If I manufacture equipment and hire a subcontractor (who isn't licensed as a Missouri contractor) to install it at a customer's Missouri site, is the subcontractor's installation labor subject to Missouri sales tax, and how do exemption certificates flow between everyone involved?

Plain-English summary

The Missouri Department of Revenue ruled that when a subcontractor installs manufactured equipment on behalf of the manufacturer, the subcontractor's installation labor is not subject to Missouri sales tax. In this ruling, a Wisconsin-based manufacturer of paint booth equipment ("Applicant") was contracted to ship and install paint booths at a purchaser's St. Louis location. Because Applicant is not a licensed Missouri contractor, it hired a subcontractor to do the actual installation, and that subcontractor in turn subcontracted some electrical work to a supplier.

The Department's reasoning is straightforward: Missouri sales tax under Section 144.020.1(1), RSMo, applies only to retail sales of tangible personal property and to the specific services listed in Section 144.020, RSMo. Installation is not one of those listed taxable services, so labor charges for installing the paint booth are not taxable no matter how many layers of subcontracting are involved.

The ruling also addresses the materials side of the transaction. Even though installation labor is exempt, the subcontractor may still sell materials to the manufacturer as part of performing the installation, and those materials could be taxable unless properly exempted. The fix here was the purchaser's Certificate of Direct Pay Authorization, which should be furnished down the contracting chain (manufacturer to subcontractor to supplier), combined with a completed Form 149 Sales and Use Tax Exemption Certificate covering the "Machinery and Equipment Used or Consumed in Manufacturing" exemption.

What this means for you

Manufacturers who subcontract installation

If you manufacture equipment and are not a licensed Missouri contractor, you can hire a subcontractor to install your equipment without your contract for that installation labor being subject to Missouri sales tax. Your invoice or contract for installation labor alone should not have Missouri sales tax charged on it, because installation is not a taxable service under Section 144.020, RSMo.

Handling materials purchased during installation

Labor is exempt, but materials are a separate question. If your subcontractor sells you materials as part of installing your equipment, that sale can be taxable unless you provide the subcontractor a completed Form 149 Sales and Use Tax Exemption Certificate. Where your ultimate customer holds a Certificate of Direct Pay Authorization, get a copy from your customer, obtain a completed Form 149 from them, and pass both the Form 149 and the direct-pay certificate down to your subcontractor -- who should pass them along to their own suppliers in turn.

Multi-party contracting chains

This ruling involved three tiers (manufacturer, subcontractor, and the subcontractor's own supplier for electrical work). The same exemption documentation needs to flow through every tier of the chain for the exemption to hold up; a break anywhere in the paperwork chain could expose a link in the chain to tax.

Common questions

Q: Is installation labor taxable in Missouri?
A: Not in this ruling's fact pattern. Installation is not among the services listed as taxable under Section 144.020, RSMo, so charges purely for installing equipment are not subject to Missouri sales tax.

Q: What about the materials used during installation?
A: Those can be taxable. The subcontractor's sale of materials to the manufacturer as part of the installation contract is a separate transaction from the labor, and it needs its own exemption support (Form 149 and/or a Certificate of Direct Pay Authorization) to avoid tax.

Q: What exemption certificate should be used, and for what category?
A: A Form 149 Sales and Use Tax Exemption Certificate, with the purchaser selecting the "Machinery and Equipment Used or Consumed in Manufacturing" exemption category.

Q: Can I rely on this ruling for my own installation contract?
A: Not directly. This letter ruling is binding on the Department only with respect to the specific Applicant who requested it, only for three years from its date, and only as long as the facts and the underlying law don't change. Other taxpayers cannot rely on it, though it shows how the Department reasons about similar facts.

Q: Does it matter that multiple subcontractors were involved?
A: The ruling treats the installation labor as exempt regardless of how many subcontracting tiers exist, but each tier needs the appropriate exemption paperwork (Form 149, Certificate of Direct Pay Authorization) passed down to it for materials sales to stay exempt.

Citations and references

Statutes and regulations:

• Section 144.020.1(1), RSMo (imposition of sales tax on retail sales of tangible personal property and taxable services)
• Section 144.021.1, RSMo (purpose of imposing tax on sales of tangible personal property and listed services)
• Section 536.021.10, RSMo (procedure for issuance of letter rulings)
• 12 CSR 10-1.020 (Department of Revenue letter ruling regulation)

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8378

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 November 12, 2025.

The facts as presented in your letter ruling request and subsequent phone conversation on December 3, 2025 are summarized as follows:

Applicant is a Wisconsin-based manufacturer of paint booth equipment who has been contracted by Purchaser to ship and install paint booth equipment in a St. Louis location. Purchaser provided a Certificate of Direct Pay Authorization to Applicant for this project. Applicant is subcontracting some design services, labor services, and material from Subcontractor. Subcontractor will in turn subcontract some electrical work to Supplier.

Applicant does not have a contractor's license for the state of Missouri. Because of this, Applicant enters into contract with Subcontractor for Subcontractor to install the paint booths Applicant manufactures for Purchaser's St. Louis location. Subcontractor will purchase materials from Supplier. These materials will then be sold to Applicant as part of the contract between Applicant and Subcontractor to install the paint booth. Applicant is currently registered for vendors use tax in Missouri but is not registered for sales tax. Purchaser is the ultimate end user of the paint booth sold by Applicant.

ISSUE 1:
Is Subcontractor's installation of Applicant's paint booth taxable?

RESPONSE 1:
No. Subcontractor's installation of Applicant's paint booth is not taxable as Subcontractor is providing labor and labor is not subject to sales tax.

Section 144.020.1(1), RSMo, provides:

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.

Section 144.021.1, RSMo, provides:

The 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...

Installation of equipment is not a taxable service listed under Section 144.020 RSMo. Applicant should not collect sales tax from Subcontractor because Applicant's contract with Subcontractor is for the purposes of installing paint booth equipment manufactured by Applicant. However, to the extent that Subcontractor sells materials to Applicant as part of Subcontractor installing Applicant's paint booth equipment, Applicant should provide Subcontractor with a Form 149 Sales and Use Tax Exemption Certificate.

ISSUE 2:

Should Applicant furnish Subcontractor a copy of the Certificate of Direct Pay Authorization and provide Subcontractor with a completed Form 149 Sales and Use Tax Exemption Certificate to exempt Applicant's purchase of materials from Subcontractor?

RESPONSE 2:

Yes. Applicant should receive a completed Form 149 from Purchaser and Applicant should provide the completed Form 149 to Subcontractor along with furnishing Subcontractor with a copy of the Certificate of Direct Pay Authorization.

Applicant was furnished a copy of the Certificate of Direct Pay Authorization that Purchaser had been approved for. Applicant should in turn furnish a copy of this Certificate of Direct Pay Authorization to Subcontractor, and Subcontractor should furnish a copy to Supplier. Additionally, for the purchase of materials necessary to fulfill the contract between Applicant and Subcontractor, Purchaser should complete a Form 149 Sales and Use Tax Exemption Certificate and provide the completed Form 149 to Applicant. Applicant can then provide the completed Form 149 to Subcontractor, and Subcontractor to Supplier. On Form 149, Purchaser should choose the exemption for "Machinery and Equipment Used or Consumed in Manufacturing".

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, Gabriel Barnes, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Trish Vincent