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Missouri Chamber testifies in support of legislation that blocks back-door tax increase on employers

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A Missouri House committee heard testimony on a bill that would prohibit the Department of Revenue from assessing sales tax on delivery fees. The legislation is House Bill 129, sponsored by Rep. Kevin Engler, a Republican from Farmington. A similar bill, Senate Bill 16, was approved by a Senate committee on Jan. 17. The legislation is sponsored by Sen. Will Kraus, a Republican from Lee’s Summit, and awaits debate by the full Senate.

Prior to 2015, sales tax had never been assessed on delivery fees. But a 2015 Missouri Supreme Court ruling, Alberici Constructors Inc. v. Director of Revenue, reversed that interpretation by allowing the taxation on the delivery fees of a crane that was used by the construction company on a worksite.

“This is a clear overreach by the Department of Revenue to expand employer tax liability,” said Tracy King, Missouri Chamber vice president of governmental affairs. “Delivery services are just that, a service, and therefor exempt from tax. If the courts and DOR are allowed to arbitrarily expand tax in this case, one wonders what’s next?”

The holding in Alberici is inconsistent with historical interpretation on this issue. Delivery and shipping charges were not subject to sales/use tax if they were optional and separately stated on the invoice. The notification by the DOR, as required by law, failed to clarify the impact of the ruling on other services.

“It is a real threat to Missouri employers,” said King. “The Department has been identifying this non-compliance in recent audits, and businesses are still largely unclear how the decision might be applied to their business.”

Inconsistency in tax law was identified as a concern of Missouri employers during the Missouri Chamber/Gallup survey of more than 1,000 CEOs.

“According to Gallup, nearly one in three Missouri employers are concerned about inconsistent state tax policies,” said King. “Rulings like this are the reason why.”

For more information on this issue, contact King at 573.634.3511.

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