Online sales tax legislation introduced in Missouri
- Feb 13, 2018 | Gail Cole
A bill that would require remote retailers to collect and remit Missouri sales tax has been introduced in the Missouri Legislature. House Bill 2390 would establish an economic nexus law similar to a South Dakota law that’s currently awaiting review by the Supreme Court of the United States.
Challenge to Quill prompts economic nexus legislation in Missouri and Hawaii
States are currently prohibited from taxing businesses with no substantial connection to (i.e., physical presence in) the state, or nexus. This physical presence standard was upheld by the Supreme Court in the seminal case Quill Corp. v. North Dakota, 504 U.S. 298 (1992). It’s now being challenged in South Dakota v. Wayfair, Inc., which questions the constitutionality of South Dakota SB 106.
Like the South Dakota law, HB 2390 requires out-of-state sellers with no physical presence in Missouri to collect and remit Missouri sales tax if they sell tangible personal property or products electronically and had previous or current calendar year sales of at least $100,000, or 200 or more transactions in the state.
The measure authorizes the state to “bring a declaratory judgment in any circuit court to establish that the obligation to remit sales tax is valid,” and stipulates that “the circuit court shall act on this declaratory judgment action as expeditiously as possible.” Appeals would be made directly to the state supreme court. This is the route South Dakota took, and it took less than two years for the challenge to SB 106 to make it to the United States Supreme Court.
The Supreme Court is expected to hear arguments on the South Dakota case in April of this year and issue a decision in June. Its ruling could greatly impact the future of remote sales in this country. If the court lets South Dakota’s law stand, other states are likely to enact economic nexus laws of their own. Missouri’s not the only state looking to get a head start: Hawaii legislators introduced economic nexus legislation earlier this session.
Of course, even if South Dakota’s law is allowed to stand, similar laws in other states could still be challenged because the situation in every state is different. Not having an income tax, South Dakota is more heavily reliant on sales tax revenue than Missouri, which does have an income tax. In the event the Missouri bill is enacted and challenged, it would not be enforced during pendency of action.
Affiliate and click-through nexus in Missouri
Missouri’s been working to increase remote sales tax collections for years, though this is the first time it’s considered instituting economic nexus. The state enacted affiliate and click-through nexus in 2013, imposing a tax collection obligation on out-of-state vendors that generate a certain amount of business from referrals from Missouri residents, or those with in-state affiliates that help them establish and maintain a market in Missouri.
In response to the 2013 law, Amazon banned Missouri residents from participating in its Associates Program. The ban ended February 1, 2017, when Amazon began voluntarily collecting and remitting tax on its Missouri sales.
Congressional solution to remote sales tax and the Streamlined Sales and Use Tax Agreement
HB 2390 isn’t the only bill under consideration this session that could impact Missouri remote sales tax revenue. Governor Eric Greitens is calling for the state to join the Streamlined Sales and Use Tax Agreement (SST), which was created to “simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance.”
Simplified sales and use tax reporting is integral to the Marketplace Fairness Act (MFA) and the Remote Transactions Parity Act (RTPA), federal measures seeking to grant states the right to tax certain remote sales. The fact that Gov. Greitens is proposing SST membership suggests he may believe a congressional solution to remote sales tax is still possible.
Although a 2013 version of the MFA was approved in the Senate, neither it nor subsequent versions of the bill ever made it to the floor of the House for a vote. Neither did the 2015 or 2017 version of the RTPA. All have been held in the House Judiciary Committee, which is chaired by Congressman Bob Goodlatte. Chairman Goodlatte does not want the Supreme Court to intervene — he wants Congress to handle the issue. However, Congress has failed to come up with a solution thus far.
This is an exciting time for policy wonks, but it’s an uncertain time for businesses unsure of what the future holds. There’s wisdom in preparing for any eventuality, even collection and remittance in other states. Tax automation software can facilitate this. Learn more.