Tax policy bills moving in House and Senate

Several proposals to improve Missouri tax law made progress in the House and Senate as lawmakers prepared to leave for their annual, week-long spring break.

The Missouri House approved House Bill 299, requiring the Missouri Department of Revenue to notify businesses when they change how they are interpreting and enforcing the state’s sales tax laws.

In recent years, the department has notably begun requiring gymnastics studios and similar businesses to collect sales tax for their services. However, the department never informed these businesses of the changes until state auditors arrived demanding payment of back taxes with penalties.

“We’ve all heard some of the horror stories going on about how some of our small businesses are being notified about sales tax changes by our of Department of Revenue,” said Rep. Denny Hoskins a Republican from Warrensburg. “Have these small businesses been notified by email? No. Have these small businesses been notified about sales tax modifications and changes by letter? No. have these changes been posted on the Department of Revenue’s website? No. Literally, these changes and notifications are being made by the Department of Revenue to our small businesses by audit.”

Rep. Hoskins is sponsoring House Bill 299, which would require the Missouri Department of Revenue to notify businesses of sales tax changes for 90 days before the modification can take effect. The bill allows the notification to happen via email or similar electronic means.

The House also approved a bill allowing businesses to absorb sales tax into their advertised price. Rep. Andrew Koenig, a Republican from Manchester, sponsored the proposal which is contained in House Bill 440. He said that absorbing the sales tax is already a widespread practice, putting businesses at risk.

“We have a number of businesses across our state breaking this,” he said. “It’s not being enforced.”

The Missouri Senate also approved an important tax bill, Senate Bill 336, to protect restaurants from being penalized when their tipped employees fail to properly report their tipped income.

Bill sponsor Sen. Will Kraus, a Republican from Lee’s Summit, said the Department of Revenue has started reviewing restaurant tip records. The department is calculating the tip percentage on credit card receipts and comparing that to the cash tip percentage restaurant employees are reporting as income. When the percentages show a discrepancy, the department is going after restaurants to make up the difference.

“We’re trying to correct an injustice with our department of revenue,” said Sen. Kraus. “The Department of Revenue is constantly going after our businesses. This time, they are going after restaurants and their owners for the underreporting of tips, which is an income tax, which is due by the employee. This bill is just simply clarifying that the employer is not responsible for the underreporting and therefore not responsible for the income tax that their employee is supposed to pay.”

In other tax-related legislative work, the Missouri House Ways and Means Committee heard testimony on Senate Bill 15, which would create a commission to study the state’s tax code and recommend improvements by the end of 2017. This bill is sponsored by Sen. Bob Dixon, a Republican from Springfield.

The Missouri Chamber of Commerce and Industry is advocating for the passage of all these bills as the chamber works to implement the recommendations made in the Missouri 2030 15-year plan for economic growth. The Missouri 2030 plan calls for improvements to Missouri’s tax climate as the state works to compete for jobs. The Missouri 2030 Gallup survey revealed that 10 percent of Missouri business leaders believe that Missouri’s tax environment is their biggest obstacle to growth—a higher rate than the nation average of 7 percent.

“The Missouri Chamber will continue to improve the state’s tax code as the General Assembly reconvenes on March 30,” said Tracy King, Missouri Chamber vice president of governmental affairs. “Missouri employers have consistently identified tax policy as a critical issue for growth. On behalf of the business community, I’d like to thank the legislature for focusing on these bills. I’d also like to encourage them to continue to make tax policy a priority through the end of the legislative session.”

For more information about tax legislation, contact King at tking@mochamber.com or by phone at 573-634-3511.

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