Koenig bill one of two proposing new online state sales tax, income tax cuts

Sen. Andrew Koenig speaks at the Tesson Ferry Republican Club last summer. Photo by Jessica Belle Kramer.

By Kathryn Palmer
Columbia Missourian

JEFFERSON CITY — A proposed sales tax for out-of-state online purchases could lead to more income tax breaks for Missourians. That’s the crux of a pair of Senate bills heard simultaneously by the Missouri Senate Ways and Means Committee last week.

“This bill (Senate Bill 50) would accomplish both ends of putting our retailers and (out-of-state) internet retailers on a level playing field while at the same time reducing our income tax,” said the bill’s sponsor, Sen. Bill Eigel, R-Weldon Spring. Eigel’s bill would impose a 6.5 percent tax on online sales.

“This is something we should do to address fairness for businesses in our state,” Sen. Andrew Koenig, R-Manchester, said. The committee also heard Koenig’s bill, Senate Bill 46, which is similar to Eigel’s.

David Overfelt, president of the Missouri Retailers Association, agreed, as he testified in favor of both bills. He said big companies on the coasts want to maintain their competitive advantage by not being taxed, “and we need to oppose that,” Overfelt said.

The bills come after last year’s U.S. Supreme Court decision, South Dakota v. Wayfair Inc., which allows states to levy state sales taxes on businesses without a physical presence in individual states. Both bills include a threshold amount that businesses need to earn for the state to collect the tax. Both bills would require businesses that make over $100,000 in their state, regardless of physical presence, to pay and remit sales taxes, following suit with a number of states with similar legislation.

Eigel’s bill creates a Simplified Remote Sales Tax Remittance Program, which would “facilitate the collection, reporting, and remittance of sales tax by remote sellers.” The Missouri Department of Revenue would oversee the program.

Koenig’s approach is two-pronged:

  • Marketplace facilitators, or remote retailers that meet the sales tax threshold outlined in the bill, would be required to register with the Department of Revenue to ensure collection of those funds.
  • Missouri would join the Streamlined Sales Tax and Use Agreement, which is a nationally coordinated effort to simplify tax collection processes.

Like Eigel’s, Koenig’s bill would also put in place income tax cuts.

“Income tax is the most destructive tax known to man,” Koenig told the committee at the Jan. 29 hearing.

“It is our view that Missourians need tax relief,” Michael Hafner, a lobbyist for Missouri Century Foundation, testified in support of the tax cut.

Division in the committee emerged, however, on where to direct the extra revenue.

Sen. Lauren Arthur, D-Kansas City, had concerns about moving forward with those cuts when previous tax cuts are still being enacted, and their effects remain unknown.

“There are informed estimates on how much we can collect from the online sales tax, but we don’t know yet,” Arthur said, asking Koenig if he’d be opposed to passing the bill without a tax cut.

Koenig, who has supported other legislation aimed at income tax cuts, said he’d be open to delaying it but would most likely take issue with eliminating the tax cut component.

That position gave pause to Jim Moody, the former budget director for Republican Gov. John Ashcroft and a lobbyist for the Civic Council of Greater Kansas City, who said the money should be allocated for general revenue instead of more tax cuts.

Moody told the committee that “we’re dealing with too many moving parts already. We need to slow down on the tax cut portion.”

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