If you thought tax codes were too complicated, dig this: municipalities in the state of Missouri have more than 2,000 different local sales tax rates. For brick and mortar storefronts, that is not really too big of a deal. If you are in O’Fallon, you collect at the O’Fallon rate. If you are in Ballwin, you collect at the Ballwin rate. But what if you are in West Virginia and you sell something to a customer in Wildwood via the internet?
As of right now, the state of Missouri has done little but throw up their hands, shrug and mutter “Well, it’s complicated.”
This is where it becomes a very big deal for brick and mortar business and for local government. For your local shopkeeper, it grants an unfair competitive advantage to the online retailer, who can charge less simply by virtue of not levying a sales tax on the product. For local government, this creates a significant revenue problem as more and more sales occur online but generate no local taxes. At the end of the day, we taxpayers end up footing the bill for purchases we never made, and we business owners are left to compete in an uneven marketplace. The local economy gets hurt.
Missouri’s hands are not tied.
In 2018, the United States Supreme Court waded into the deep end of this particular pool. In the South Dakota vs. Wayfair, Inc. case, the court ruled that states were allowed to charge tax on purchases from out-of-state sellers, even if the seller did not have a presence in that state. Missouri and Florida are the only two states who charge a sales tax but have not yet taken advantage of this decision.
We are talking about big money here. Estimates are that next year alone, Missouri and local governments could collect around $100 million each through the passage of a law that takes advantage of the Wayfair ruling. Several such laws were floated in the last legislative session, but none passed.
This is not, by the way, a new tax. Today, the consumer is supposed to pay something called a use tax on any purchase from an out-of-state retailer, but the state has no meaningful way to collect or track such a tax. This law simply puts the obligation back onto the retailer to collect and pay the tax, the same as it is for a local business.
None of this is simple by any stretch of the imagination. Having to deal with multiple taxing entities is a considerable burden for a business. Most states have put in a minimum sales amount before the business is obligated to pay, which helps a bit. Complicated or not, the fact remains that 43 other states have figured this out and Missouri has not.
Missouri needs to make passage of an online sales tax bill one of its highest priorities. Allowing online retailers a distinct competitive advantage hurts local business, local government and local residents. That, friends, is not complicated at all.