The Missouri legislature is scheduled to reconvene Tuesday, but any action on bills imposing tax collection duties on remote sellers will likely have to wait for a special session later in the year.
House Ways and Means Committee Chair Rep. Chrissy Sommer (R) said the primary goal for lawmakers would be a supplemental budget for the remainder of the year after a two-week hiatus due to the coronavirus public health emergency. The legislature will have little bandwidth to focus on anything other than the fiscal and public health needs of the state.
“Our main concerns are budget, budget and safety,” she said.
On Monday Gov. Mike Parson (D) said lawmakers need to focus on supplemental spending to aid the state through the pandemic. Work on the fiscal year 2021 budget will follow, possibly during a special session in May or June.
Inaction on a remote-sellers bill means that Missouri will remain an outlier among the states, which have rushed to enact modifications to their sales and use tax codes since the Supreme Court’s 2018 ruling in South Dakota v. Wayfair. The high court tossed out the 1992 physical presence standard affirmed in Quill Corp. v. North Dakota, which limited the ability of states to tax remote sales.
Since the Wayfair ruling, only two states with a sales tax—Missouri and Florida—have declined to impose tax duties on remote sellers based on a measure of economic activity instead of physical presence. More than 30 states have also passed marketplace facilitator laws, which place a duty to collect and remit sales tax on large online websites such as Amazon Marketplace, eBay Inc., and Etsy Inc. that broker transactions for other, typically smaller, vendors.
Sommer said she still believes the legislature and the governor have an appetite for conformity with the vast majority of sales tax states. At least two Wayfair-inspired bills got some attention before the capitol shut down in March—H.B. 1957 and S.B. 529—and others could emerge. The Covid-19 crisis is creating a new sense of urgency in the legislature as lawmakers consider options for closing a yawning revenue gap.
“This might be a bill that they call us back for in a special session because if we have a shortfall, how do you make up for those things? This is something we already should have been collecting so the question is how do we go about doing it—and doing it quickly,” Sommer said.
Broadening the Base
While the states have moved rapidly to modernize their sales tax structures following the Wayfair ruling, the Covid-19 pandemic will likely drive the reform efforts several steps further, said Charlie Kearns, a state and local tax partner at Eversheds Sutherland LLP in Washington, D.C.
Shelter-in-place orders across the country have accelerated online buying, granting new credence to the three-decade campaign for state authority to impose collection duties on remote sellers, Kearns said. Building on this trend, the pandemic also could accelerate some of the modernization themes suggested by revenue departments for years, such as broadening tax bases to include services.
“And when you start talking about broadening the base, the comments from the business community are that you have to lower the rate at the same time, making the tax structure more horizontal,” he said.
Lower tax rates, however, may be unrealistic for many states as revenues sputter in the coming months, he said.
“Some states will be fine with tax increases and others don’t want that to happen no matter what,” even if it’s “an extreme situation” like Covid-19. Solutions will vary across the country, he said.
—With assistance from Tripp Baltz in Denver.