If my company processes donor biological samples through leukapheresis to create a new cell-therapy product for research and therapeutic customers, are the materials I purchase for that process exempt from Missouri sales and use tax?

Subject

Taxability of Materials Used in Cell Therapy and Leukapheresis Processing

Plain-English summary

The Missouri Department of Revenue ruled that a company starting a new cell therapy and leukapheresis business does not have to pay Missouri sales or use tax on the materials it buys to run that process. The company takes biological samples donated by human donors as raw material and separates out the white blood cells, creating a new product that it sells to biotechnology firms, research and development companies, medical/lab equipment suppliers, hospitals, universities, cell therapy manufacturers, and clinical research organizations.

The Department reasoned that this processing qualifies as "manufacturing" under Missouri law: an input material is transformed into a different, marketable output with a new use, identity, and value. Because the resulting product is intended to be sold for final use or consumption, the materials consumed in making it -- and the machinery and equipment used directly in the process -- fall under Missouri's manufacturing exemptions rather than being taxed.

The ruling leans on two specific exemption statutes: Section 144.030, RSMo, which exempts materials that become a component or ingredient of new personal property intended for sale, and Section 144.054, RSMo, which exempts energy and materials consumed in manufacturing and in research and development related to manufacturing or processing. Both applied here because the leukapheresis process physically alters the donor sample into a distinct new product.

What this means for you

Cell therapy, biotech, and life-sciences manufacturers

If your business takes a raw biological or other input material and physically processes or transforms it into a new product with a different use, identity, and value -- intended to be sold to end customers -- the materials you purchase for that process may qualify for Missouri's manufacturing exemption from sales and use tax. This can include specialized inputs used in cell separation, processing, or similar biotechnology workflows.

Businesses claiming a manufacturing exemption generally

Missouri courts and the Department place the burden on the taxpayer to prove an exemption applies, and exemptions are "strictly construed against the taxpayer" with doubts resolved in favor of the tax. Be ready to show exactly how your process alters an input into an output with a separate and distinct use, identity, or value -- the same manufacturing test applied here.

Accountants and tax professionals advising on manufacturing exemptions

This ruling is a useful data point for how the Department applies the manufacturing definition (Section 144.030.2(5), RSMo, as construed in Branson Props. USA, L.P. v. Dir. of Revenue and Galamet, Inc. v. Dir. of Revenue) to newer biotechnology and cell-processing business models, not just traditional industrial manufacturing.

Common questions

Q: What product was actually at issue in this ruling?
A: The Applicant's cell therapy and leukapheresis process, which separates white blood cells from donor biological samples to create a new product sold to biotech, research, medical, and clinical customers -- not a packaged consumer "medical product."

Q: Why are the materials exempt instead of taxed?
A: Because the process meets Missouri's statutory definition of manufacturing: it transforms a raw input into an output with a different use, identity, and value, and the resulting product is intended to be sold for final use or consumption. That satisfies the exemptions in Section 144.030, RSMo, and Section 144.054, RSMo.

Q: Does this exemption cover machinery and equipment too, or just materials?
A: The ruling states that neither sales nor use tax is due on machinery and equipment or materials used directly in the manufacturing process.

Q: Can another company with a similar cell-processing business rely on this exact ruling?
A: No. The ruling itself says it is binding on the Department only with respect to this Applicant, only for three years from its date, and only as long as the facts don't change and the underlying law isn't changed by the General Assembly or the courts. Any change in the facts as presented renders it inapplicable, and no other taxpayer can rely on it.

Q: What happens if the underlying law changes after the ruling is issued?
A: The Department warns that a taxpayer who relies on an outdated interpretation after a change in law may be subject to additional taxes, interest, and penalties imposed prospectively from the date of the change, which is why the Department also recommends reviewing the interpretation regularly.

Citations and references

Statutes and regulations:

• Section 144.020.1, RSMo (imposition of sales tax on retail sales)
• Section 144.610.1, RSMo (imposition of use tax)
• Section 144.030, RSMo (manufacturing exemption for materials becoming a component of new personal property)
• Section 144.054, RSMo (exemption for energy and materials used in manufacturing and R&D)
• Section 144.030.2(5), RSMo (statutory definition of manufacturing)
• Section 536.021.10, RSMo (letter ruling authority)
• 12 CSR 10-1.020 (letter ruling procedure)

Cases cited in the ruling:

• DI Supply I, LLC v. Director of Revenue, 601 S.W.3d 195, 196-97 (Mo. banc 2020) (taxpayer bears burden of proving exemption)
• Branson Props. USA, L.P. v. Dir. of Revenue, 110 S.W.3d 824, 826 (Mo. banc 2003) (manufacturing test)
• Galamet, Inc. v. Dir. of Revenue, 915 S.W.2d 331, 333 (Mo. banc 1996) (manufacturing defined)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8355

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 26, 2025.

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

Applicant is beginning a new business involving cell therapy and leukapheresis.   The process involves taking biological samples from human donors (raw materials) and separating white blood cells (processing) from these biological samples.   The processing creates a new product that can be sold to customers for research, development, and therapeutic purposes.   Customers for the new product will be biotechnology, research and development companies, medical/lab equipment suppliers, hospitals and universities, cell therapy manufactures and clinical research organizations.

ISSUE:

Will purchases of materials to be used in Applicant’s work be exempt from Missouri sales tax and use tax?

RESPONSE:

Yes. Purchases of materials to be used in Applicant’s work will be exempt from sales tax and use tax.

Section 144.020.1, RSMo, imposes a sales tax upon all sellers of tangible personal property in Missouri for the privilege of engaging in the business of selling tangible personal property within the state of Missouri.   Taxpayers bear the burden of demonstrating that they qualify for an exemption.  DI Supply I, LLC v. Director of Revenue , 601 S.W.3d 195, 196-97 (Mo. banc 2020).   “Exemptions from taxation are to be strictly construed against the taxpayer and any doubt is resolved in favor of application of the tax.”  Id .  Section 144.610.1, RSMo, imposes a use tax on the privilege of storing, using or consuming within this state any article of tangible personal property in an amount equivalent to the percentage imposed by the sales tax.

Section 144.030, RSMo, exempts from sales tax, materials which when used in manufacturing, processing, compounding, mining, production or fabricating become a component part or ingredient of the new personal property resulting from such process and which new personal property is intended to be sold ultimately for final use or consumption.   Section 144.054, RSMo, exempts from sales tax, energy and materials consumed in manufacturing and research and development related to the manufacturing or processing of any product.

The process employed by Applicant meets the statutory definition of manufacturing.   An initial input material is processed and a different, marketable material results.   In interpreting Section 144.030.2(5), RSMo, the Courts have held the term “manufacturing” encompasses only activities that “transform an input into an output with a separate and distinct use, identity, or value” from the original.  Branson Props. USA, L.P. v. Dir. of Revenue , 110 S.W.3d 824, 826 (Mo. banc 2003) . See also  Galamet, Inc. v. Dir. of Revenue , 915 S.W.2d 331, 333 (Mo. banc 1996)   (“Manufacturing” is “the alteration or physical change of an object or material in such a way that produces an article with a use, identity, and value different from the use, identity, and value of the original.”)   Applicant’s manipulation of the materials at issue meets this requirement.

Applicant’s processing of an initial input raw material in a manner that results in the alteration or physical change of that material into a new material with a use, identity, and value different from the use, identity, and value of the original and which is intended to be sold ultimately for final use or consumption, satisfies the statutory requirements for sales and use tax exemption under Missouri law.   Neither sales nor use tax is due on machinery and equipment or materials used directly in the manufacturing process.

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 Kent L. Brown, General Counsel’s Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Trish Vincent