SB 617
Modifies several provisions relating to taxation
Sponsor:
LR Number:
4085S.22P
Committee:
Last Action:
5/18/2018 - Informal Calendar S Bills for Third Reading--SS#2 for SCS for SBs 617, 611 & 667-Eigel (In Fiscal Oversight)
Journal Page:
Title:
SS#2 SCS SBs 617, 611 667
Calendar Position:
1
Effective Date:
Varies

Current Bill Summary

SS#2/SCS/SBs 617, 611, & 667 - This act modifies several provisions relating to taxation.

INDIVIDUAL INCOME TAX

Current law provides for a reduction in the top rate of income tax over a period of years from 6% to 5.5%, with each cut becoming effective if net general revenue collections meet a certain trigger. Beginning in the 2019 calendar year, this act provides that the top rate of tax shall be eliminated, with a top remaining tax rate reduced to 5.25% for all taxable income over $8,000. In each subsequent calendar year, the top rate of tax shall be reduced by 0.1% if net general revenue collections in the fiscal year exceed the net general revenue collections from any of the three previous fiscal years by $150M. No more than four such reductions shall be made, and the rate shall not be reduced more than once per calendar year. The Director of Revenue shall adjust the tax tables as provided in the act.

This act also provides for an additional 0.3% reduction in the top rate of tax if the U.S. Supreme Court renders a decision, the U.S. Congress passes a law, or the U.S. Constitution is amended, which allows the state to require out-of-state sellers with no physical presence in the state to collect and remit state and local sales taxes. (Section 143.011)

This provision is similar to a provision contained in HB 1824 (2018), HCS/HB 1964 (2018), HB 2502 (2018), SCS/HCS/HB 2540 (2018), HB 2641 (2018), HB 2691 (2018), HB 2738 (2018), and HCS/SS#2/SB 674 (2018).

This act provides that Missouri personal and dependency exemptions shall not be allowed if the federal exemption amount is zero. (Sections 143.151 and 143.161)

This provision is identical to a provision contained in SCS/HCS/HB 2540 (2018) and is substantially similar to a provision contained in HCS/SS#2/SB 674 (2018), HCS/HB 1964 (2018), and HB 2472 (2018).

This act modifies the income tax deduction for federal tax liability paid by indexing the amount that may be deducted to the taxpayer's Missouri adjusted gross income, as described in the act. The deduction is allowed at 100% for adjusted gross income of $25,000 or less, and is phased out to 0% for adjusted gross income of $150,001 or more. (Section 143.171)

This provision is substantially similar to HB 2691 (2018) and to a provision contained in SCS/HCS/HB 2540 (2018), and is similar to a provision contained in HB 1824 (2018) and HB 2734 (2018).

Currently, the revenue generated from an income tax on certain nonresident athletes and entertainers is distributed among several funds. Such distributions will currently end on December 31, 2020. This act extends the distributions until December 31, 2030. For all fiscal years beginning on or after July 1, 2019, this act also provides for an additional 2% withholding on such nonresident individuals, with the revenue generated by such additional withholding deposited in the Senior Services Protection Fund. (Section 143.183)

This provision is substantially similar to HB 1897 (2010) and to a provision contained in CCS/HCS/SB 773 (2018).

MISSOURI WORKING FAMILY TAX CREDIT

This act establishes the Missouri Working Family Tax Credit Act.

For all tax years beginning on or after January 1, 2019, this act creates a tax credit to be applied to a taxpayer's Missouri income tax liability after all reductions for other credits for which the taxpayer is eligible have been applied. The tax credit shall not exceed the amount of the taxpayer's tax liability, and shall not be refundable. For the tax year beginning on or after January 1, 2019, the amount of such tax credit shall be ten percent of the amount of a taxpayer's federal earned income tax credit. For all tax years beginning or after January 1, 2020, the amount of such tax credit shall be twenty percent of the amount of a taxpayer's federal earned income tax credit.

The Department of Revenue shall determine whether a taxpayer who did not apply for the tax credit established by this act is eligible and shall notify such taxpayer of his or her potential eligibility.

The Department shall prepare an annual report regarding the tax credit established by this act containing certain information as described in the act. (Section 143.177)

This provision shall sunset after six years unless reauthorized by the General Assembly.

This provision is substantially similar to SB 615 (2018), SB 197 (2017), SB 342 (2017), HCS/HB 109 (2017), and to a provision contained in HB 2691 (2018) and HCS/HB 1605 (2016), and is similar to HB 2154 (2016), SB 1018 (2016), SB 40 (2015), SB 687 (2014), HB 1120 (2014), HB 895 (2013), HB 1606 (2012), HB 581 (2011), and HB 1915 (2010).

CORPORATE INCOME TAX

For all tax years beginning on or after January 1, 2019, this act reduces the corporate income tax rate from 6.25% to 5.25%. (Section 143.071)

This provision is similar to HB 2576 (2018) and to a provision contained in CCS/SB 884 (2018), HCS/SS#2/SB 674 (2018), HB 2691 (2018), HB 2738 (2018), and HCS/HB 1964 (2018).

For all tax years beginning on or after January 1, 2019, no corporation shall be allowed a deduction for federal tax liability paid. (Section 143.171)

This act removes the requirement that an affiliated group of corporations have fifty percent or more of its income derived from sources within this state in order to file a consolidated return, and eliminates transactions between affiliated members of the group from such consolidated return. (Section 143.431)

This provision is identical to a provision contained in CCS/SB 884 (2018) and HCS/SS#2/SB 674 (2018).

For all tax years beginning on or after January 1, 2019, this act modifies the Multistate Tax Compact by requiring corporations subject to income tax in this state to apportion and allocate income according to the income tax provisions provided in Chapter 143, and disallows the three-factor apportionment option available in the Multistate Tax Compact. (Section 32.200)

For all tax years beginning on or after January 1, 2019, this act modifies the law relating to the allocation and apportionment of corporate income by requiring corporations to determine their income derived from sources within this state according to the provisions of this act.

ALLOCABLE INCOME

Net rents and royalties from real property located in the state, and capital gains from the sale of such property, is allocable to the state. Net rents and royalties from tangible personal property are allocable to the state to the extent that the property is used in this state, or in their entirety if the corporation's commercial domicile is in this state and is not organized or taxable by the state in which the property is utilized, as described in the act. Capital gains from the sale of tangible personal property is allocable to this state if the property had a situs in the state at the time of sale, or if the corporation's commercial domicile is in this state and is not organized or taxable by the state in which the property had a situs, as described in the act. Interest and dividends are allocable to this state if the corporation's commercial domicile is in this state. Patent and copyright royalties are allocable to this state to the extent that the patent or copyright is utilized in this state, or to the extent that the patent or copyright is utilized in a state in which the corporation is not taxable and the corporation's commercial domicile is in this state.

APPORTIONABLE INCOME

All apportionable income shall be apportioned to this state by dividing the total receipts of the corporation in this state during the tax period by the total receipts of the corporation everywhere during the tax period, and multiplying such result by the net income.

Receipts from the sale of tangible personal property shall be considered in this state if the property is received in this state by the purchaser, as described in the act. Receipts from all other sales shall be considered in this state if the corporation's market for such sales is in this state, as described in the act.

In the case of certain industries where unusual factual situations produce inequitable results under the apportionment and allocation provisions of this act, the Director of Revenue shall promulgate rules for determining the apportionment and allocation factors for each such industry. In such a case, a corporation may petition the Director of Revenue, as described in the act. (Sections 143.451, 143.455, 143.471, 620.1350)

This act provides that the method of allocation and apportionment elected by a corporation shall expire after five years, or whenever the director of revenue finds and notifies such corporation that such method does not show the income applicable to this state, whichever occurs first. After such expiration or revocation, the corporation may elect to use the same or a different method. Failure to make such an election shall constitute an election to comply with the allocation and apportionment provisions provided by the act. (Section 143.461)

These provisions are substantially similar to provisions contained in CCS/SB 884 (2018), HCS/SS#2/SB 674 (2018), HCS/HB 1964 (2018), HB 2691 (2018).

FINANCIAL INSTITUTIONS TAX

Current law allows certain financial institutions to receive a credit against the financial institutions tax for any corporate income tax paid. This act provides that, if the corporate income tax rate is reduced, the financial institutions tax rate shall be reduced proportionally. (Section 148.622)

This provision is substantially similar to a provision contained in HCS/SCS/SB 769 (2018) and HCS/SS#2/SB 674 (2018).

MOTOR FUEL TAX

Beginning July 1, 2019, this act increases the rate of motor fuel tax from $0.17/gallon to $0.18/gallon. Beginning, July 1, 2020, the rate of tax shall be $0.20/gallon. Beginning, July 1, 2021, the rate of tax shall be $0.23/gallon.

This act also provides that the motor fuel tax rate shall be an additional four cents if an income tax rate cut is triggered by the state being authorized to require out-of-state sellers with no physical presence in the state to collect and remit state and local sales taxes, provided that the rate of tax shall not exceed $0.25/gallon. This act also provides that, until June 30, 2025, the motor fuel tax rate shall be adjusted annually for inflation once all adjustments to the motor fuel tax rate are made under the act, provided that no inflation adjustment shall exceed 3.5% in a given fiscal year. (Section 142.803)

This provision is substantially similar to SCS/SB 734 (2018), HCS/HB 2091 (2018), and to a provision contained in SS#2/HB 1460 (2018), HB 2149 (2018), and is similar to SB 1090 (2018), HB 2092 (2018), HB 995 (2015), HB 1168 (2015), and HB 1581 (2016), and to a provision contained in HB 1824 (2018), HB 2147 (2018), HCS/HB 2148 (2018), HB 992 (2017), HB 993 (2017), HCS/SS/SB 623 (2016), SS/SB 540 (2015), HB 738 (2015), and HB 1360 (2015).

This act also increases the rate of tax on compressed natural gas, liquified natural gas, and propane gas fuels to $0.23/gallon equivalent, and beginning on January 1, 2026, requires that all such alternative fuels be taxed at the same rate as motor fuel. (Section 142.803)

SALES AND USE TAX EXEMPTIONS

This act exempts nonprofit organizations exempt from taxation under Section 501(c)(7) of the Internal Revenue Code of 1986 from sales and use taxes on charges for initiation fees or dues. (Section 144.011)

This provision is identical to SB 1003 (2018), HB 2501 (2018), SCS/SB 80 (2017), and to a provision contained in HB 1831 (2018), HCS/SCS/SBs 632 & 675 (2018), SCS/HB 245 (2017), and HCS/SB 332 (2017), and is similar to HB 276 (2017), HB 328 (2017), and HB 833 (2017).

This act also exempts usual and customary delivery charges from sales and use taxes. (Section 144.030)

This provision is substantially similar to SB 16 (2017), HCS/HB 129 (2017), HB 671 (2017), and HB 704 (2017).

STREAMLINED SALES AND USE TAX AGREEMENT

Under this act, the Department of Revenue shall enter into the Streamlined Sales and Use Tax Agreement (SSUTA). The state shall be represented by four delegates in meetings with other states regarding the Agreement. One delegate shall be appointed by the Governor, one shall be a member of the General Assembly appointed by the President Pro Tem of the Senate, one shall be a member of the General Assembly appointed by the Speaker of the House of Representatives, and one shall be the Director of the Department of Revenue or his or her designee. These delegates shall report annually to the General Assembly regarding the agreement. (Section 32.070)

Any local sales tax changes due to a boundary change shall take effect on the first day of the calendar quarter 120 days after the sellers receive notice of the change.

The effective date for the imposition, repeal, or rate change of each local sales and use tax shall be the first day of the calendar quarter at least 120 days after the sellers receive notice of the change. (Section 32.087)

This act makes changes to several sections of law relating to local sales taxes in order to make language consistent across sections and to make such sections compliant with the SSUTA. (Sections 66.601 to 94.705, 184.845, 221.407, 238.235, 238.410, 644.032)

The act adds several definitions relating to the application of the sales tax law in order to make interpretation of said sales tax law compliant with the SSUTA. (Section 144.010)

Certain exemptions from state sales tax are modified to be in compliance with the SSUTA. (Section 144.030)

The school and Show Me Green sales tax holidays are modified by removing the fifty-dollar per purchase limit on school supplies, and by defining how the sales tax exemption applies to the purchase or return of certain items. (Sections 144.049 and 144.526)

This act relieves a purchaser from any penalties for failure to pay the proper amount of sales tax if the error was a result of erroneous information provided by the Director of Revenue. (Section 144.060)

The Director of Revenue shall promulgate a rule allowing for the issuance of a direct pay permit to purchasers, which would allow the purchaser to purchase goods and services without remitting payment of the tax to the seller at the time of purchase. Such purchaser shall determine the amount owed and remit such amount directly to the taxing jurisdiction. (Section 144.079)

The Director of Revenue shall participate in an on-line registration system that will allow sellers to register in this state and other member states. Registering in the system obligates the seller to collect and remit sales and use taxes for all taxable sales into this state as well as the other member states. Registration in the system shall not be used as a factor for determining nexus with this state. (Section 144.082)

The Director shall promulgate rules for the remittance of returns, which shall include an allowance for electronic payments and simplified electronic returns, as described in the act. (Section 144.084)

A certified service provider, as defined in the act, shall not be certified unless it meets certain requirements relating to the security and privacy of purchasers' information, as described in the act. (Section 144.109)

This act provides uniform sourcing rules for all purchases made in this state. For purchases for which the location where the order is received by the seller and the purchaser receives the product are both in Missouri, the sale shall be sourced to the location where the order is received by the seller, as described in the act. For purchases for which the location where the order is received by the seller and the purchaser receives the product are in different states, the sale shall be sourced to the location where receipt by the purchaser occurs, as described in the act. All sales of motor vehicles, trailers, semi-trailers, watercraft, outboard motors, and aircraft shall be sourced to the address of the owner. For the lease or rental of tangible personal property that requires recurring periodic payments, the first periodic payment shall be sourced to where the order is received by the seller. All subsequent payments shall be sourced to the primary property location for the property, as described in the act. For the lease or rental of tangible personal property that does not require recurring periodic payments, the payment shall be sourced to the location where receipt by the purchaser occurs. (Section 144.111)

The sale of certain telecommunications service, including internet, mobile telecommunications service, and ancillary service, shall be sourced to the customer's place of primary use. (Section 144.114)

The Director shall provide and maintain downloadable electronic databases at no cost to the user of the databases for taxing jurisdiction boundary changes, tax rates, and a taxability matrix detailing taxable property and services. Sellers will be relieved from liability if they fail to properly collect tax based upon certain information provided by the department. (Sections 144.123 and 144.124)

Amnesty for uncollected or unpaid sales or use tax shall be granted for sellers under certain circumstances following registration with the state, as described in the act. (Section 144.125)

This act provides that a cause of action against a seller by a purchaser for a tax erroneously or illegally collected shall not accrue until the purchaser has provided written notice to a seller and the seller has had sixty days to respond. A seller shall be presumed to have a reasonable business practice if in the collection of such tax the seller uses a provider or a system certified by the Director of Revenue and has remitted all tax collected. (Section 144.190)

Monetary allowances from taxes collected shall be provided to certain sellers and certified service providers for collecting and remitting state and local taxes, as described in the act. (Section 144.140)

When an exemption is claimed by a purchaser, a seller shall be required to collect certain information, as described in the act. A seller shall be relieved from collecting and remitting tax if it is determined that the purchaser improperly claimed an exemption. Relief from liability shall not apply to a seller who fraudulently fails to collect tax, or sellers who otherwise improperly accept an exemption certificate, as described in the act. (Section 144.212)

This act repeals a provision which requires the Director to establish brackets showing the amounts of tax to be collected on sales of specified amounts. Instead, the tax computation shall be carried to the third decimal place, and the tax shall be rounded to a whole cent using a method that rounds up to the next cent whenever the third decimal place is greater than four. (Section 144.285).

This act provides that all provisions of law with respect to sales into the state by out-of-state sellers apply to the Compensating Use Tax Law. (Section 144.600)

These provisions are substantially similar to HB 1479 (2018), HB 1699 (2018), HB 1836 (2018), HB 2162 (2018), HB 2269 (2018), SCS/SB 105 (2017), SCS/SB 795 (2016), HB 726 (2015), HB 727 (2015), and HCS/HB 1356 (2013), and to provisions contained in HB 2691 (2018), and is similar to provisions contained in HB 500 (2013), HB 422 (2013), HB 521 (2013), and HB 579 (2013).

EFFECTIVE DATES

Certain sections of this act shall become effective on July 1, 2019. Sections relating to the Streamlined Sales and Use Tax Agreement shall become effective on January 1, 2020, if on such date the Director of the Department of Revenue determines that the state of Missouri is not able to require out-of-state sellers with no physical presence in the state to collect and remit state and local sales taxes.

JOSHUA NORBERG

Amendments