The former mayor of St. Joseph said he believes communities across Missouri are missing out on millions of dollars in revenue on online purchases made within the state.
Bill Falkner, now a Republican state representative, said lawmakers need to create a framework to collect sales taxes online, a place where more and more people seem to be shopping.
“I think there is a feeling in Jefferson City that we need to address this,” Falkner said. “It’s just a matter of how we do it.”
The U.S. Supreme Court opened the door for states to rake in greater online sales tax collections in a 2018 ruling that upheld a South Dakota law. That decision overturned a decades-old precedent stating that businesses without a physical presence in a state — such as a store, office or warehouse — didn’t have to collect sales taxes on behalf of the state. In such cases, customers technically were responsible for paying the tax, but most didn’t.
“If you’re in the state of Missouri and you’re buying it from a company in Missouri, you’re going to pay sales tax, the sales tax where they sell it,” Falkner said. “If you’re ordering something from out of the state, that would classify as an internet sale and that’s the sales tax we are looking at capturing.”
As online commerce has grown, some large retailers such as Amazon already have begun collecting sales taxes in all 45 states that charge them, including Missouri. But others with a physical presence in only a few places haven’t been doing so.
“As mayor, I would get companies calling to complain because they hired employees, they paid rent on the building or had a building that they paid for,” Falkner said. “They were losing sales as people would come look at (their products) then go order it online.
“One business even told me, ‘Why should I invest in employees when I can just send out a catalog?’” he added. “So in the long run that’s hurting the local economy.”
Falkner sponsored legislation to address the matter during this year’s legislative session, but it didn’t get very far.
“There are several issues on it that different people do not like,” he said. “One is who collects the sales tax.”
Missouri charges a 4.225 percent sales tax. But counties, cities, fire and ambulance districts and various other local jurisdictions tack on their own sales taxes. A tax table available from the Missouri Department of Revenue shows about 2,350 different sales tax rates in Missouri, making it complicated for retailers who sell products throughout the state.
“You’ve got to come up with a third-party group to collect that sales tax and pay it to the state, and that’s going to cost you money,” Falkner told News-Press NOW. “The states that have already done it, the revenue they are bringing in well pays for it.”
There is also the issue of selling the collection of the tax to a Republican super majority, some of whom may balk at the idea of new streams of revenue. But Falkner said the tax isn’t new, it’s already on the books.
“All we are doing is trying to collect a sales tax through the use tax vehicle,” he said. “It’s confusing and that’s what makes it really hard to inform the public of what is going on.”
The Associated Press contributed to this report.