Missouri Streamlined Sales and Use Tax Agreement

SB 795 would implement Streamlined Sales and Use Tax Agreement

A bill has been pre-filed for the 2016 Missouri legislative session by Senator Wayne Wallingford (R-Distrit 27) that would enact the Streamlined Sales Tax Collections Mechanism for Missouri.   Our position paper, written in 2011, is below.

The Missouri Budget Project supports SB795.  Here is more information from MBP:

Missouri relies on sales taxes to fund services like education and health.  The state has been losing sales tax revenue as a result of a failure to capture sales taxes that are owed for online retail purchases.  A University of Missouri study estimated that Missouri missed out on $358.3 million in state and local sales tax revenue in 2014.⁷

The U.S. Congress is considering companion legislation that would require retailers to fully comply with the state legislation. At that time, Missouri would likely capture hundreds of millions per year in currently uncollected state and local sales tax revenue.

Both the state and federal measures have strong bipartisan support because they would level the playing field between Missouri’s bricks-and-mortar retailers and their online competitors and would allow Missouri to strengthen public services by capturing tax revenue that is already due the state.

Position:  Implement Streamlined Tax Provisions to Bring Missouri Needed Revenue

January 2011

We believe that Missouri’s outdated tax structure, under which the state fails to collect revenue from remote sales (internet, phone, TV, and catalogue sales), is both penalizing local businesses and robbing our state of much-needed revenue.

Missouri retailers must now compete with online commerce at a huge disadvantage.  Although our local businesses must collect and remit state, county and city sales tax on every sale, remote sellers with no physical presence in Missouri do not have this same obligation.  Obviously, this gives the online dealer a considerable advantage over his bricks-and-mortar competitor.

In addition to the harm done to Missouri retailers, the current tax structure also disproportionately harms the poorest and least powerful of our citizens, as lost revenue results in disastrous cuts to dwindling state services.

Until federal law is changed, Missouri cannot require remote retailers to collect and remit taxes.  In the meantime, however, there is a partial solution:  the state could pass legislation to bring Missouri tax laws into compliance with the Streamlined Sales and Use Tax Agreement.  The state would then be able to collect taxes from remote sellers that are voluntarily doing the right thing.

The Streamlined Sales and Use Tax Agreement is the result of the cooperative effort of 44 states, the District of Columbia, local governments and the business community to simplify tax collection and administration by retailers and states.  The Agreement minimizes costs and administrative burdens on retailers that collect tax, particularly retailers operating in multiple states.  It encourages remote sellers to collect tax on sales to customers living in the Streamlined states.  To date 1,200 businesses have voluntarily joined the agreement and 24 of the 44 states have passed the conforming legislation.

To date, those 1,200 retailers have collected over $468 million in taxes for Streamlined states, only a small fraction of what remains uncollected.  Studies estimate that states lose billions a year in uncollected tax; this figure could reach $23 billion by 2012.  A recent report from the Center for Business & Economic Research at the University of Tennessee recently estimated that in 2010 Missouri lost approximately $159.4 million tax dollars due to remote sales.  That amount is projected to increase to $210 million by 2021.

Only Congress has the authority to allow states to require collection of the billions of dollars of this uncollected tax.  But as more and more states make tax collection simple and easy for retailers through the Streamlined Agreement, Congress should be more inclined to adopt federal legislation that applies to all products and services sold by remote sellers.

In addition to the 24 conforming states, nine others, including Missouri, have introduced conforming legislation.  Missouri has had such legislation introduced for several years without success.  In January 2011, Representative Margo McNeil filed House Bill 278, which would implement the Streamlined tax provisions in Missouri.

We call on the Missouri Legislature to bring Missouri sales and use tax laws into compliance with the Streamlined Sales and Use Tax Agreement.