Missouri considers tax on out-of-state, online sellers

Missouri lawmakers are seeking to collect taxes from some online and out-of-state retailers in a move that could both bolster the state’s finances and aid traditional stores in their competition for customers.

Support has been growing in the House and Senate for legislation that would tighten the requirements for when businesses must collect Missouri taxes on their sales. The legislation aims at businesses such as furniture and appliance stores in Kansas and Illinois that deliver their products to Missouri homes.

That could apply to a Kansas City resident, for instance, who buys a product from an Idaho business and has it delivered.

It also focuses on online retailers who gain significant sales when Internet traffic is routed their way by Missouri-based businesses.

A Senate committee heard testimony on the legislation earlier this month, and a similar House bill was referred to a committee last week.

Sponsoring Sen. Mike Parson, a Bolivar Republican, portrays the measure as “a fairness bill for businesses across the state.”

The legislation addresses two areas that traditional retail stores contend put them at a disadvantage.

One provision would repeal an existing Missouri law that exempts out-of-state business with less than $500,000 of annual sales in Missouri or $12.5 million in sales nationally from being subject to collecting Missouri taxes on their sales.

The Missouri Retailers Associations says similar exemptions don’t exist in neighboring states such as Kansas and Illinois. As a result, a Missouri furniture or appliance store must collect Kansas or Illinois taxes when it delivers items to customers’ homes in those states. But a store in Kansas or Illinois does not have to collect Missouri taxes when it sells and delivers products to Missouri residents, so long as its total sales stays below that annual cap.

“They’re coming after our retailers but we can’t collect from theirs — it’s a disadvantage that needs to be fixed,” David Overfelt, president of the Missouri Retailers Association, told the House Ways and Means Committee last week.

Another section of the Missouri legislation seeks to levy taxes on online retailers if they reap at least $10,000 in sales annually from customers routed to their website by Missouri-based businesses. Some of the bill’s supporters hope to force companies such as Amazon to start collecting taxes on Missouri sales. But whether the legislation actually would accomplish that is unclear because the bill contains a provision allowing online retailers to avoid the tax by proving that the affiliated companies did not significantly affect the retailer’s market presence in Missouri.

So far, the legislation has not encountered much opposition from lobbyists. But any time a bill could result in greater tax collections, some lawmakers fear that future political opponents could tag them as having backed a tax increase.

“I think people are finally starting to realize that we’re bleeding these revenue streams,” said Rep. Doug Funderburk, a Republican from St. Charles who is sponsoring the House version of the bill.

“If everybody wants to live in a community that has no services and you pay no taxes, fine and dandy,” he said. “But when I go home, I want the street lights to work, I want law enforcement up and ready, I want to know that there’s a fire truck down the street that’s ready to come put out a fire.”