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House Ways and Means committee hears several pieces of important legislation

When state legislators arrived back in the State Capitol following their Easter break Tuesday evening, members of the House’s Ways and Means Committee went right to work on several pieces of legislation supported and/or drafted by Associated Industries of Missouri.

The committee held a hearing on Senate Bill 584, legislation that specifies how sales taxes are collected in places of amusement, entertainment, recreation, games, and athletic events. The bill is one of several designed to reign in the Department of Revenue as it broadens its reach to collect sales taxes from entities that are unaware of their tax collection responsibility.

AIM and TRIM support the legislation.

“The bill would clarify when sales tax should be collected in places of amusement, recreation and entertainment,” AIM president Ray McCarty told committee members. “The Department of Revenue often changes their interpretations and this will help clarify the legislative intent.”

The committee heard House Bill 2218, AIM/TRIM legislation that changes the laws regarding sales and use tax refund claims. The bill clarifies that current limits on obtaining sales tax refunds do not apply when the taxpayer applying for the refund actually paid the tax.  The bill also ensures that if refunds are reduced to offset tax liabilities that the taxpayer has had an opportunity to exhaust all appeals and administrative remedies regarding such delinquencies.

AIM and TRIM support this legislation that was drafted by the AIM Tax Committee.

“The Missouri Department of Revenue is not allowing taxpayers to obtain valid refunds of sales and use taxes to which they are entitled,” McCarty testified in front of the committee. “It has become clear that some legislative clarification is necessary for the DOR to properly administer refund claims, and this law will accomplish that purpose.”

After drafting the legislation, AIM and TRIM became aware of another situation involving refunds where the seller refuses to allow the original taxpayer a refund, but will not give a reason. They will ask the sponsor to amend the language to address this issue as the legislation progresses.

House Bill 2255 authorizes a sales tax exemption for transmission and distribution of electricity to customers.

Current law provides a sales tax exemption for items used in manufacturing. A court case extended that exemption to the provision of telephone service in the Southwestern Bell telephone case. The legislature further expanded the scope to specifically include radio and television broadcasters. In both of these cases, telephone service and broadcasting services, everything used in providing the service is considered to be exempt from sales and use taxes.

Utility companies that provide electricity are currently exempt only for purchases made in the process of generating electricity – not in the transmission and distribution of electricity.

“We believe the current law should also apply to the transmission and delivery of electricity to customers as the electricity does undergo transformation throughout the lines on its way to the customer, very similar to the manipulation of signals that occurs in a telephone conversation,” McCarty told the committee. “However, the Department of Revenue has not agreed to allow this exemption.”

AIM and TRIM are asking the legislature to specifically address this issue and clarify that providers of electricity should be able to purchase all machinery, equipment, utilities, etc. that are used in the provision of the electricity to the customer exempt from sales and use taxes. AIM and TRIM provided substitute language to Ways and Means chairman Rep. Andrew Koenig that would limit the exemption to state sales and use taxes only, leaving local taxes intact.

The Ways and Means Committee also conducted a hearing on HB 2273, legislation that authorizes a sales tax exemption for drugs used in the treatment of terminal illnesses, a bill that is a priority of AIM and TRIM.

One of the items that would be exempted is a device produced by Novocure that helps control the growth of cancerous tumors using electrical waves.

Current law provides a sales tax exemption for many medically-necessary items such as drugs, prosthetic devices, orthopedic devices, etc., but no such exemption apparently exists for biological products and other devices that are used to treat illnesses that would otherwise be terminal.

The bill corrects that oversight and provides an exemption for many items.

The House Ways and Means Committee did not take action on any of the bills that were heard Tuesday, but will likely vote on most, if not all, of these bill at next week’s hearing.

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