Proposed resolution aims to eliminate Merchants’ and Manufacturers’ replacement tax

This week the Missouri House Ways and Means Committee held a public hearing on House Joint Resolution 76, which would create a constitutional amendment that allows local governing bodies to reduce the merchants’ and manufacturers’ replacement tax rate by a majority vote of the governing body of the count. The bill would allow the rate to fall or rise as assessments increase or decrease adjusted for the percentage of increase in the federal Consumer Price Index from the previous year. The bill also sets the maximum rate to the rate first set in 1985 and would eliminate the tax for tax years after Jan. 1, 2019. The proposed constitutional amendment would appear on the November 2014 ballot.

The merchants’ and manufacturers’ replacement tax has a long history in Missouri and the bill sponsor, Rep. John Diehl, R-Town and Country, would like to see the tax phased out by 2019. In 1982 the voters of Missouri approved an amendment that created an exemption for merchants’ and manufacturers’ tangible personal property for tax purposes, thus eliminating the tax commonly referred to as the “merchants’ and manufacturers’ tax.”

To replace the lost revenues from the elimination of the merchants’ and manufacturers’ tax,” a replacement tax was imposed, commonly referred to as the commercial surcharge, on real property. The statute established the formula to determine the tax rate of the commercial surcharge for each county. Currently,  the tax rate may not be increased and may only be decreased if approved by a majority of the voters of that county.

The revenue collected from the commercial surcharge is distributed to the taxing authorities in the same manner that the real estate tax is distributed to the taxing authorities.

Tracy King, vice president of governmental affairs for the Missouri Chamber, testified on behalf of the bill.

No action was taken on the bill. For more information, please contact Tracy King at tking@mochamber.com or by phone at 573-634-3511.

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