1. Chapter 100
MEDFA – October 13, 2017

2. 5 benefits of Chapter 100
Avoid Paying Real Property Tax on Buildings (all or portion)
Avoid Paying Personal Property Tax on Machinery and Equipment (all or portion)
Avoid paying sales tax on the purchase of building materials
Avoid paying sales tax on purchase of machinery and equipment
Avoid paying sales tax on the lease of Machinery and Equipment/Tangible personal property from local government to the Company

3. Wait, what?
Why would we ever give a sales tax exemption on the purchase of machinery and equipment and not want to offer an exemption of sales tax on the lease of it?
Time value of money.
Not having to pay sales tax all at once when you buy the equipment is still a deal, even if you have to pay it on each lease payment.

4. Limitations of chapter 100
Only way to accomplish personal property tax exemption
Other statutes allow means for real property
Requires reliance on ownership transfer and lease transaction to function (cumbersome)
Statute is incredibly confusing (buy/purchase/sell/lease….)

5. Some Common confusion
Many we may have caused…….

6. Authority of the local Government, Alone
Avoid Paying Real Property Tax on Buildings (all or portion)
Avoid Paying Personal Property Tax on Machinery and Equipment (all or portion)
Avoid paying sales tax on the purchase of building materials
Avoid paying sales tax on purchase of machinery and equipment

7. Common questions on local authority
Does the local government have the authority Alone to exempt the state sales tax portion on the purchase of building materials?
Yes, State, County and City – they are not decoupled
Does the local government have the authority alone to exempt the state sales tax portion on the purchase of machinery and equipment?

8. Authority of DED, Alone
Exempt the sales tax (if applicable) on the lease of machinery equipment/tangible personal property.
Applies to all sales tax, state, County City

9. Why is there sales tax on a lease?
Because the constitution (and Chapter 100) provide tax exempt authority to local governments on the purchase of items but not on the sale or lease of them.
When cities and Counties sell or lease items they are treated like any other vendor and become responsible for the collection of sales tax.

10. When is sales tax applicable on the lease?
When the machinery and equipment were purchased sales tax exempt
When there is no other special sales tax exemption for the items otherwise on the books and it was purchased sales tax exempt
If the city/County did not provide their sales tax exemption authority on the purchase and sales taxes were paid, there is no sales tax applied to the lease.

11. When is Property tax applicable on the lease?
Although property of city/county is exempt from property taxation, the Mo. Supreme Court has held that the company’s leasehold interest is taxable to the extent that the economic value of the lease is less than the actual market value
If lease payments under the lease agreement equal the actual debt service on the bonds, the leasehold interest has no “bonus” value and the project should be exempt from property taxation

12. What about building materials?
Why is there no sales tax on the lease of a building if the building materials were purchased sales tax exempt?
Because building materials become affixed to the real property and real property is not subject to sales tax.

13. Common questions
Does a local government have the authority to exempt the their sales tax on the lease?
No, only the state (DeD) has that authority and it is granted for all sales tax – state, county, city – they are not de- coupled.

14. What machinery and equipment counts?
Revenue has traditionally interpreted only machinery and equipment/tangible personal property used in the main purpose or function (used in the process) of the company as applicable under chapter 100
No break rooms, Pool tables, day cares, weight rooms, tasteful (or tacky) art…….

15. Chapter 100 projects Types of Projects that can be financed:
Industrial plants
Warehouses and distribution facilities
Research and development facilities
Agricultural processing industries
Service facilities which provide interstate commerce
Office industry
Commercial Facilities (not listed in Chapter 100 – Found In Constitution)

16. Notes on Project Types
Service facilities which provide interstate commerce
Have only ever been interpreted by revenue as utilities
Office industry
Regional, national or international headquarters
Telecommunications operation
Computer operation
Insurance company
Credit card billing and processing center

17. When does DED apply its Discretion on the lease?
When we include it in a formal proposal
When the proposal is accepted by the company prior to any announcement
Prior to the approval or issuance of the bonds
Prior to the purchase of the machinery and equipment/tangible personal property

18. When does DED apply its Discretion on the lease?
Projects must be competitive
Local skin in the game
Be a part of an underlying chapter 100
Have above average wages or be located in a distressed or blighted area
Approval must occur prior to the date it is placed into service

19. Application DED website Company application
Estimated amount of tangible personal property
Estimated sales tax exemption amount
List of anticipated purchases
Local Government application
Copy of ordinance/resolution
Application contact: Bryant Davidson,

20. Thanks! Sallie Hemenway
Director, Missouri department of economic development
301 west high street, HST office bldg, ste 770
Jefferson city, MO
Direct
assistant