Missouri lawmakers will again consider online sales tax legislation that could generate much-needed revenue for the state amid the economic downturn caused by the COVID-19 pandemic.
H.B. 554, introduced January 6 by Rep. J. Eggleston (R), would establish economic nexus for out-of-state vendors and marketplace facilitators.
The bill had its second reading in the House January 7. The bill is similar to one Eggleston introduced in 2020 (H.B. 1957), which died in the House after the legislature adjourned early because of the COVID-19 pandemic.
Under the bill, any vendor that does not have a physical presence in Missouri and has cumulative gross receipts of at least $100,000 from sales of tangible personal property into the state during a 12-month period would be required to collect and remit use tax starting January 1, 2022.
Marketplace facilitators that meet the economic nexus threshold would be required to register with the Department of Revenue by January 1, 2022, to collect and remit use tax on sales through their marketplace. The legislation also stipulates that out-of-state vendors would not be subject to the use taxes of political subdivisions unless the use tax is approved or re-approved by voters.
Like the earlier bill, H.B. 554 would decrease income taxes to offset the sales and use tax increase, according to Eggleston. However, he told Tax Notes that the new bill is similar to H.B. 1957 “in spirit, but the mechanics of the income tax decrease to offset the sales/use tax increase are different due to the out-of-the-ordinary year of COVID.”
Eggleston explained that last year's bill used a mathematical calculation comparing sales or use tax revenues from year to year to determine the size of the corresponding income tax reduction. But “because COVID has created a year of anomaly, having that year included in a comparison could produce unintended consequences,” he said. “Therefore, this year is a defined income tax reduction of 0.2 percent, half of which will occur when the Wayfair tax is enacted, and the other half several years from now.”
Missouri and Florida are the remaining sales tax states that have yet to impose a collection obligation for remote sellers following the U.S. Supreme Court’s decision in South Dakota v. Wayfair Inc. A separate bill (H.B. 588) pre-filed in Missouri ahead of the legislative session would require the state director of revenue to enter into the Streamlined Sales and Use Tax Agreement. Doing so would impose a collection obligation on remote sellers and marketplace facilitators.
Previous efforts to pass remote seller legislation have failed in Missouri, mostly because some legislators take the position that requiring remote sellers to collect and remit taxes is a tax increase that must be offset through tax reductions.
However, Eggleston said he believes his bill has a better chance of being adopted this year because he has heard from key players that they want the issue resolved.
Eggleston has also proposed an omnibus tax reform bill (H.B. 555) that he said contains similar economic nexus provisions and a number of tax-related provisions that advanced last session or in previous sessions.
Meanwhile, David Overfelt, president of the Missouri Retailers Association, told Tax Notes January 8 that the best chance for addressing the issue would be to get a bill through the Senate.
Observing that several economic nexus bills have been considered over the years, Overfelt said S.B. 153, introduced by Sen. Andrew Koenig (R) January 6, is one of the more important ones.
The bill would modify the definition of the phrase "engaging in business activities within this state" to include vendors that had cumulative gross receipts of at least $100,000 from the sale of tangible personal property in the previous 12 months.
Marketplace facilitators that meet the threshold would be required to register with the DOR to collect and remit use taxes starting January 1, 2023.
S.B. 153 would also offset the revenue increases with income tax cuts, reducing the top income tax rate by 0.05 percent starting on or after January 1, 2023. For all tax years starting after the final incremental tax rate reduction under existing law, the bill would gradually reduce the top rate to 4.95 percent in increments of 0.1 percent, according to a summary of the bill.
Overfelt said the Missouri Retailers Association hopes lawmakers will tackle the issue because there are "very high local government sales taxes in a lot of areas – higher than the state rate — and a lot of the state tax is being collected but not the local tax."