Missouri state auditor releases audit of Cost of Tax Incentives and Exemptions
State Auditor Nicole Gallaway released a report – partly analyzing how much Missouri could potentially be losing by not collecting sales tax on some online orders.
“The General Assembly has not passed legislation to allow Missouri to participate in the Streamlined Sales and Use Tax Agreement (SSUTA), costing the state millions in potential sales tax revenue,” the report reads.
The only time sales tax would be collected for an online purchase is if the business had a brick and mortar store in the state. Due to a 1992 U.S. Supreme Court ruling, some states cannot require companies without a physical store to collect state and local sales tax.
“As a result, Missouri cannot require businesses without (physical stores) to collect sales tax on goods sold to Missouri residents,” the report continues.
As online shopping and e-commerce sales become more popular, the report suggests Missouri and its municipalities could be missing out on millions of tax dollars.
“Estimates from the U.S. Census Bureau show e-commerce sales for the first quarter 2017 now account for approximately $100 billion of $1.25 trillion in total retail sales (approximately 8 percent), up from approximately $36 billion in the second quarter 2008.”
The report says a 2012 study estimated that Missouri would lose $328 million in sales/use tax revenue in 2014.
“The SSUTA allows member states to collect a portion of the sales taxes that cannot be collected on online sales from out of state vendors,” the report says. “Participation in the SSUTA is voluntary for businesses; therefore, Missouri cannot require out-of-state sellers without nexus to collect sales taxes on purchases made by Missouri residents.”
The study looked at five states with similar populations to Missouri (+/- 2 million) who have joined the SSUTA and received millions in additional tax revenues.
The five states were Indiana, Kentucky, Minnesota, Washington and Wisconsin. On average, those states received $12 million, $17 million and $18 million dollars in additional tax revenues in the years 2014, 2015 and 2016, respectively.
The auditor’s report ends saying the state is “forgoing revenue from online sales by not pursuing options to capture sales taxes on such sales.”
