitting use tax in accordance with section 144.610, RSMo, on promotional gift items purchased outside the State of Missouri.

Section 144.020.1, RSMo, states:

A tax is hereby levied and imposed ... upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state.

Applicant should pay sales tax on their initial purchases of the promotional gift items that occurred in the State of Missouri. For the purchases of gift items out of state, Applicant should collect and remit use tax specified in section 144.610, RSMo, which states:

A tax is imposed for the privilege of storing, using or consuming within this state any article of tangible personal property, excluding motor vehicles, trailers, motorcycles, boats, and outboard motors required to be titled under the laws of the state of Missouri and subject to tax under subdivision (9) of subsection 1 of section 144.020, purchased on or after the effective date of sections 144.600 to 144.745 in an amount equivalent to the percentage imposed on the sales price in the sales tax law in section 144.020. This tax does not apply with respect to the storage, use or consumption of any article of tangible personal property purchased, produced or manufactured outside this state until the transportation of the article has finally come to rest within this state or until the article has become commingled with the general mass of property of this state.

The promotional gifts given to Applicant's supporters in exchange for donations are not "sold at retail," but rather used or consumed by the Applicant for advertising purposes. Supporters likely do not contemplate that the amount of their donation to Applicant represents the fair market value of the tangible personal property being received. The object of the transaction is to support the Applicant's activities, not to buy a t-shirt or tote bag.

Instead, Applicant is using and consuming the tangible personal property by gifting it to their supporters in appreciation of their donations, and Applicant gains the benefit of advertising their branded products. Applicant would be responsible for accruing and remitting use tax under section 144.610, RSMo.

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 Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, (573) 751-0961.

Sincerely,

Wayne Wallingford