Veto of laundry sales tax exemption overridden

A bill that creates sales tax exemptions for certain commercial laundries became law Wednesday after both legislative chambers voted to override Gov. Jay Nixon's veto.

Senate Bill 20 started in the Senate, where it passed with a 28-4 vote, then moved to the House of Representatives, which passed it with a vote of 110-46.

The bill creates a sales tax exemption for commercial laundries for the materials and utilities purchased by the companies to provide their laundering services. These materials include soaps, detergents, chemicals and other sanitizing agents used by laundries to treat and clean textiles.

It applies to only 48 commercial laundries owned by 29 companies in Missouri that process at least 500 pounds of textiles per hour and at least 60,000 pounds per week, according to the bill text.

Gov. Jay Nixon vetoed SB 20 in July for reasons including: "There is no requirement that a benefiting business create any new jobs to take advantage of these broad new exemptions."

Nixon's veto letter also noted the bill would overrule a 25-year legal precedent that doesn't allow the same tax exemptions as manufacturing companies.

The Missouri Supreme Court ruled in 1989 that sales and use tax exemptions do not apply to commercial laundries, and a similar suit was rejected by the court last year.

The sales tax exemption is projected to result in a $2 million annual reduction in state revenue as well as $2 million reduction in tax revenue for local jurisdictions, according to the governor's veto letter.

Bill sponsor state Sen. Will Kraus, R-Lee's Summit, said charging commercial laundries sales and use tax creates a double taxation.

"The successful override of Senate Bill 20 will help these laundries continue to operate in Missouri and will preserve the jobs those businesses provide," Kraus said in a news release. "When taxes are levied by court rulings, it raises costs for businesses, and those costs are passed onto consumers."

State Sen. Jill Schupp, D-Creve Couer, was the only senator to debate the bill, saying the legislature should not provide tax breaks at a time when there is a shortage of funds for other projects. Allowing a tax exemption would "erode our tax base," she said.

"It's the wrong thing to do at the wrong time," Schupp said.

The bill then went to the House with state Rep. Caleb Jones, R-Columbia, starting a motion to pass the bill.

State Rep. Jon Carpenter, D-Gladstone, said the tax exemption would be "giving away money," which he said could go toward funding education.

Carpenter also argued allowing this tax exemption does not create jobs. He said he is in agreement with the 1989 Supreme Court ruling.

"We need to promote manufacturers, and that makes sense. But it was never meant to include laundromats, and we know that in our hearts," Carpenter said. "What are we doing today? We're going to pretend (laundries) are manufacturers."

Jones replied to Carpenter's remarks, noting, "This isn't a pie in the sky bill." He said several states surrounding Missouri have this same tax exemption for commercial laundries.

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