Businesses in Missouri can earn a 3% state income tax credit for the increase in their annual research and development expenses, compared to the previous two years. To calculate the credit, the eligible expenses incurred for qualifying R&D activities must be identified and calculated, including wages, supplies, and contract research. The credit must be claimed 25% each year for four years. Accurate records and documentation must be kept to determine eligible expenses.

As of now, Missouri lacks a Research and Development (R&D) tax credit that aligns with IRC Section 41. Nonetheless, on June 30, 2022, Governor Mike Parson of Missouri enacted HB 2400. This legislation empowers the Missouri Department of Economic Development (DED) to sanction such a tax credit, effective January 1, 2023 and onward.

In Missouri, R&D tax credits are available to companies that engage in qualifying activities to advance knowledge or improve processes, products, or technologies. These must be technological, aid in product development, and involve experimentation. Eligible expenses exclude land, equipment, surveys, customer-specific costs, and government-funded research. Some of the qualifying R&D activities include: Development of new products, Testing and experimentation, Development of prototype, Solving technical problems and the like. Accurate record-keeping is crucial for claiming credits.

Eligible businesses in Missouri’s enterprise zones can claim for R&D tax credit if they meet legal requirements under the state and federal law. The credit requires 3 years of presence in the same enterprise zone, with prorated credit for businesses opening mid-year. Qualifying R&D activities must advance knowledge or improve processes, products or technologies. It even includes C-corporations and pass-throughs.

To claim sales tax exemption for eligible items purchased for use directly in qualified research, you must provide the retailer with a properly completed Form 01-931, Texas Qualified Research Sales and Use Tax Exemption Certificate, which includes your registration number. Please note that a generic sales tax exemption certificate cannot be used to claim the Texas Qualified Research Sales and Use Tax Exemption. If you use an item purchased under a valid exemption certificate in a taxable manner, you will be liable for paying sales tax and applicable penalties and interest based on the fair market rental value of the tangible personal property for the period of use. In the event that the exemption certificate was not valid when issued, the purchaser will be required to pay tax and any applicable penalty and interest on the original purchase price.