Missouri Inches Toward Economic Nexus
Missouri will become the last state with a sales tax to enact economic or “Wayfair” nexus with the passage of S.B. 153/97, imposing a use tax collection requirement for remote sellers. This ends an almost three-year saga started with the landmark Supreme Court South Dakota v. Wayfair Inc. in 2018. Wayfair overturned the “physical presence” requirement for collection of sales tax by remote sellers.
Missouri Governor Mike Parson is expected to sign the bill, as he previously supported the legislation.
Assuming the bill is signed by the Governor, Missouri will impose economic nexus on sellers with gross receipts of at least $100,000 from the sale of tangible personal property in the previous 12 months and sellers who meet the threshold will be required to collect and remit use tax starting January 1, 2023.
The bill also includes provisions for the requirement for marketplace facilitators to collect use taxes on behalf of third-party sellers starting in 2023.
With the increase of use tax revenue from remote sellers, the legislature agreed to some tax reductions, most notably a contingent income tax reduction. The bill reduces the top rate of individual income tax in 0.1% annual increments, with each tax cut becoming effective if net general revenue collections increase by at least one hundred fifty million compared to the highest revenue collected in any of the last three fiscal years.
Also, the bill includes reductions in video service provider fees, modifications to the tax increment financing rules, and use tax administration changes related to remote sellers including simplification of complying with local sellers use tax.
With Missouri being the last state passing economic nexus, now would be a good time for businesses to assess their current nexus footprint in all states if they have not done so previously.
If Parson takes no action within the prescribed time, the bill goes to the Secretary of State, who then enrolls the bill and it becomes law.
If the bill becomes law, Missouri will join Florida – which recently passed economic nexus – as the last two states with a statewide sales tax to enact economic nexus. This means all 45 states with a statewide sales tax will have economic nexus laws as soon as both states’ bills go into effect.