On June 30, 2021, Missouri became the latest entrant to impose sales, and use tax as Governor Parson signed into law the Wayfair bill (Senate Bill 153 and 97). The purpose of the bill is to impose online sales tax on out-of-state vendors. This move was emboldened by the ruling passed by the U.S Supreme Court in South Dakota v. Wayfair Inc. in 2018. Now states have the authority to collect sales from businesses not physically located in a state. Missouri is now the last of the 45 states that have adopted a statewide sales tax with Wayfair Law.
In a press release, Governor Parson boldly stated that the law was going to benefit the over 570,000 Missouri small businesses allowing them to operate on the same level as out-of-state retailers not keen on investing within the community or providing jobs to citizens. This law intends to protect small physical businesses in Missouri while limiting larger online businesses. However, the Wayfair bill will become effective from January 1, 2023.
Currently, Missouri companies collect and remit state sales tax to other states but out-of-state companies are not charging sales taxes. As a result, they are losing significant revenue while large online retailers sail through. With the law, there will be an economic nexus threshold on annual online sales reaching up to $100,000. Similarly, from 2023 any out-of-state business without a physical location must register with the Missouri Department of Revenue to enact the new tax rules provided it generated the set minimum gross sales (current or previous year) from selling tangible property in Missouri. Along the same lines, the governor awarded working Missouri residents a $380 million tax cut.
When the law takes effect, some noticeable changes occur. For example, the running of local and online businesses, the trajectory of sales, and consumer behavior trends.
Expected Implications of the Wayfair Law
- Ranked as the 5th state in the affordability category, this new law acts as a great incentive to encourage more businesses and people to reside in Missouri. With the Missouri sales tax imposed, small businesses stand a fighting chance as online retailers.
- The new changes also gift individual workers with an income tax cut to 4.8%. Thus, they can afford to buy from local Missouri shops instead of out-of-state retailers. Previously, most buyers preferred online retailers because they did not impose the sales tax. However, Missouri State Senator Tony Luetkemeyer, R-Parkville is of the view that the tax increase adds more weight to citizens already dealing with the negative impacts of the pandemic such as unemployment.
- With online retailers being required to pay the same category of taxes, it will promote fair competition, and they will now work to market their services and products and retain their customers given they could shave off up to 11% of the cost. Now, they will have to deal with potential pricing wars with local businesses as customers look for better deals.
Lawmakers, local businesses, and residents view this law's passing as a big win, especially with the accompanying tax cuts. There is an estimated $80 million to $120 million to be raised from the tax adding to the general revenue fund. The state will also collectively raise approximately $50 million for education and conservation purposes. However, everyone has to wait until 2023 to collect the money with Wayfair Law.
As a small business owner, the oncoming Wayfair law will impact you in more ways than one. As you prepare to integrate it into your operations, we recommend that you work with someone to guide you through the requirements of collection and remittance of the Missouri sales tax.
At Sales Tax Helper, we offer sales tax consulting, sales tax audit defense, and sales tax audit appeal services. We can help you understand more and fully prepare for when the law comes into effect. We know Missouri sales tax, Missouri sales tax audit, and consulting services. Do not hesitate to contact us.