Bit by bit, Missouri Governor Eric R. Greitens is releasing more details about his 2019 budget plan, which he calls “bold and responsible.” His plans to eliminate special breaks and loopholes could affect sales tax.
Eliminate timely filing discounts
Vendors in Missouri who file sales tax on time are rewarded with a timely filing discount of up to 2 percent. Unlike most states that offer a similar discount, it’s uncapped, meaning there’s no maximum. A similar discount is provided for the timely filing of withholding taxes.
According to a gubernatorial press release, discounts for timely filing originated because, “at one time in history, it was a great difficulty for businesses to manually calculate and send their sales tax to state and local governments. This discount was intended to factor those difficulties into the tax collection system, and reward those who paid their taxes on time.”
Thanks to the efficiencies of modern technology, vendors no longer need extra time to file. As the governor’s press release notes, “Paying taxes on time is the norm, not the exception.” So, he believes it’s time to eliminate the Withholding Tax Timely Filing Discount and Vendor Timely Filing Discount to stop rewarding businesses “for doing what they are required to do.”
Join the Streamlined Sales and Use Tax Agreement
The governor’s also looking to tax sales by out-of-state sellers who don’t already collect Missouri sales tax.
Generally, states are prohibited from taxing sales by businesses that aren’t physically located in the state. This physical presence standard was upheld by the Supreme Court of the United States in Quill Corp. v. North Dakota, 504 U.S. 298 (1992).* Quill found that it would be burdensome for out-of-state businesses to comply with different states’ sales and use tax rates, rules, and regulations.
Quill gave rise to the Streamlined Sales and Use Tax Agreement, which was created “to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance.” The 24 states that have adopted the agreement and its simplification measures encourage out-of-state sellers to voluntarily collect and remit tax. Furthermore, they’re well-positioned to take advantage of any remote sales tax legislation that may be enacted by the federal government. Thus far, measures that have been considered (i.e., the Marketplace Fairness Act and the Remote Transactions Parity Act) require states to adopt simplified reporting to ease the compliance burden for remote sellers.
Missouri is not a member of the Streamlined Sales and Use Tax Agreement, but it’s been discussing membership for years. The Missouri Budget Project endorsed membership in 2016, noting that “Missouri missed out on $358.3 million in state and local sales tax revenue in 2014” because of untaxed remote sales.
Now Gov. Greitens is also calling for membership. His press release declares, “out-of-state retailers who sell their products on-line into Missouri have an unfair advantage over Missouri retailers. Missouri should join the Streamlined Sales and Use Tax Agreement to realize revenue from remote sellers and level the playing field for local Missouri retailers.”
If Missouri does join the Streamlined Sales and Use Tax Agreement, it will have to amend many existing sales and use tax laws. Compliance could get complicated before it becomes more streamlined.
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*Some states are challenging Quill in the hope that the court will abrogate its decision, and in January, the Supreme Court agreed to hear one such case, South Dakota v. Wayfair, Inc. A decision is expected in June.