Economic nexus bill introduced in Missouri

Economic nexus bill introduced in Missouri

Last year at this time, Missouri lawmakers introduced a couple of bills relating to remote sales tax. Both sought to implement economic nexus, requiring out-of-state vendors with a certain amount of sales in the state to collect and remit sales tax. And both would require marketplace facilitators to handle sales tax on behalf of their third-party sellers. Neither made it into law.

Missouri legislators are trying again this year. Senate Bill 529 would:

  • Impose a use tax collection obligation on remote vendors with at least $100,000 in cumulative gross receipts from the sale of tangible personal property in the state in the previous 12-month period (effective October 1, 2020)
  • Require marketplace facilitators meeting the above threshold to register with the Missouri Department of Revenue and collect and remit sales and use tax on direct and third-party sales in the state (by January 1, 2022)
  • Require the Missouri Department of Revenue to create and maintain a mapping feature for use tax information
  • Require the Missouri Department of Revenue to provide and maintain a downloadable electronic database of taxing jurisdiction boundary changes and tax rates

The sales and use tax system in Missouri is incredibly complex: There are more than 2,200 local tax jurisdictions, each of which may have multiple sales and use tax rates (e.g., a general rate, a rate for food, a rate for domestic utilities, etc.); it’s extremely difficult to determine the correct rate because special tax jurisdictions overlap; and rates change frequently.

The mapping and database requirements SB 529 would impose on the Department of Revenue would ease the burden of collection, a bit.

SB 529 is substantially similar to its predecessor, SB 189, which had a good deal of support. According to the fiscal estimate, SB 189 would have generated between $93.3 million and $142.5 million in total state sales and use tax revenues. However, the Department of Revenue noted that actual collections may have been less because “the collectability of sales taxes on remote sellers is an unknown, particularly for sellers outside the United States.”

Missouri is one of only two states that has a statewide sales tax but doesn’t impose a sales tax collection obligation on out-of-state sellers. The other is Florida, which is also considering a tax on remote sales. The remaining 43 states and the District of Columbia have all adopted economic nexus, though Louisiana isn’t yet enforcing it. Most states also require marketplaces to collect and remit sales tax for third-party sellers.

A tax on remote internet sales is even moving forward at the local level in Alaska, which has no general sales tax but does permit localities to levy a local sales tax.

Will 2020 be the year online sales get taxed in Missouri? It’s too soon to say, but there’s widespread support for the idea. Missouri Governor Mike Parson told The Associated Press in December 2018, “I think we should collect that, and I think we will eventually collect that.”

Learn more about existing remote sales tax laws in Avalara’s state-by-state guide to economic nexus laws and state-by-state guide to marketplace facilitator laws.

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