The Director of Revenue seeks review of a decision of the Administrative Hearing Commission which determined that certain income of taxpayer Robert Baskowitz Enterprises, Inc., was derived from sales occurring partly within and partly without the State of Missouri, thus to permit the taxpayer the advantages of an apportionment formula for Missouri income tax purposes. The decision reversed a decision by the Director which determined that the transaction in question occurred wholly within the state and subjected all the income derived from such sales to Missouri income tax. The question is whether sales of goods by the taxpayer which were shipped from an out-of-state manufacturer to the taxpayer’s customer in Missouri are transactions occurring partly within and partly without the State of Missouri. If so, the taxpayer is entitled to use of the apportionment formula, and the decision of the Administrative Hearing Commission would *217be for affirmance; if not, the decision is for reversal. Reversed.
The facts are stipulated. Robert Bas-kowitz Enterprises, Inc., is a Missouri corporation whose office is in Clayton, Missouri, and whose income is derived solely from its contract with Anheuser-Busch, Inc., to supply it with glass bottles for Busch’s breweries in St. Louis, Missouri, California, Texas, New Jersey and Florida. At issue is only that part of its income derived from the sale of bottles to the brewery in St. Louis, Missouri. Baskowitz purchased these bottles from manufacturers located outside Missouri and had them shipped directly to the St. Louis brewery without receipt or warehousing by Baskowitz.
The taxpayer applied the single-factor apportionment formula of section 143.040 RSMo 1969 (now section 143.451 RSMo 1978) to income tax returns filed for 1970, 1971 and 1972. It treated its sales of bottles to the St. Louis brewery as sales made partially within and partially without the state thus to make application of the fifty per cent apportionment formula; it treated its sales to out-of-state breweries as sales made wholly without the state thus to make no allocation of income to Missouri. The Director of Revenue found these returns deficient: The Director agreed that the sales of bottles which were shipped from out-of-state manufacturers to out-of-state breweries were transactions “partially within and partially without” the State of Missouri; it determined that the sales of bottles which were shipped from out-of-state manufacturers to the in-state brewery were transactions wholly within Missouri. The Administrative Hearing Commission agreed with the Director of Revenue that the sales of bottles by the taxpayer to out-of-state breweries were sales partially within and partially without the State of Missouri and subject to apportionment; it disagreed with the Director that the sales of bottles to the St. Louis Brewery were wholly within the state and wholly taxable to the state, and determined that such sales were also partially within and partially without the state and subject to apportionment. This appeal involves only that part of the Commission’s decision which covers the taxpayer’s sales to the St. Louis brewery.
Whether a taxpayer may elect to apportion income derived from the transaction of business in interstate commerce is “based on the ‘source of income’ test of section 143.451 and its predecessors and the long-standing judicial interpretation thereof.” Goldberg v. State Tax Comm’n, 639 S.W.2d 796, 803 (Mo.1982). Under that test “the source of the income is the place where it was produced.” In re Kansas City Star Company, 346 Mo. 658, 142 S.W.2d 1029, 1037 (Mo.1940).
Under the stipulation of fact for this appeal, the source of the taxable income in question was the contracted sales of bottles by the Missouri-based taxpayer to its customer in St. Louis, Missouri. Under the source test, the transaction which produced the taxable income occurred entirely in Missouri, and the income produced is thereby taxable in whole in Missouri and is not a subject for apportionment.
The taxpayer’s argument is that the taxpayer’s purchase of bottles from an out-of-state manufacturer for direct shipment to the taxpayer’s customer in St. Louis caused the income from the resale which took place in Missouri to be relieved of a portion of Missouri income taxes by a formula applicable only to sales which occur partially within and partially without Missouri.
Retailers located in Missouri purchase raw materials, partially finished products and finished products from manufacturers and sellers within and without the state where a retailer maintains its business, renders sales and negotiates contracts for sales. Such arrangements and purchases (for resale) are not a part of the transaction by which the taxpayer sells or resells to its customers. The taxpayer must have a product to sell if it is to produce income; and the transaction which produces income is the sale by the taxpayer to its customer, not the preceding purchase by the taxpayer. Unless the taxpayer uses labor or capital outside this state in its transaction, the *218income from the transaction must be regarded as produced from a source wholly within this state. In re Kansas City Star Company, 142 S.W.2d at 1037. Compare and distinguish Artophone Corporation v. Coale, 345 Mo. 344, 133 S.W.2d 343 (1939) and International Travel Advisors, Inc. v. State Tax Commission, 567 S.W.2d 650 (Mo.1978).
The decision of the Administrative Hearing Commission is reversed with direction to reinstate the decision of the Director of Revenue that the sales of bottles by the taxpayer to its customer in St. Louis are wholly taxable by Missouri and subject to the additional income tax assessed for the years 1970, 1971 and 1972.
RENDLEN, C.J., and GUNN, BILLINGS, BLACKMAR and DONNELLY, JJ., concur. WELLIVER, J., dissents in separate opinion filed.