AIM testifies in favor of bill to correct earnings tax collection

February 7, 2022- This afternoon, Chuck Pierce, on behalf of Associated Industries of Missouri (AIM), testified in favor of HB 1740, filed by Rep. Shamed Dogan.

The bill would clarify when workers that are working from home outside the city levying an earnings tax, they would not be liable for earnings tax for work that occurs outside the city. The bill is aimed at correcting a misguided application of the earnings tax by the City of St. Louis to workers working from home - a position that started with the COVID pandemic.

Prior to COVID, the City of St. Louis allowed a credit for days worked by employees outside the city. Those traveling for work or working from home outside the city were eligible for a refund of the earnings tax for those days. However, when COVID resulted in many more workers working from home, the City, without any ordinance or statute change, decided there should be no credit when the employee was working from home.

The City of Kansas City took the opposite approach and continued to allow workers to file a refund claim for work performed outside the city.

The bill provides for all tax returns filed on or after January 1, 2022, "work done or services performed or rendered in the city" will not include any work or services performed or rendered through telecommuting or otherwise performed or rendered remotely unless the location where such work is performed is located in the city. Any taxpayer denied a refund for taxes paid for such work or services not performed or rendered in the city may bring a cause of action in a court of competent jurisdiction, and such taxpayer will recover reasonable attorney's fees resulting from such cause of action.

Associated Industries of Missouri was the only group supporting the bill. Chuck Pierce testified on behalf of AIM that the bill helped ensure a city did not try to impose a tax on work that occurred outside their borders. He explained the concept of nexus - the connection required to allow a taxing entity, such as the city, to impose a tax on a particular taxpayer. In a work from home situation, the work is being done outside the city's taxing jurisdiction and the tax should be refunded.

At the same time, a lawsuit is pending on the subject. We will keep you posted on the progress of the bill and the lawsuit.