For more than 20 years, hundreds of young people have visited Xtreme Gymnastics in Lee’s Summit Missouri to learn and improve their skills. But one visit by a tax auditor from the Missouri Department of Revenue could close the small business’ doors. Following an audit in 2012, Xtreme Gymnastics owner, T.J. Rehak, was told he owed four years of back sales taxes on services he never knew were taxable.
“No one that I knew of was charging sales tax in our line of business,” Rehak said. “I talked to my attorney and my accountant and no one knew these services were taxable.”
Sen. Bob Dixon (R-Springfield) sponsored Senate Bill 15, which would create the Office of Taxpayer Advocate and amended the Taxpayer’s Bill of Rights to include a right to fair and consistent application of Missouri tax laws.
“This bill would amend the current taxpayer bill of rights to include, and it’s really sad that we even have to do this, but it would include the right to fair and consistent application of Missouri tax laws,” Sen. Dixon testified. The bill would also put an end to the so-called “notification by audit.”
“I believe we need to stop the Missouri Department of Revenue from what we call ‘notification by audit,’ ” said Sen. Will Kraus (R-Lee’s Summit). “That’s how they are notifying businesses that they owe these taxes.”
Sen. Kraus is sponsoring a bill that would require the DOR to notify affected sellers when there is a change in their burden to collect taxes.
“There’s a lot of inconsistency in the applications of the tax law, and that really keeps business from being able to plan for the future,” Missouri Chamber of Commerce and Industry vice president of governmental affairs Tracy King testified.
“That particular gymnastics studio was never informed of the new taxes.” Sen. Will Kraus testified. “They were never notified that they were supposed to be collecting (taxes) on the lessons, and I believe there are probably other gymnastics studios and gyms still not collecting on lessons because they just don’t know they have to. This bill would just say if the department of revenue fails to notify a business that they have changed the interpretation because of a court ruling or because of a new interpretation of the rules, then they cannot go after back taxes.”
The committee also heard testimony on Senate Bill 19, sponsored by Sen. Kraus, which would create a new method of allocating corporate income between states for tax purposes. The Missouri Chamber testified in support of both bills.
For more information on tax issues, contact Tracy King, Missouri Chamber vice president of governmental affairs, at firstname.lastname@example.org, or by phone at 573-634-3511.