HCS/SS#2/SCS/SBs 26, 11 & 31 - This act modifies laws regarding taxation.
The act modifies the individual income tax rate table. Beginning with the 2014 tax year, the maximum tax rate on personal income will be reduced by two-thirds of a percent over a period of five years. For all tax years beginning on or after 2018, the maximum tax rate will be five and one-third percent. If the federal government pass the Marketplace Fairness Act of 2013, or similar legislation, the maximum rate of tax on personal income will be reduced an additional one-third of a percent. (Sections 143.011 & 143.021)
The act creates an individual income tax deduction for business income and phases it in over a five-year period. Taxpayers will be allowed to deduct ten percent of business income for the 2014 tax year and, once fully phased-in, will be allowed a fifty percent deduction for all tax years after the 2017 tax year. Shareholders of S corporations and partners in partnerships will be allowed a proportional deduction based their share of ownership. (Section 143.022)
The act reduces the tax rate on corporate income by 0.75% over a period of five years, beginning with the 2014 tax year. For all tax years beginning on or after January 1, 2018, the tax rate on corporate income will be 5.5%. The act also exempts the first $25,000 of corporate income from taxation. (Section 143.071)
Currently, there is a personal exemption amount of $2,100 for personal income taxes. This act increases the exemption amount by $2,000 for individuals with a Missouri adjusted gross income of less than $20,000. (Section 143.151)
The reductions to the rates of tax on personal and corporate income taxes will not take effect unless the current year revenue collections exceed the prior year's revenue collections by at least $100 million dollars. (Section B)
SALES AND USE TAX RATES
Currently, the rate for state sales and use tax is 4%. This act raises the rate by three-fifths of a percent over five years, beginning January 1, 2014. For all calendar years beginning on or after January 1, 2018, the state sales and use tax rate will be 4.6%. (Sections 144.020, 144.021, & 144.440)
The increase to the rate of sales and use taxes will not take effect unless the current year revenue collections exceed the prior year's revenue collections by at least $100 million dollars. (Section B)
Currently, a sales tax of four percent is collected on amounts paid for admission and seating and fees paid to places of amusement, entertainment or recreation. This act specifically excludes fees paid to such places. The act also excludes places of recreation from the tax. (Section 144.020)
Beginning January 1, 2014, the first $200 million from the rate of one-fifth of a percent of sales and use taxes collected shall be deposited into the newly created Mental Health Facilities Capital Improvements Fund. Once $200 million has been deposited into the fund, the revenue derived from the one-fifth of a percent will be deposited into the State Road Fund. If the sales and use tax rate is further increases with the revenue derived from such increase being deposited into the State Road Fund, then the amount derived from the one-fifth of a percent will cease being deposited into the State Road Fund. The revenue from the one-fifth of a percent will be deposited into the general revenue fund. (Section 144.700)
STREAMLINED SALES AND USE TAX AGREEMENT
This act requires the Department of Revenue to enter into the Streamlined Sales and Use Tax Agreement. Missouri will be represented by three delegates in meetings with other states regarding the Agreements. One delegate will be appointed by the Governor, one appointed by mutual agreement between the Speaker of the House of Representatives and the President Pro Tem of the Senate, and one will be the Director of the Department of Revenue. These delegates will report annually to the General Assembly regarding the agreement.
Cities imposing sales taxes must notify the Department within 10 days of changing their boundaries. Any sales tax changes due to a boundary change will take affect on the first day of the calendar quarter 120 days after the Department receives notice of the change.
When a political subdivisions changes its local sales tax rate or taxing boundary, such change shall take affect on the first day of the calendar quarter 120 days after the Department receives notice of the change
The act requires all state and local sales taxes to have the same bases by requiring identical exemptions at the state and local level.
The act provides uniform sourcing rules to determine what tax rates will apply to certain transactions. Political subdivisions are prohibited from opting out of the sales tax holiday.
The act requires the Department to participated in an on-line registration system for sales tax collection. Registration in the system cannot be used as a factor to determine nexus with this state. The Department is required to accept electronic payments. Sellers will be allowed to deduct uncollectible bad debts attributable to taxable sales from sales tax remittances.
The Department must provide electronic 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.
Amnesty will be available for sellers under certain circumstances following registration with the state. Monetary allowances will be provided to sellers and certified service providers for collecting and remitting state and local taxes equal to two percent of the taxes collected. Sellers and certified service providers are prohibited from simultaneously receiving the monetary allowance and the two percent timely filed discount provided under current law. The act sets out requirements for the seller and purchaser for tax exempt sales.
For products that are bundled, with one item being taxable and the other nontaxable, the entire product will be subject to taxation unless the provider can properly identify the nontaxable portion. For products that are bundled items with different tax rates, the highest tax rate will be used for the entire product unless the provider can properly identify the lower taxed item.
The provisions relating to the Streamlined Sales and Use Tax Agreement have an effective date of January 1, 2015.
Theses provisions are substantially similar to HB 500 (2013) and similar to provisions contained in SS/HB 253 (2013), HB 422 (2013), HB 521 (2013), & HB 579 (2013).
USE TAX NEXUS
This act makes agreements between the executive branch and any person that exempts them from collection of sales and use tax void unless approved by both chambers of the General Assembly.
The definition of "engages in business activities within this state" is modified. The use of media to exploit Missouri's market will no longer make a vendor meet the definition. Being controlled by the same interests which control a seller engaged in a similar line of business in this state will also no longer meet the definition.
Under the Compensating Use Tax Law, a presumption is created that a vendor engages in business activities within this state if any person with a substantial nexus to Missouri performs certain activities in relation to the vendor within this state. The presumption may be rebutted by showing that the person's activities are not significantly associated with the vendor's ability to maintain a market in Missouri.
A second presumption is created that a vendor engages in business activities within this state if the vendor enters into an agreement with a resident of Missouri to refer customers to the vendor and the sales generated by the agreement exceeds $10,000 in the preceding twelve months. This presumption may be rebutted by showing that the Missouri resident did not engage in activity within Missouri that was significantly associated with the vendor's market in Missouri in the preceding twelve months.
The definition of "maintains a place of business in this state" is modified to remove common carriers from its provisions. Currently, there is an exemption from the definition of vendor for vendors whose gross receipts are less than certain amounts, do not maintain a place of business in Missouri, and have no selling agents in Missouri. This act removes the exception.
The use tax nexus provisions are similar to SB 174 (2013) and a provision contained in SS/HB 253 (2013).
This act grants amnesty for payment of all penalties, additions to tax, and interest accrued on state tax liability due but unpaid as of December 31, 2012. Persons that are a party to a criminal investigation or civil or criminal litigation and relating to unpaid taxes will be ineligible for the amnesty. Persons seeking amnesty must apply between August 1, 2013, and October 31, 2013, and pay the balance of taxes due within 60 days of the application being accepted. If a taxpayer granted amnesty fails to comply in good faith with all state tax laws for the next eight years, they must pay the amounts that were waived under the act. Taxpayers granted amnesty cannot participate in future amnesty programs for the same tax. (Section 32.383)
These provisions contain an emergency clause. These provisions are similar to HB 55 (2013) and SB 465 (2013) and a provision contained in SS/HB 253 (2013).
AMENDING PROPERTY TAX LEVY FORMS
Currently, taxing authorities levying a property tax must file a form with the State Auditor every year. The State Auditor then determines if the tax rate complies with state law . This act allows taxing authorities to amend the form. The amended form must be accompanied by an explanation of the need for changes. The State Auditor must take the amended form into consideration when determining if the tax rate complies with state law. This provision is similar to HB 1035 (2013). (Section 137.073)
MENTAL HEALTH FACILITIES CAPITAL IMPROVEMENTS FUND
This act creates the Mental Health Facilities Capital Improvements Fund. Revenue derived from one-fifth of a percent of sales and use taxes collected will be deposited in the fund until the fund contains $200 million. At such time, revenue from the sales and use tax will cease being deposited into the fund. Moneys in the fund will be used to build a new mental health facility in Callaway County. After construction of the facility, any moneys remaining in the fund will be deposited into the general revenue fund. (Section 630.1100)
HA #1 THIS AMENDMENT REQUIRES THAT BEFORE THE RATES OF TAX ON INCOME ARE DECREASED AND THE RATES OF TAX SALES AND USE AND BUSINESSES INCOME DEDUCTION IS INCREASED, REVENUES FOR THE CURRENT YEAR MUST EXCEED THE HIGHEST LEVEL OF REVENUES IN THE PRIOR THREE YEARS BY AT LEAST $100 MILLION DOLLARS.
HA #2 THIS AMENDMENT STATES THAT LOCAL SALES TAX WILL BE COLLECTED ON ALL TRANSACTIONS IN WHICH STATE SALES TAX IS IMPOSED. THE AMENDMENT ALSO STATES THAT SALES TAX ON MOTOR VEHICLES IS TO BE IMPOSED DURING THE TITLING OF THE MOTOR VEHICLE.
HA #3 THIS AMENDMENT PROVIDES AN ALTERNATE METHOD OF CALCULATING THE DIVISION OF CORPORATE INCOME FOR INSTATE AND OUT-OF-STATE PURCHASES.