A bill to require out-of-state retailers to pay sales tax on online purchases passed the House Ways and Means Committee on Wednesday.
If passed, Missouri would be the last state to tax out-of-state businesses selling online merchandise to state customers.
The bill now goes to the House Rules Committee before being debated on the House floor. Earlier in the session, the Senate passed the bill with bipartisan support.
"It applies to out-of-state sellers who are selling tangible products in the state," said Chuck Pierce, the government relations consultant for the Missouri Society of CPAs.
Multiple efforts have been made during the last three years to pass a similar measure without success. Last year, an online sales tax bill landed in the Senate, but the COVID-19 lockdown stalled any further progress.
Currently in Missouri, only companies that own land or have a physical presence in the state are required to pay an online sales tax, now commonly known as the "Wayfair tax."
In 2018, the Supreme Court ruled in South Dakota v. Wayfair that sales tax could be collected from businesses without a physical presence in the state.
"Missouri is the only state with a sales tax that has not addressed Wayfair," said David Overfelt, president of the Missouri Retailers Association.
Just this week, Florida began to require out-of-state retailers to pay the tax after Gov. Ron DeSantis signed legislation establishing a universal online sales tax policy.
"We need to fix this problem because we literally have the worst thing you could want in a tax code," said Sen. Andrew Koenig, R-Manchester, sponsor of the Senate version of the bill.
"It's telling Missourians to purchase from a non-Missouri business," he said.
While the Senate and House bills include the Wayfair tax, there are a few key differences, including proposed tax cuts.
The Senate bill proposed an additional tax credit to be applied to a taxpayer's state income tax liability. Additionally, this bill sought incremental decreases of 0.1 percent in the top rate of income tax until a total decrease of 0.5 percent had been reached.
During Wednesday's meeting, a compromise was reached to eliminate the earned income tax credit provision and revise the income tax reduction schedule.
Rep. J. Eggleston, R-Maysville, sponsor of the House bill, said negotiations with Koenig over the bill provisions have been positive.
"We often hear about contentiousness between the House and the Senate and different opinions on different ideas," he said. "But so far, we've worked well together, and we both have the common goal of getting a good Wayfair bill across the finish line."
It is difficult to calculate the implications that passage of this bill will have on the state's general revenue.
COVID-19 and the rise of e-commerce that followed in its wake have skewed the numbers surrounding online shopping revenue. It is unknown whether the robust online shopping figures will remain constant or whether shopping will return to physical stores.
"In all the studies that were done, they have really been turned on their ears since COVID happened," said Ray McCarty, president and CEO of Associated Industries of Missouri. "That forced a lot more online sales than they'd ever seen before."
For retailers across the state, however, imposing an online sales tax would level the playing field with out-of-state merchants.
"It gives us a little bit more equity on the playing field," Overfelt said. "When you're having purchases that can forego up to 11 percent of the cost, that's very tough to compete against."
The work of the Missouri News Network is written by Missouri School of Journalism students and editors for publication by Missouri Press Association member newspapers.