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St. Louis loses appeal to keep collecting earnings taxes from remote workers

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(The Center Square) – The City of St. Louis violated state law when collecting earnings taxes on wages earned by remote workers, a three-judge panel of the Missouri Court of Appeals unanimously ruled on Tuesday.

“It was the logical conclusion for the court to make,” Rep. Jim Murphy, R-St. Louis, said in an interview with The Center Square. “If anything, the city should be ashamed of themselves for spending $200,000 in taxpayer money to pursue an appeal that they were doomed to lose.”

The judges ruled against the group of taxpayers in their appeal of a lower-court ruling dismissing class-action status of the lawsuit, which could have cost the city hundreds of millions of dollars in refunds.

“They should have done it, but that doesn’t mean I’m not going to try to do some type of legislation to make sure that doesn’t happen again,” Murphy said.

Last year, Murphy was chairman of a special committee investigating earnings taxes in St. Louis and Kansas City. He also sponsored House Bill 1516, which would have prohibited the city from collecting earnings taxes from remote workers.

Murphy’s bill would have created a process for taxpayers to receive a refund if earnings taxes were deducted for work or services not performed or rendered in the city currently or in the past.

Democrat Mayor Tishaura Jones announced the lifting of a hiring freeze in the city earlier this month. She specifically mentioned her reason for ending it was Murphy’s bill dying at the end of Missouri’s legislative session.

Jones and members of the Board of Aldermen expressed concerns about the impact on the city budget if the earnings tax on remote workers was determined to be illegal.

“The City of St. Louis is reviewing the Missouri Court of Appeals’ decision that was handed down today,” Rasmus Jorgensen, deputy director of communications for Jones, wrote in an email to The Center Square. “In creating the 2025 budget proposal, the mayor took a financially prudent approach to take into account the potential impact of today’s decision. We do not believe this decision will require changes to the budget or will impact the current level of city services.”

The judges consulted a dictionary to show how the city incorrectly applied “plain and ordinary meanings of ‘perform’ and ‘render,’” according to the ruling.

“Additionally, this Court cannot ignore the remaining words in the Ordinance,” the judges wrote. “Specifically, the Ordinance’s explicit condition that the earnings tax only applies to work done and services rendered or performed ‘in the City.’ Webster’s Third New International Dictionary defines the preposition ‘in as ‘used as a function word to indicate location or position in space or in some materially bounded object.’”

Murphy continually praised Kansas City during committee hearings for refunding earnings taxes collected from remote workers during the pandemic.

“Kansas City made the right decision to begin with,” Murphy said. “The law is so crystal clear as to what was right and wrong, and yet (City Collector) Gregory Daly decided he knew better than the law and he was going to do it his way. And all he did was waste taxpayer money and put citizens through a lot of trouble.

“I’m thrilled with the court that they stood up for the citizens of Missouri. It’s a great day for Missouri and the city gets what they deserve.”

The court also ruled against ordering the city to pay the attorneys’ fees of the taxpayers who filed the lawsuit.

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