HCS SCS SB 11 -- TAXATION

SPONSOR:  Kinder (Cooper, 120)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Tax Policy
by a vote of 14 to 4.

This substitute creates a state sales and use tax holiday for
certain clothing, personal computers, and school supplies
purchased during a three-day period each August.  Any political
subdivision may opt in to the holiday by adoption of a local
ordinance if submitted to the Department of Revenue by July 1
each year.  The tax holiday will expire July 1, 2005.

The substitute also creates the Joint Legislative Committee on
Tax Policy consisting of five members from both the House of
Representatives and the Senate.  The committee will be
responsible for continuous study and review of state tax policy
and to issue reports on its findings and recommendations to the
General Assembly as deemed necessary.

The substitute also makes various changes to the collection of
various taxes by the Department of Revenue.  The substitute:

(1)  Requires every vendor or affiliate of a vendor seeking to
provide goods and services to the State of Missouri by contract
to collect and properly pay all sales and use taxes;

(2)  Requires any amount of pension, annuity, or retirement
allowance deducted for state individual income tax purposes to be
included in the taxpayer's federal adjusted gross income and not
otherwise deducted in the calculation of Missouri taxable income.
Persons who are 100% disabled, as defined by federal law, are
exempted from this provision;

(3)  Requires all lottery and other gaming winnings to be
included in Missouri nonresident adjusted gross income when the
winnings are from a Missouri source;

(4)  Allows the director of the department to require the
remittance of sales and use taxes and withholding taxes through
an electronic funds payment system for employers and sellers who
are required to file and pay on a quarter-monthly frequency;

(5)  Includes court costs in excess of $25 related to the State
Supreme Court, Court of Appeals, or any circuit court of Missouri
as amounts that can be offset against a refund of taxes owed to a
taxpayer;

(6)  Adds additional requirements on any article being traded in
for the purpose of receiving a sales or use tax credit against a
new article being purchased.  The article being traded in must
have originally had sales or use tax paid on it or have been
specifically exempted from sales and use taxes by law.  Grain and
livestock raised or produced by a purchaser may be traded in on a
motor vehicle or trailer used for agricultural purposes by the
purchaser;

(7)  Requires as a condition of employment with state government
that all state income taxes due be filed and paid by the
employee;

(8)  Requires all state income taxes due to be paid by members of
the General Assembly, statewide elected officials, and members of
the judiciary; and

(9)  Requires a tax clearance from the department prior to the
issuance or renewal of any professional license granted by the
state.

The substitute exempts certain investment funds service
corporations from the local license fees and local business taxes
and allows the apportionment of income in determination of the
Kansas City earnings tax.

The substitute changes provisions related to the carry-forward
and carry-back provisions of net operating losses for income tax
purposes.  Any amount of net operating losses taken against
federal taxes but disallowed against Missouri taxes since July 1,
2002, may be carried forward and used up to 20 years in the
future.  In addition, certain net operating losses relating to
farming may be carried back and forward in the same manner as
allowed by federal law.

The substitute changes the effective date of the pharmacy tax
from July 1, 2002, to July 1, 2003, and allows the Department of
Social Services to adjust the pharmacy tax rate quarterly, on a
prospective basis.  The tax will expire 90 days after stated
conditions are met.  The director of the department is required
to notify the Revisor of Statutes of the expiration date if the
conditions are met.  If the conditions are not met, the tax will
expire on June 30, 2005.

The substitute contains an emergency clause.

FISCAL NOTE:  Estimated Net Income to General Revenue Fund of
$17,702,141 to Unknown in FY 2004, $7,667,219 to Unknown in FY
2005, and $9,522,283 to Unknown in FY 2006.  Estimated Net
Savings to Pharmacy Tax Fund of $31,494,070 in FY 2004,
$31,490,334 in FY 2005, and $31,490,334 in FY 2006.  Estimated
Net Effect to All Other State Funds of a cost of $580,953 to an
income of Unknown in FY 2004, a cost of $714,561 to an income of
Unknown in FY 2005, and an income of Unknown in FY 2006.

PROPONENTS:  Supporters of the bill as it passed the Senate say
that a sales tax holiday during August is a good way to stimulate
the retail economy and will likely produce additional revenue for
the state through increases in non-exempt sales during the same
period.  The sales tax holiday concept has been used successfully
in many other states.

Testifying for the bill were Senator Kinder; Famous Barr and the
Jones Store; Consumer Electronic Association; Missouri Retailers
Association; Missouri Chamber of Commerce; and Associated
Industries of Missouri.

OPPONENTS:  Those who oppose the bill say that local governments
cannot afford the losses they will see from including local sales
tax in the holiday.  They requested that local governments be
allowed to choose whether or not they participate in the holiday.

Testifying against the bill were Missouri Municipal League; St.
Louis County Municipal League; Missouri Association of Counties;
and County Commissioners Association of Missouri.

Bill Tucker, Deputy Director of Research

Missouri House of Representatives
Last Updated July 25, 2003 at 10:13 am