Bill would allow Mo. to collect taxes from online retailers

Missouri is missing out on millions of dollars in sales tax, a revenue not collected by out-of-state Internet vendors.

A proposal in the Missouri House by Rep. Margo McNeil, D-Florissant, would change Missouri's sales tax laws to make them consistent with laws of 24 other states taking part in a national Streamlined Sales and Use Tax Agreement.

If McNeil's bill is adopted, Missouri could initially collect an additional $6 million to $10 million, the Missouri Department of Revenue estimated in the bill's fiscal note.

In addition to helping fill the state's coffers, the bill also puts Missouri businesses on an even playing field with internet retailers, McNeil said.

She called House Bill 278 the most important bill for businesses this session.

"This is very important for our businesses in Missouri who are being undercut now by Missouri statute that incentivize Missourians to buy goods outside the state of Missouri," she said. "We require local businesses to collect sales tax, even if they have an online business. But out of state companies are not required to do that."

Right now the burden to pay sales tax on online purchases falls to Missouri residents.

People making more than $2,000 in online purchases annually are required to pay that year's worth of sales taxes when they file their Missouri income tax return, said Ted Farnen, director of communications for the Department of Revenue.

"We want to take this responsibility away from the person and put it back onto the merchants," McNeil said.

Under a 1992 U.S. Supreme Court ruling, states cannot require companies that do not have a physical presence within their borders to collect their state and local sales taxes. It would take an act of Congress to allow that, said Scott Peterson, executive director of the Streamlined Sales Tax Governing Board, based in Nashville, Tenn., which oversees the 24-state agreement.

"We hope to make it easier for online retailers to collect sales tax, then figure out some way to make everybody collect it," Peterson said. His organization is asking Congress to pass the Main Street Fairness Act requiring all online retailers to collect local sales taxes based on where the person ordering the item lives.

Taxing purchases made on the internet is an issue the legislature has dealt with since the Supreme Court's 1992 decision, said Rep. Wayne Wallingford, R-Cape Girardeau. He hasn't yet taken a position on this proposal and said he hopes to hear from his constituents, particularly local small businesses, on how they feel.

"Some are saying online sellers who don't charge sales tax have an unfair advantage over brick and mortar businesses, but it will be a tough sell with personal budgets as tight as they are," he said. Wallingford also has concerns about additional administrative costs associated with sales tax collection.

Currently, states that are part of the Streamlined Sales and Use Tax Agreement collect taxes from retailers under a voluntary system with 1,400 retail participants. In 2010, these 1,400 retailers collected $204 million in sales taxes for participating states, Peterson said. If McNeil's bill is adopted and Missouri joins these states, which includes its neighbors Kentucky, Tennessee, Iowa and Arkansas, it would receive state and local sales tax from these online retailers as well.

"Our Missouri merchants are getting creamed because people are looking at merchandise in their stores and then going to buy their books or bicycles online. They've said they just need an even playing field," McNeil said.

The bill also would require taxing entities to provide retailers uniform notice of local tax changes, create common definitions within the sales tax codes and create a simplified electronic sales tax return to be used by all retailers.

It includes an amnesty provision for certain out-of-state sellers with unpaid sales or use taxes if the seller was not registered in Missouri during the previous year.

Retailers that voluntarily take part in Streamlined Sales and Use Tax Agreement are allowed to keep 2 percent of the taxes they collect, as an incentive to participate, McNeil said. This would be the case if Missouri took part in the agreement as well.

A hearing on the bill took place last month. Another hearing has not yet been scheduled.

mmiller@semissourian.com

388-3646