Wallingford: Statewide online tax reform unlikely this year

Missouri lawmakers likely won’t decide on how to tax online sales before the legislative session ends in May, state Sen. Wayne Wallingford said Friday.

Bills have been introduced in the House and Senate, but there has been no consensus on the issue, he said.

Wayne Wallingford

“So far, it has not gotten a lot of traction in the Senate,” the Cape Girardeau lawmaker said.

The U.S. Supreme Court, in a 5-4 decision last year, overruled a pair of decades-old decisions that made it difficult for states to collect sales tax from online businesses that didn’t have a physical presence in their states.

Under the ruling, states can pass laws requiring out-of-state sellers to collect sales taxes.

Missouri has a use tax, but it only applies to purchases made from businesses that have a physical presence in the state.

Under a bill sponsored by state Sen. Andrew Koenig, R-Manchester, a use tax could be levied on all online sales.

The measure would require all vendors without a physical presence in the state to collect sales taxes, beginning Jan. 1, 2021.

In cases where the buyer and seller are based in Missouri, the sale would be sourced to the location where the order is received by the seller. In cases where the buyer and seller are in different states, the sale would be sourced to the buyer’s location, according to an online summary of the bill.

The state would maintain a downloadable electronic database at no cost to the user for tax rates in the various taxing jurisdictions.

Cape Girardeau city officials have voiced concern about flat sales-tax revenue as more consumers purchase items online rather that at local stores.

City officials had talked of asking voters to approve a use tax on online sales.

But officials scrapped the idea in October. Council members agreed with city staff to wait and see whether lawmakers would establish a statewide process for all taxing jurisdictions to collect sales taxes from online businesses that don’t have a physical presence in the state.

Some Missouri cities already have implemented use taxes.

But Missouri’s state and local governments cannot require out-of-state companies that do not have nexus or a “direct connection” with the state to collect and remit use tax, according to the Department of Revenue.

If an out-of-state seller does not collect use tax from the purchaser, the purchaser is responsible for remitting the use tax to Missouri, the Revenue Department states on its website.

But consumers typically don’t pay the tax, officials have said.

“I don’t think they are personally trying to cheat the state out of money,” Wallingford said. Missouri’s consumers often are just unaware of the law, he said.

The idea of a use tax, which amounts to a sales tax on out-of-state purchases, has been unpopular with area voters.

Voters in Cape Girardeau have twice rejected a proposed use tax. Voters in Jackson on Tuesday turned down a use tax for the third time.

Cape Girardeau city manager Scott Meyer said Friday he wishes lawmakers would simply define a sales tax as applying to all purchases whether made online or at a local store.

Meyer said it is “frustrating” Missouri lawmakers have not addressed the taxing of online sales.

“It is an issue we will have to deal with,” he said. Without the ability to tax online sales, the city may have to cut costs, Meyer said. “We may need to shrink services. We don’t have the ability to live above our means.”

But Meyer said he doesn’t believe the city council will look at putting another use-tax measure before voters in the near future.

Meyer said the council is focused on extending a capital improvements tax set to expire at the end of December. That tax funds sewer improvements.

In 2020, city officials will seek voter approval of another five-year extension of the transportation sales tax to fund street improvements and repairs.

Meanwhile, state lawmakers continue to wrestle with how best to tax online sales.

“It is a very confusing thing,” Wallingford said, pointing out there are numerous taxing entities in the state.

Gov. Mike Parson has said he favors taxing online sales, although he has stopped short of offering up specific legislation.

Wallingford said there are differing views in the Legislature over what to do with an estimated $165 million the state could collect annually from taxing online sales.

Some lawmakers want to use tax revenue from online sales as a means to reduce income and corporate taxes.

Wallingford, a Republican, said some lawmakers believe it would be easier to pass a measure to tax online sales if it is “not looked at as a tax increase.”

He said the state needs to address the issue.

For the past several years, Wallingford has introduced legislation to make it easier to collect sales taxes from online sellers who have no physical presence in Missouri. But none of those bills passed.

Wallingford’s bill would have authorized Missouri to participate in the “streamlined sales and use tax” agreement. More than 20 states are part of that agreement.

Through the compact, thousands of sellers, both large and small, charge sales taxes to buyers from participating states.

Koenig has proposed cutting the state income tax rate in conjunction with taxing online sales, an idea favored by several lawmakers.

But Wallingford said lawmakers likely would be reluctant to approve a tax cut if projections continue to show lagging state revenue.

The Senate already has received the state budget bills from the House.

“That would make it difficult to pass with a tax cut in there,” he said.

State revenue has increased, but “the trouble is we have more expenses,” Wallingford said.

Still, he said, “I like the idea of a small, modest tax cut.”

mbliss@semissourian.com

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