Missouri legislation seeks taxes from out-of-state retailers

JEFFERSON CITY, Mo. -- Missouri lawmakers are seeking to collect taxes from some online and out-of-state retailers in a move that could both bolster the state's finances and aid traditional stores in their competition for customers.

Support has grow in the House and Senate for legislation that would tighten the requirements for when businesses must collect Missouri taxes on their sales. The legislation targets businesses such as furniture and appliance stores in Kansas and Illinois that deliver their products to Missouri homes. It also targets online retailers who gain significant sales when Internet traffic is routed their way by Missouri-based businesses.

A Senate committee heard testimony on the legislation earlier this month, and a similar House bill was referred to a committee this past week.

Sponsoring Sen. Mike Parson, R-Bolivar, Mo., portrayed the measure as "a fairness bill for businesses across the state."

The legislation addresses an area that traditional retail stores contend put them at a disadvantage.

A provision would repeal an existing Missouri law that exempts out-of-state business with less than $500,000 of annual sales in Missouri or $12.5 million in sales nationally from being subject to collecting Missouri taxes on sales.

The Missouri Retailers Associations said similar exemptions don't exist in neighboring states such as Kansas and Illinois. As a result, a Missouri furniture or appliance store must collect Kansas or Illinois taxes when it delivers items to customers' homes in those states. But a store in Kansas or Illinois does not have to collect Missouri taxes when it sells and delivers products to Missouri residents, as long as its total sales stays below the annual cap.

"They're coming after our retailers but we can't collect from theirs -- it's a disadvantage that needs to be fixed," David Overfelt, president of the Missouri Retailers Association, told the House Ways and Means Committee this past week.

The situation has existed for quite awhile. In 1996, the Illinois Supreme Court ordered a Palmyra, Mo.-based furniture store to pay more than $47,000 of uncollected taxes, interest and penalties for items sold and delivered to Illinois residents from January to October 1989.

Another section of the Missouri legislation seeks to levy taxes on online retailers, if they reap at least $10,000 in sales annually from customers routed to their website by Missouri-based businesses. Some of the bill's supporters hope to force companies such as Amazon to collect taxes on Missouri sales. But whether the legislation would accomplish that is unclear because it contains a provision allowing online retailers to avoid the tax by proving the affiliated companies did not significantly affect the retailer's market presence in Missouri.

Rep. Doug Funderburk, who is sponsoring the House version of the bill, described it as "an attempt to bring some of our sales tax laws in line with today's modern technology."

Anytime a bill could result in greater tax collections, some lawmakers are hesitant because of the fear that future political opponents could tag them as having backed a tax increase. Funderburk acknowledged that remains an obstacle, but he said the tax revenue lost to Internet sales are having a big effect on local government services.

"I think people are finally starting to realize that we're bleeding these revenue streams," said Funderburk, R-St. Charles, Mo.

"If everybody wants to live in a community that has no services and you pay no taxes, fine and dandy," he said. "But when I go home, I want the streetlights to work, I want law enforcement up and ready, I want to know that there's a firetruck down the street that's ready to come put out a fire."