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Focus on Automotive: Recent Missouri Income Tax Ruling Affects Dealerships

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A recent ruling by the Missouri Supreme Court adds some clarity to the calculation of a Missouri dealership’s taxable income.
May 6, 2009

A recent ruling by the Missouri Supreme Court adds some clarity to the calculation of a Missouri dealership’s taxable income.

Many businesses are able to pay Missouri income tax on only a portion of their taxable income. The income that they pay tax on in Missouri is calculated using the ratio of Missouri sales to total sales. A sale is considered a Missouri sale if it is delivered to the customer in Missouri. Since vehicles are typically delivered at the dealership, most dealerships do not use this apportionment method and report all their taxable income as Missouri income.

The Missouri Supreme Court recently ruled that a dealership’s sales to out-of-state customers must be considered Missouri sales when calculating its Missouri taxable income.

The dealer had considered sales to customers with out-of-state addresses as not having been delivered in Missouri. As a result of this ruling they were assessed additional tax, interest and penalties.

 

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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