Online Sales Taxes Bill Finalized
Earlier this week, Governor Parson signed the so-called Wayfair bill, and it’s a big deal for Missouri. Named for the Supreme Court case South Dakota v. Wayfair, the legislation makes our state the 50th in the nation to begin collecting online sales taxes from out-of-state retailers.
My colleagues and I have been writing about the online sales tax issue for years and have submitted testimony on the topic five times this year alone. The purpose of the tax is help level the playing field between online retailers and brick and mortar stores, but as Institute researchers have repeatedly emphasized, any effort to expand the state’s sales tax base should be done in such a way that it doesn’t raise the cumulative tax burden on Missourians. In other words, the bill should be revenue neutral. This legislation delivers in that regard.
SBs 153 & 97 offset the tax increases that will come with collecting online sales taxes from out-of-state retailers with future income tax reductions. Once fully implemented, after hitting various revenue targets over a period of years, Missouri’s top income tax rate will fall incrementally from 5.4 percent to 4.8 percent. This is a good move. It shifts the state government’s revenue reliance away from the economically destructive income tax and is paid for without raising other tax rates.
Additionally, SBs 153 & 97 include a host of other positive tax-related reforms that go beyond Wayfair. A few highlights include tax-increment financing reform, special taxing district reform, and a non-refundable earned-income tax credit. Components of each of these major reforms have been included in the Show-Me Institute’s Blueprint for Missouri over the past few years and represent significant improvements over our state’s status quo.
The bill signing represents just the beginning of what will be a long road toward Wayfair implementation. Online sales taxes aren’t slated to begin being collected until Jan. 1, 2023, while the other parts of the more than 200-page bill will go into effect later this summer. In the coming months, I’ll cover the many questions our state and local governments are facing regarding the online sales tax topic. But for today, I’m glad that after years of talk and no action, the governor and legislature finally delivered on this front for Missouri taxpayers.