In late September, the Missouri Department of Revenue (DOR) published a letter ruling concerning a Missouri LLC that operates an online peer-to-peer (P2P) marketplace for digital cosmetic items used in the video game Counter-Strike. The DOR issued the letter ruling at the company's request to determine the sales and use tax treatment of its business model, particularly how Missouri tax rules apply to the marketplace's fees and software-related services.
Company's Business Model and DOR's Ruling
The company does not own or take custody of the digital items sold. Valve Corporation, which owns both Counter-Strike and Steam, maintains the accounts and digital transaction system through which users buy and sell the items, and the items remain within Valve's ecosystem.
The company acts only as a marketplace intermediary, providing tools that allow users to list and search for items, make offers, participate in auctions, check out, track transactions, resolve disputes, and receive seller payouts. Stripe processes user payments. Users may be located in Missouri or elsewhere. The company earns revenue from marketplace fees on transactions and from optional software features, available through its website and a related browser extension, which users can access by monthly, annual, or one-time subscription.
In its ruling, the DOR stated that the transfers of Counter-Strike digital cosmetic items to Missouri users are not taxable sales or services under Missouri's sales tax law. The company also cannot be treated as a marketplace facilitator for these transactions. Furthermore, the DOR concluded that the company's paid software subscription service is also not subject to Missouri sales or use tax. The reason is that the subscription service is not among the specific categories of services that Missouri law treats as taxable.
Conclusion
The ruling reflects Missouri's narrow, statute-based approach to taxing services: digital marketplace facilitation and software subscriptions are not taxed unless the legislature expressly includes them. For businesses operating digital platforms, it offers useful guidance that marketplace and subscription fees like these may fall outside Missouri's sales tax. Note that a letter ruling is generally binding only on the requesting taxable person, so businesses with different facts should consult a tax advisor.
