2/13/18 – The Senate Ways and Means Committee considered and passed some bills that are important to Missouri employers this morning.
SB 884 (Koenig) would allow the Missouri Department of Revenue to issue a sales tax license without a bond unless the DOR believes the bond would be necessary. Current law requires a bond be posted as a pre-requisite for obtaining a sales tax license. The Department testified that only about 6% of the bonds are applied to delinquencies and they would like the authority to waive the bonding requirement while retaining the right to require one if an applicant’s previous history indicates collection problems. Associated Industries of Missouri testified in support as did the Missouri Department of Revenue, MSCPA, Mo. Retailers Assn. and the Mo. Grocers Assn. There was no opposition to the bill.
The Senate Ways and Means Committee also passed a combination of several tax reform bills, SCS SB 617, 611 and 667. While some of the original tax reform proposals would have terminated the 2% timely filing allowance for sales/use taxes, the bill that emerged from Committee today only eliminates the withholding tax filing allowance. AIM opposes eliminating either of these allowances.
The combination bill also contains several hundred pages that seek to align Missouri sales and use tax law with the provisions of the Streamlined Sales and Use Tax Agreement (SSUTA), a multistate effort to encourage internet retailers to collect state and local sales taxes. “Several of the changes made to ‘comply’ with the SSUTA contain mistakes,” said Ray McCarty, president of Associated Industries of Missouri. “We have found and reported some mistakes to the sponsors, but have also let them know we are continuing to examine the bill and believe there may be many more unintended consequences if the bill is passed before all problems are identified and addressed. We have suggested pulling back on that particular piece of tax reform and awaiting the results of the Wayfair v. South Dakota U.S. Supreme Court case,” said McCarty. That case, if decided in favor of the State of South Dakota, could result in mandatory collection of sales taxes on internet sales where the collection of tax is voluntary for an internet retailer under the SSUTA.
The package of tax reform moved this morning from committee include a 6 cent motor fuel tax increase in 2 cent steps over three years; a reduction in the top individual income tax rate from 5.9% to 5.25% for all taxable income over 8,000. Additional tax rate cuts could be enacted if state revenues hit triggers in the bill (.1% each step for a maximum of 4 steps).
The corporation income tax rate would be reduced from 6.25% to 4.25%. Choices of apportionment formula would be limited to the single sales factor formula. AIM has noted the bill contains “throw-back” and “throw-out” provisions that would result in tax increases for Missouri multistate corporations. We believe those provisions may be removed in a future version of the bill.
The federal income tax deduction, already limited by a bill passed in 1993 to fund education, would be eliminated for corporations and would be phased out for higher income individuals. AIM has consistently opposed eliminating these deductions.
The Low Income Housing Tax Credit would be limited to $135 million per fiscal year and a new Capitol Complex Tax Credit is established in the bill to provide funding for renovation and repair of the State Capitol building. A fee would also be placed on Historic Preservation Tax Credits with proceeds deposited in this new fund.
Finally, the bill contains a new earned income tax credit called the “Working Family Tax Credit” in the amount of 10% of the federal earned income credit in tax year 2019 and 20% in 2020 and beyond.
“We continue to work with the sponsors of these tax reform bills as we see ways to improve them,” said McCarty.