The 2017 Legislative Session: Tax Issues
The 2017 Regular Legislative Session ended May 12, 2017, followed by a week-long special legislative session on an economic development proposal. We want to thank Chuck Pierce for representing AIM in the Capitol on tax matters again this year. He did a great job on your behalf!
AIM enjoyed several successes: some on offense, some on defense.
You will recall, the Alberici Missouri Supreme Court decision called into question whether delivery charges were subject to sales and use taxes. Until that decision, delivery charges, when separately stated, were usually not part of the sale price of an item. That decision left taxpayers (and tax practitioners) in a dangerous position. Rather than a clear, bright line test, several criteria were used as a test for whether delivery charges should be taxed and those criteria were repeated in a letter sent by the Missouri Department of Revenue to more than 100,000 taxpayers in Missouri. You may also recall Associated Industries of Missouri called a meeting of our Tax Committee and other concerned groups and directly asked representatives of the Department of Revenue how they would treat these transactions. We received little concrete guidance.
Because of the uncertainty surrounding this issue, AIM was able to pass a definitive fix for this problem: a sales and use tax exemption for usual and customary delivery charges when separately stated. The exemption was contained in SB 16 and that bill now awaits Governor Greitens’ approval. We anticipate the governor will sign this bill.
A top priority for AIM this session was to address the uncertainty created by the Missouri Supreme Court in another case, the IBM v. Director of Revenue (MasterCard) case. That over-reaching decision called into question settled sales tax exemptions for equipment used to provide telecommunications and data processing services. While our “fix” for the situation was blocked in the Missouri House by Rep. Jay Barnes, he did help us with a simple extension of the notice requirements contained in section 144.026 to August 28, 2018. We believe this delay in the ability of the DOR to notify taxpayers would effectively “pause” enforcement of the decision with respect to assessments. The impact on refund claims is less clear and continues to be the subject of multiple AHC decisions that may indicate the DOR is applying the decision to pending refund claims, but not using it to assess new tax liability. We have scheduled a meeting later this month with the DOR to further discuss this issue and hope to have more clarification from DOR in that meeting. The language extending the notification date was contained in SB 49 and SB 128 and both are pending Governor Greitens’ signature.
Another tax issue that passed this session was a cap on local sales taxes. County sales taxes and city sales taxes were capped in SB 49 and SB 283. Effective August 28, 2017, cities may not send to voters a general city sales tax that, when combined with all other general city sales taxes, exceeds 2%. Counties wanting to impose an additional county sales tax under section 67.547 would be limited to a 1% total rate. Special rules apply for the St. Louis County sales tax, in that 3/8 of the county sales tax rate is counted toward the limit.
On defense, we were successful in defending our two percent timely filing allowance for sales/use taxes and defeated an attempt to reverse the language we passed previously that applied the new optional apportionment method to income other than income derived from the sale of tangible personal property.
An amendment to HCB 3, a bill drafted to provide funding for senior services, would have reversed the intangible and service income apportionment language we passed in 2015. Many believed this language was responsible for a budget shortfall and the amendment would have reversed this language. We were successful in defeating this amendment.
The fight continues to ensure taxpayers retain their two percent timely filing allowance, as well as other exemptions and credits. The Governor’s Committee on Simple, Fair and Low Taxes is meeting to examine all tax credits and exemptions and we believe that Committee may consider limiting or eliminating the timely filing allowance as part of their comprehensive review. We provided information to another tax reform committee last year that showed businesses use this allowance to help pay for accounting and bookkeeping services, and as compensation for the businesses assuming the risk of collecting and remitting the proper amount of sales tax to the state and local governments. This promises to be an ongoing fight, but so far, we have been successful in defending against this threat.