SS/HB 253 - This act modifies provisions relating to taxation.INCOME TAX
The act modifies the individual income tax rate table. The maximum tax rate on personal income will be reduced by one-half of a percent over a period of years. Each reduction to the rate will be by one-twentieth of a percent. No reduction will go into effect unless the general revenue in the previous fiscal year exceeded the amount of general revenue in any one of the three fiscal years prior to such year by at least $100 million. Once fully phased in, the top rate of tax on individual income will be five and one-half percent. If the federal government pass the Marketplace Fairness Act of 2013, or similar legislation, the maximum rate of tax on personal income will be reduced an additional one-half of a percent. (Sections 143.011 & 143.021)
The act creates an individual income tax deduction for business income and phases it in over a five-year period. Taxpayers will be allowed to deduct ten percent of business income for the 2014 tax year and, once fully phased-in, will be allowed a fifty percent deduction for all tax years after the 2017 tax year. Shareholders of S corporations and partners in partnerships will be allowed a proportional deduction based their share of ownership. (Section 143.022)
The act reduces the tax rate on corporate income by 3% over a period of years. Each reduction to the rate will be by three-tenths of a percent. No reduction will go into effect unless the general revenue for the previous fiscal year exceeded the amount of general revenue in any of the three fiscal years prior to such year by at least $100 million. Once fully phased in, the top rate of tax on corporate income will be three and one-quarter percent. (Section 143.071)
Currently, there is a personal exemption amount of $2,100 for personal income taxes. This act increases the exemption amount by $1,000 for individuals with a Missouri adjusted gross income of less than $20,000. (Section 143.151)
EMPLOYER INCOME TAX WITHHOLDING
Currently, an employer is allowed to file an annual withholding tax return instead of four quarterly returns when the aggregate amount withheld is less than $20 in each of the four preceding quarters. The act changes the amount to less than $100 in each of the four preceding quarters if the employer is not otherwise required to file a withholding return on a quarterly or monthly basis. (Section 143.221)
STREAMLINED SALES AND USE TAX AGREEMENT
This act requires the Department of Revenue to enter into the Streamlined Sales and Use Tax Agreement. Missouri will be represented by three delegates in meetings with other states regarding the Agreements. One delegate will be appointed by the Governor, one appointed by mutual agreement between the Speaker of the House of Representatives and the President Pro Tem of the Senate, and one will be the Director of the Department of Revenue. These delegates will report annually to the General Assembly regarding the agreement.
Cities imposing sales taxes must notify the Department within 10 days of changing their boundaries. Any sales tax changes due to a boundary change will take affect on the first day of the calendar quarter 120 days after the Department receives notice of the change.
When a political subdivisions changes its local sales tax rate or taxing boundary, such change shall take affect on the first day of the calendar quarter 120 days after the Department receives notice of the change
The act requires all state and local sales taxes to have the same bases by requiring identical exemptions at the state and local level.
The act provides uniform sourcing rules to determine what tax rates will apply to certain transactions. Political subdivisions are prohibited from opting out of the sales tax holiday.
The act requires the Department to participated in an on-line registration system for sales tax collection. Registration in the system cannot be used as a factor to determine nexus with this state. The Department is required to accept electronic payments. Sellers will be allowed to deduct uncollectible bad debts attributable to taxable sales from sales tax remittances.
The Department must provide electronic databases for taxing jurisdiction boundary changes, tax rates, and a taxability matrix detailing taxable property and services. Sellers will be relieved from liability if they fail to properly collect tax based upon certain information provided by the department.
Amnesty will be available for sellers under certain circumstances following registration with the state. Monetary allowances will be provided to sellers and certified service providers for collecting and remitting state and local taxes equal to two percent of the taxes collected. Sellers and certified service providers are prohibited from simultaneously receiving the monetary allowance and the two percent timely filed discount provided under current law. The act sets out requirements for the seller and purchaser for tax exempt sales.
For products that are bundled, with one item being taxable and the other nontaxable, the entire product will be subject to taxation unless the provider can properly identify the nontaxable portion. For products that are bundled items with different tax rates, the highest tax rate will be used for the entire product unless the provider can properly identify the lower taxed item.
The provisions relating to the Streamlined Sales and Use Tax Agreement have an effective date of January 1, 2015.
Theses provisions are substantially similar to HB 500 (2013) and similar to provisions contained in SS#2/SCS/SBs 26, 11 & 31 (2013), HB 422 (2013), HB 521 (2013), & HB 579 (2013).
USE TAX NEXUS
This act makes agreements between the executive branch and any person that exempts them from collection of sales and use tax void unless approved by both chambers of the General Assembly.
The definition of "engages in business activities within this state" is modified. The use of media to exploit Missouri's market will no longer make a vendor meet the definition. Being controlled by the same interests which control a seller engaged in a similar line of business in this state will also no longer meet the definition.
Under the Compensating Use Tax Law, a presumption is created that a vendor engages in business activities within this state if any person with a substantial nexus to Missouri performs certain activities in relation to the vendor within this state. The presumption may be rebutted by showing that the person's activities are not significantly associated with the vendor's ability to maintain a market in Missouri.
A second presumption is created that a vendor engages in business activities within this state if the vendor enters into an agreement with a resident of Missouri to refer customers to the vendor and the sales generated by the agreement exceeds $10,000 in the preceding twelve months. This presumption may be rebutted by showing that the Missouri resident did not engage in activity within Missouri that was significantly associated with the vendor's market in Missouri in the preceding twelve months.
The definition of "maintains a place of business in this state" is modified to remove common carriers from its provisions. Currently, there is an exemption from the definition of vendor for vendors whose gross receipts are less than certain amounts, do not maintain a place of business in Missouri, and have no selling agents in Missouri. This act removes the exception.
The use tax nexus provisions are similar to SB 174 (2013) and HB 1042 (2013). These provisions are similar to provisions contained in HCS/HBs 521 & 579 (2013), HB 578 (2013), HCS/SB 23 (2013), and SS#2/SCS/SBs 26, 11 & 31 (2013).
TAX AMNESTY
This act grants amnesty for payment of all penalties, additions to tax, and interest accrued on state tax liability due but unpaid as of December 31, 2012. Persons that are a party to a criminal investigation or civil or criminal litigation and relating to unpaid taxes will be ineligible for the amnesty. Persons seeking amnesty must apply between August 1, 2013, and October 31, 2013, and pay the balance of taxes due within 60 days of the application being accepted. If a taxpayer granted amnesty fails to comply in good faith with all state tax laws for the next eight years, they must pay the amounts that were waived under the act. Taxpayers granted amnesty cannot participate in future amnesty programs for the same tax. (Section 32.383)
These provisions contain an emergency clause. These provisions are similar to HB 55 (2013) and SB 465 (2013). These provisions are similar to a provision contained in HCS/SS#2/SCS/SB 26, 11 & 31 (2013).
MIKE HAMMANN