The coronavirus pandemic has thrown Missouri’s legislative calendar into disarray, raising questions about the state’s ability to act this session on bills that would impose tax duties on remote sellers and marketplace facilitators.
The state capitol and state offices are closed until further notice due to the pandemic. But the expanding public health emergency could also become the precipitating factor forcing the state to ultimately act on legislation permitting tax collections from remote retailers, as outlined in the U.S. Supreme Court’s 2018 ruling in South Dakota v. Wayfair.
Tax practitioners and legislative insiders predicted a coronavirus cash crunch would force Missouri to drop its reputation as an outlier among the 45 sales tax states. Missouri and Florida are the only two states with a sales tax that haven’t required remote sellers to collect and remit tax following Wayfair.
“They will likely need funds,” said David Overfelt, president of the Missouri Retailers Association. “A special session could be called. They will eventually have to pass a budget.”
Action in Missouri could come before the current legislative session concludes on May 15, or during a special session later in the year.
Rick Najjar, a state and local tax consultant in the Kansas City, Mo. offices of BKD CPAs & Advisors LLP predicted Missouri would conform with other sales tax states within the next year. Najjar also expects Missouri to enact special accommodations to reduce burdens on small sellers.
“With the fallout from the coronavirus, I wouldn’t be surprised if they tried to make the provisions a little more complicated with more exceptions for small business sellers,” Najjar said.
Two Bills in Play
“We will return at some point in the next month or so to finish the budget,” Rep. J. Eggleston (R), primary sponsor of H.B. 1957. “It remains to be seen if we will return to address any policy bills, and if so which bills will be of high enough priority to be debated in the limited amount of time we will have.”
While the measures are similar, Najjar said S.B. 529 has a looser standard for economic presence in Missouri. The bill would modify the definition of “engaging in business activities within this state” to include sellers with gross receipts of at least $100,000. H.B. 1957 has the same language but also would establish a 200 transactions standard.
S.B. 529 would impose tax collection duties on marketplace facilitators and requires the Department of Revenue to develop a downloadable electronic database describing taxing jurisdiction boundaries and tax rates. The proposed law has an effective date of Jan. 1, 2022.
The proposed law could bring significant new revenues to the state. The revenue department, together with the Office of Administration, estimated revenue of between $106.6 million and $162.9 million for calendar year 2022, ramping up to between $116.1 million and $177.4 million in 2024.
The Wayfair ruling created a framework for states to collect sales taxes from remote retailers. In Wayfair, the court tossed the physical-presence standard affirmed in 1992’s Quill Corp. v. North Dakota, which had limited the ability of states to tax remote sales.
In total, 43 states and the District of Columbia have adopted laws and regulations requiring out-of-state sellers with an economic presence to collect and remit sales tax. More than 30 states have passed marketplace-facilitator laws, which place a sales-tax obligation on large websites such as Amazon Marketplace, eBay Inc., and Etsy Inc. that broker transactions.
Pressure Mounts on Colorado
The COVID-19 pandemic underscores the need for Colorado to have a simpler sales structure, as soon as possible, said Rep. Tracy Kraft-Tharp (D).
It is urgent for the state General Assembly to approve a bill extending the life of its Sales and Use Tax Simplification Task Force, which sunset last year, said Kraft-Tharp, who chaired the group.
The bill faces two problems. It is now stuck after the General Assembly voted to adjourn March 13. And, it is unclear whether the days the Legislature is on hiatus count toward the requirement that a General Assembly session be 120 days.
Legislative leadership recently put the question to the Colorado Supreme Court: When they reconvene, will they get back the days they didn’t meet, or will they be required to adjourn on May 6 as scheduled before the virus hit?
Leadership has said that only the highest-priority bills will be on the agenda when lawmakers return. Colorado is under a governor-issued stay-at-home order until April 11.
Kraft-Tharp said she is getting traction with the argument the task force extension bill should be numbered among the high-priority bills, given its ramifications for remote sales taxation in the Centennial State. The task force was the entity that crafted the bill that gave Colorado the authority to require remote vendors to collect and remit, as well as the state’s marketplace facilitator bill. Those bills are critical given the economic devastation caused by the coronavirus.
—With assistance from Tripp Baltz in Denver, Colo.