Parson signs bill requiring online sales tax collection

JEFFERSON CITY, Mo. — Gov. Mike Parson on Wednesday signed a bill to require out-of-state online stores to collect sales taxes on purchases made by Missouri residents starting in 2023.

Missouri is the last state with a sales tax to approve such a requirement. Buyers are still required to pay that tax, but many people don’t know that, and it’s challenging to enforce without the help of retailers.

Bipartisan proponents of the new law have argued it’s unfair local Missouri stores are required to charge sales taxes while some out-of-state online retailers have been able to avoid collecting the tax.

“It’s a big deal for small businesses, especially after everything we’ve been through in this crisis over the last 15 to 16 months,” Parson said, referencing the hit local businesses suffered because of the coronavirus pandemic.

The legislation will require out-of-state retailers with at least $100,000 in annual sales in Missouri to collect state and local taxes beginning in 2023. It also will require online marketplace facilitators to collect Missouri’s taxes on sales made through their sites, beginning in 2023.

“It never made sense to place our own Missouri employers at a disadvantage against out-of-state online retail giants,” Missouri Chamber of Commerce and Industry President and CEP Dan Mehan said in a statement. “With the risks of the pandemic starting to dissipate, creating a level playing field will help encourage Missourians to patronize local stores and reinvigorate our economy.”

As part of a deal to boost tax collections from online sales, Missouri lawmakers also agreed to cut state income taxes. The individual income tax rate will fall by one-tenth of a percentage point in 2024 and could fall by two additional one-tenth percentage point increments in subsequent years if Missouri’s net general revenues grow by $150 million.

Another provision creates a state tax credit for lower income working families modeled after the existing federal earned income tax credit. That tax credit also takes effect in 2023 and could increase in size in subsequent years, but again, only if Missouri’s revenues grow by at least $150 million.

The legislation also exempts federal coronavirus relief payments from state income taxes.