If Businesses Are Going to Be Our Tax Collectors, We Should Compensate Them for That
Every few years, a new state audit or some report by a progressive group comes out criticizing Missouri for allowing businesses to keep a portion of the sales taxes they collect or the income taxes they withhold. The way it works is that if businesses remit the sales or income taxes they collect and withhold on time, they get to keep a portion of the taxes. The amount they can keep is two percent for sales taxes. For income taxes, the amount starts at two percent and declines as the amount increases.
There are two good reasons for this program, which many, but not all, states have some version of. Reason one is that incentives matter, and if you provide incentives to businesses to get these taxes in on time, they will be more likely to do so. Reason two is that if you are going to force businesses to serve as tax collectors for the government, you should compensate them for it. It is not free for a business to calculate, collect, and remit these taxes to the government. The cost for a behemoth like Walmart may be far less than two percent, but it is not zero. Between the cost of doing the work for the government in the first place, and then providing an incentive to do it properly and on time, I think the sales and income tax timely filing discounts are perfectly reasonable and should be kept as they are.
The recent audit states that Missouri’s sales tax credit is more generous than other states. (I don’t know how the income tax withholding credit compares.) I presume the audit is correct on this, and to that I say, “Good for Missouri.” It’s nice to be number one in something beyond booze, BBQ, shoes, stools, and fountains.
As the saying went, “First in shoes, first in generous levels of sales tax remittance timely credit allowances, last in the American league.”