It’s been more than a year since the U.S. Supreme Court said states could force online retailers to collect sales tax, but the money isn’t yet flowing into Missouri’s coffers.
Among 45 states that levy a sales tax, only Missouri and Florida have not enacted a law or regulation requiring e-commerce companies to collect from customers.
The cash-strapped Show-Me State is missing out on a lot of money: Officials estimated in February that taxing online shopping could bring in at least $93 million for the state next year, and as much as $142.5 million. In addition, local governments could collect between $90.7 million and $138.6 million.
Traditional store owners are among the loudest voices urging state officials to take advantage of the June 2018 Supreme Court ruling. “We need fairness,” said David Overfelt, president of the Missouri Retailers Association. “We don’t see why they can’t do this like the rest of the nation and give us the equity we need.”
Sen. Andrew Koenig, R-Manchester, sponsored a bill this year to begin collecting tax on internet sales, but it died in the waning hours of the legislative session. His bill copied some provisions of a South Dakota law that was upheld by the Supreme Court, including an exemption for businesses with less than $100,000 of sales in the state.
Koenig understands retailers’ sense of urgency. “We’re basically incentivizing people to make purchases outside the state, and hurting our local shops,” he said.
Koenig said he thought his bill had widespread support, but ultimately couldn’t overcome opposition from a few conservative lawmakers who saw it as a tax increase. The final version of his bill would have cut income tax rates to offset the increase in state sales-tax collections, but would still have allowed local governments to increase their revenue.
Michael Mazerov, who follows state fiscal issues for the Center on Budget and Policy Priorities in Washington, argues that the e-commerce issue shouldn’t be viewed as a tax increase.
“It’s clearly not a new tax; it’s always been owed,” he said. Missouri consumers are supposed to pay a use tax, equal to the sales tax, when they shop online. Few people do that, and the state has no effective way to make them pay.
Amazon, the leading online retailer, began collecting sales tax in Missouri in 2017 but doesn’t collect for vendors that sell on its online marketplace. Koenig’s bill would have required platform companies like Amazon and Ebay to collect taxes on marketplace sales.
Missouri certainly could use the taxes it’s been missing as e-commerce has grown. Amy Blouin, president of the Missouri Budget Project, points out that the state’s revenue grew just 1% last fiscal year, compared with 7.7% growth in Illinois, 6.6% in Iowa and 6.3% in Kansas.
“It’s got to be connected with our tax structure, because our economy is not that different from the other states,” Blouin said.
Koenig vows to keep pushing his online sales tax bill, but he’s not sure some members of his party are ready to let it pass. “I’m not sure,” he said when asked about chances of passage next year. “It might take two years from now after we have new elections.”
Missouri shouldn’t wait that long to collect revenue that will be flowing in most states by the end of this year. Just as importantly, Missouri retailers shouldn’t have to wait for a level playing field against their online competitors.
David Nicklaus • 314-340-8213 @dnickbiz on Twitter firstname.lastname@example.org