New Missouri legislation to impact businesses and individuals
Posted On: 6-4-2015 | Posted By: Jessica Lehmen, CPA
A number of bills were passed in the recently adjourned 2015 Missouri legislative session that could have a financial impact on businesses and individuals in Missouri. We have highlighted a few of the tax and business-related bills below.
Editor’s note: This alert was originally posted on June 4 and was updated on July 16 to reflect Missouri Governor Jay Nixon’s recent action.
Senate Bill 19 – Clarifies tax calculations for technology and service-based companies
This bill has already been signed by the governor and could have significant impact on the Missouri tax liability of corporations doing business in Missouri and other states. It clarifies that the income apportionment formula originally enacted in a 2013 law that applied to sales of tangible personal property also applies to service and technology companies.
The 2013 law allowed companies to elect to use the optional single factor apportionment method for sales of tangible personal property. Using this method, sales delivered outside the state of Missouri were not considered to be Missouri sales. This had the potential to reduce the Missouri income taxes paid by Missouri-based companies that ship their product to other states by reducing the percentage of the company’s income considered to be Missouri income.
Senate Bill 19 expands this apportionment option to companies selling items other than tangible personal property. This has the potential to reduce Missouri income tax liability for service or intangible-based companies with locations in Missouri who also do business in other states. A couple examples of other types of sales are listed below.
- Sales of services are sourced to Missouri if the ultimate beneficiary of the service is in Missouri (and consequently, services performed in Missouri for customers outside of Missouri will not be sourced to Missouri when using this method of apportionment).
- Rentals and leases of real or personal property are sourced to Missouri if the property is located in Missouri.
- Rentals, leases, or licenses of intangible property are sourced to Missouri if the rentee, leasee or licensee uses the property in Missouri.
- Franchise fees or royalties received for the use of a trade name or franchise system are sourced to Missouri if the franchise location is in Missouri.
The legislation did not specify when the new apportionment method will be effective, but the Missouri Department of Revenue has said it will apply to tax returns filed on or after August 28, 2015.
Senate Bill 18 – Requires DOR to notify sellers of change in sales tax law interpretation
Senate Bill 18 has also been signed by Governor Nixon. The bill requires the Department of Revenue to notify sellers of a change in interpretation of sales or use tax laws designating which items are taxable or nontaxable. If the department hasn’t notified the seller of the change, the seller is not liable for the additional taxes the seller should have collected. Notification is only required if the change is not one a reasonable person could have expected.
House Bill 384 – Creates a tax amnesty program
This bill, which has been signed by the governor, creates a tax amnesty program for taxpayers who qualify, set to begin September 1, 2015, and end November 30, 2015. The amnesty program allows qualifying taxpayers to pay unpaid taxes for periods occurring prior to December 31, 2014 without interest or penalties.
Also included in the new legislation is an offset program that will allow the director of revenue to enter into a reciprocal collection and offset of indebtedness agreement with the federal government and other states. This means that, once in place, any Missouri taxpayer or government vendor or contractor that has outstanding non-tax debt to any state or the federal government could have their tax refunds or other payments due them intercepted to settle their outstanding non-tax debts.
The bill also creates a position of Taxpayer Advocate to help taxpayers resolve disputes with the Department of Revenue.
House Bills 517 & 754 & Senate Bill 336 – Requires interest on delayed tax refunds
These bills, signed by the governor, require interest to be paid on any individual or corporate tax refund not paid within 45 days of the date the return was filed. Currently the law allows 90 days.
It also specifies the amount of income tax the employer should withhold on tip income. Withholding should be based on the greater of the total tips reported to the employer on the employee’s written statement or the amount of tips remitted to the employee by the employer.
Also, mandatory gratuities at restaurants are not subject to sales tax.
House Bill 116 – Governor vetoes “right to work” bill
The legislature passed House Bill 116, known as the “right-to-work” legislation, specifying that a person cannot be required to join a labor organization, pay dues to a labor organization, or pay to a charity in lieu of dues to a labor organization as a condition of his or her employment. However, the governor vetoed this legislation and the bill was not originally passed with sufficient numbers to sustain a veto. Lawmakers are still expected to pursue this at the veto session is in September.
A full list and description of the bills which were agreed to and passed by the legislature can be found on the Missouri Senate website.
If you have any questions regarding this legislation, please contact your WK advisor at (573) 442-6171 or (573) 635-6196.