Missouri Becomes Last State to Enact Economic Nexus “Wayfair” Law
A new law in Missouri is a long-overdue victory for many Missouri small business owners.
Governor Parson recently signed senate bill (SB) 153 into law, making Missouri the last state that imposes sales tax to enact the economic nexus “Wayfair” bill.
Effective Jan. 1, 2023, this new law allows Missouri and local jurisdictions to impose vendor’s use tax on sales made by out-of-state vendors. Vendors that have cumulated taxable receipts of at least $100,000 from the sale of tangible personal property (TPP) in the state in the previous 12-month period are required to collect and remit vendor’s use tax. This levels the playing field for Missouri brick and mortar businesses who are already subject to similar levels of taxation.
SB 153 was introduced in response to the 2018 U.S. Supreme Court case South Dakota v. Wayfair, Inc., in which the Supreme Court ruled in favor of states looking to impose a sales or use tax on remote sales. Since the 2018 case, all other states that collect sales tax have passed their own forms of legislation that establish an economic nexus on remote sales.
SB 153 outlined other notable provisions that were made in order to simplify Missouri’s sales/use tax rate structure. The first of which, Section 144.054, RSMo. was amended to provide a full exemption for items consumed in the manufacturing process, including from local sales tax. Currently, manufacturing-related items (e.g., utilities, water, gas, chemicals, machinery, equipment, etc.) are subject to local sales tax, but are exempt from the state sales tax and state and local use tax. For example, current law exempts state sales tax only on the purchases of electricity used or consumed during the manufacturing process. SB 153 enacts a local exemption so that the local sales tax is also exempt when electricity is used in the same manner.
Another provision, Section 144.049, RSMo. focuses on the sales tax holidays in Missouri, e.g., the back-to-school and the Show Me Green sales tax holiday. SB 153 repeals the ability for political subdivisions to opt out of the tax holiday as well as the ability to interpret how the sales tax exemption applies to the purchase or return of certain items.
Businesses meeting this new economic threshold should consider prior year(s) risk before getting registered to collect and remit Missouri vendor’s use tax. Brown Smith Wallace can help your organization assess your individual situation while you navigate these tax law changes and take full advantage of the existing sales/use tax exemptions. If you have questions or need assistance, please feel free to reach out to Bernie Ottenlips, State and Local Tax Principal, at 314.687.2375 (BOttenlips@bswllc.com) or Amy Jackson, State and Local Tax Principal, at 314.983.1336 (AJackson@bswllc.com).