Multistate – Remote nexus scores final victory in last holdout state Missouri

With the recent enactment of its economic nexus legislation, Missouri has become the last of the “Wayfair dominoes” to fall.

When the Supreme Court issued its decision in Wayfair v. South Dakota nearly three years ago — June 21, 2018 — many states hurried to pass legislation taxing remote sales into the state. Among the holdouts were Florida and Missouri. Florida passed its own economic legislation, which Governor DeSantis signed April 19, 2021, leaving Missouri as the only state imposing a sales tax that did not have such legislation. On the last day of its legislative session, May 14, 2021, Missouri passed a bill requiring remote sellers and marketplace facilitators to collect sales tax. Governor Mike Parson is expected to sign the measure within days.

“The legislation is monumental,” said Scott Peterson, vice president of U.S. Tax Policy and Government Relations at Avalara. “I anticipated that they would do this. But I also anticipated that it would happen last year, and the year before.”Web Seminar Supporting payments growth with streamlined reconciliationEven though use of digital payments has been on a steady rise, the Covid-19 pandemic accelerated the shift to digital.SPONSOR CONTENT FROM FISERV

Why did Missouri get on board so late? The hangup had to do with politics, complications that changes in sales tax law would bring, and the changes in tax policy that would need to occur, according to Peterson. “Politically, a majority of the legislature didn’t want to increase taxes or take action that looked as if they were increasing taxes,” he said.

“Next, Missouri has always been tied to the Streamlined Sales Tax Initiative,” he said. “It’s not that they didn’t want to join SST or want to streamline — it was that the changes they would have to make were greater than what they thought they had the ability to do. They wanted uniformity and simplicity, but the task at hand was too much.”

Missouri has by far the greatest number of local taxing jurisdictions in the U.S., Peterson observed. “That’s one thing they struggled with. Of over 14,000 local jurisdictions in the U.S., more than 2,000 of them are in Missouri. All of these have a sales tax, but while the state has a use tax, almost none of the local jurisdictions have a use tax, so out-of-state retailers would have to collect tax at the state level but not the local level.”

The legislation goes into effect on Jan. 1, 2023. “The sole purpose of the delay is to give local jurisdictions enough time to have elections and implement a use tax,” Peterson remarked. “This is unusual. The elections will happen one at a time, and each will have an impact on how retailers comply with the sales tax requirement.”

Iowa does not have a local use tax, but its legislature ignored it when they did their economic nexus bill, he explained. They passed statewide legislation requiring that remote sellers had to collect state and local sales tax across the board.

“The enactment of Missouri’s remote nexus law, the final domino to fall in the states’ reaction to the Wayfair decision, means that tax simplification and tax conformity have actually won,” Peterson said.

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Accounting today
by roger russell
may 18, 2021