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Tax bills debated in Senate Ways and Means Committee

Several tax bills were heard over the last two weeks in the Senate Ways and Means Committee chaired by Sen. Wayne Wallingford.

AIM President and CEO Ray McCarty testified in favor of SB 674 (Koenig) that would provide definitions in the tax cut legislation passed in SB 509 over the objections of former Gov. Jay Nixon. The bill confirms the definitions that are currently used to determine whether the tax cut revenue increase requirements have been met. The Missouri Department of Revenue and the Missouri Society of CPA’s also testified in support of the bill.

In the same hearing, AIM testified against a bill sponsored by Sen. Hummel that would reduce the timely filing allowances for withholding and sales/use taxes, SB 679. The bill would reduce these allowances to half of their current amount. McCarty told the Committee that businesses use the allowances to help offset the enormous burden placed on them to act as the state’s tax collectors. He noted the DOR gets a collection fee for collecting local sales taxes. And he added that businesses that fail to withhold or collect and remit the correct amount of tax must pay any deficiencies out of their pocket which is especially expensive in an era when the DOR has previously changed their position on whether transactions are taxable or not. The bill was supported by Missouri School Administrators and opposed by Associated Industries of Missouri, the Missouri Retailers Assn., Missouri Grocers Assn., Tire Industry Association, Hotel Motel Association, NFIB and others.

A week earlier, the Committee approved SB 625, a bill that partially addresses the recent IBM/MasterCard decision by restoring a sales/use tax exemption for purchases used in providing telecommunications services. AIM has met with the Missouri Department of Revenue regarding more comprehensive language that would restore the legal landscape as it existed prior to the decision by codifying the case law using actual phrases from previous Supreme Court opinions. We will continue in that effort.

Also in that hearing, the Committee heard SB 939 (Cierpiot), a bill that contained only an Earned Income Tax Credit, but a Senate Committee Substitute had been prepared that purports to include Governor Eric Greitens’ tax package that raises taxes in some areas and lowers taxes in others. Director of Revenue Joel Walters said the bill would cut income tax rates for individuals and corporations, but would raise taxes by eliminating sales and withholding tax timely filing allowances, limiting the current choices of apportionment formula for corporation income tax to collect more taxes from companies located outside Missouri, eliminating the federal income tax deduction and implementing the Streamlined Sales and Use Tax Agreement (SSUTA) in Missouri.  Some Committee members expressed concern with the impact the bill would have on the current income tax cuts that are already law and that will start in tax year 2018. McCarty has expressed concern that the changes in apportionment formula contain provisions that would increase taxes on some Missouri businesses, mistakes are made throughout the bill in language that attempts to align Missouri’s tax law with the provisions of the SSUTA, and the loss of the timely filing allowances is unfair. Testimony on the bill was limited because of the time allotted for the bill and the Committee chair indicated further testimony would be taken later.

Several tax bills have been heard by the Committee and a combination of ideas could emerge from the Committee soon. AIM will reserve comment until we learn what is in any bill that may emerge from the Committee, but we will not support a bill that raises taxes on Missouri businesses, either intentionally or unintentionally through mistakes contained in the bill.

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