(The Center Square) – Collecting and submitting sales and use taxes in a timely manner allowed Missouri businesses to keep $158 million paid in taxes by citizens in fiscal year 2022.
Missouri law allows businesses meeting deadlines in sending collected sales and use taxes to the Department of Revenue to retain 2% of sales taxes payable. The state established the discount so businesses could recover a portion of their costs for compliance with state sales tax laws and encourage timely payment of the tax money.
In the annual audit of the Department of Revenue, Republican Auditor Scott Fitzpatrick recommended the discount be reviewed by the legislature as it’s one of the most generous in the nation, benefitting the state’s largest retailers.
“I believe the discount serves a meaningful purpose as it allows businesses to recover some of the costs associated with collecting and remitting these taxes,” Fitzpatrick said in a statement announcing the audit. “However, as someone who believes in a low tax burden and allowing Missourians to keep more of their hard-earned dollars, I support a reasonable cap on the discount that would generate revenue the legislature could then use to provide a tax cut for every Missourian.”
The audit showed the discount totaled more than $100 million annually since 2013 and increased most years. Businesses retained $141 million in fiscal year 2021. Sales and use taxes comprised approximately 19% of Missouri’s general revenue in fiscal year 2022, according to the audit.
“If the state is going to force a private business to be the tax collector for the state, then the state should compensate that private business, at least in some small way,” David Stokes, the director of municipal policy at the Show-Me Institute, said in an interview with The Center Square.
Other states allow a higher discount than Missouri’s 2%, the audit stated. However, those states cap their discount and Missouri doesn’t have a limit.
“According to the Federation of Tax Administrators, 27 other states offer similar vendor discounts; however, 18 of those states have established ceilings to limit the amount of discount and/or compensation retained by businesses,” the audit stated. “In addition, the other nine states either have a lower discount rate than Missouri or only apply the highest discount rate to a limited dollar amount of sales tax collected (e.g., the first $3,000, then a lower rate applies).”
The audit said changing state law to include a monthly cap on the amount of the timely discount eligible to be retained would significantly increase state and local tax revenues. Arkansas also has a 2% discount rate, the audit stated, but it has a cap of $1,000 per month, the largest cap of states surrounding Missouri. When applying the Arkansas discount and cap, it would have resulted in approximately $93.2 million in additional state and local sales tax revenue in fiscal year 2022.
“These are good incentives,” Stokes said. “If the state’s going to force private businesses to be tax collectors, then let’s provide an incentive and reward for those private businesses to do it, do it properly, on time and maybe recoup some of their costs.”
