Recent legislation has brought Kansas and Missouri up to speed with the nation by introducing new tax collection requirements for out-of-town retailers who do not have a physical presence in their state. While these taxes were held by the U.S. Supreme Court in South Dakota v. Wayfair, Inc., states had very different methods of tracking such retailers. During the 2020-21 legislative periods, the legislators of both states acted.
The Kansas Department of Revenue (KDOR) had administratively taken an aggressive approach against such out-of-state retailers and issued a notice in 2019 urging out-of-state retailers to register and begin collecting Kansas use tax for the first dollar Approach to collecting Kansas sales from such retailers is unconstitutional. Marketplace intermediaries like Amazon have been asked to volunteer in Kansas to register. In Missouri, the Missouri Department of Revenue (MDOR) largely ignored the entire matter and instead waited for legislative action.
Kansas legislature passed bill that imposed a collection and withdrawal obligation on marketplace intermediaries (a two-part definition that also applies in Missouri, see below, (1) they facilitate retail sales by marketplace vendors and (2) they facilitate direct or indirect payments from Collect and transmit buyers to marketplace sellers) due to the economic context for sellers abroad and how sales tax is levied. The legislation was enacted by overriding the governor’s veto and requires such marketplace intermediaries for marketplace sellers to collect and pay sales taxes on sales to Kansas.
A marketplace intermediary can be exempted from the collection obligation on behalf of wholesalers (who have an annual turnover of more than 1 million US dollars) or if the KDOR is convinced that the marketplace sellers who use a marketplace intermediary already have taxes move in and to the KDOR. An annual threshold of $ 100,000 applies to any collection agency, whether it is a marketplace intermediary or the seller direct, but once it is exceeded in a calendar year, the collection and withdrawal request will apply immediately in that calendar year. Class action lawsuits against market agents who collect and pay excessive taxes from buyers are excluded, but customers in Kansas can file reimbursement claims under existing reimbursement law. Customers remain subject to use tax if a marketplace broker or marketplace seller does not collect and pay sales tax in accordance with this new provision.
Kansas offsets against additional taxes levied above
There are other provisions of the bill that are intended to reduce KDOR’s revenues, especially in the area of income tax:
- Extension of the presentation period for net operating losses from 10 years to an indefinite period.
- Extension of the filing date of the corporate income tax return to a date one month after the due date of the federal return.
- Kansas does not comply with global low-taxed intangible income enacted under the federal income tax law.
- Federal restrictions on corporate interest deduction (a maximum of 30% of adjusted taxable income plus corporate interest income, see IRC § 163 (j)) are not allowed in Kansas; Standard deduction increases for individuals in Kansas by $ 500 each to $ 3,500 for singles and $ 8,000 for married couples filing together.
- Kansans filing a federal statement with a standard deduction may choose to file a Kansas statement with single deductions.
- FDIC insurance premiums that are not eligible as federal income tax deductions under IRC Section 162 (r) for certain financial institutions with assets greater than $ 10 billion are permitted as deductions in Kansas.
- The TCJA prohibits business lunches in Kansas.
- Kansas permits increased spending on tangible personal property and computer software.
SB 50 (2020-21), rejected by Governor Laura Kelly (April 16, 2021), repealed by Kansas legislature (May 3, 2021) (generally effective January 1, 2021, sales tax regulations from July 1, 2021) ).
In Missouri, lawmakers finally passed law on January 1, 2023, towards the end of the recently concluded session, to collect Wayfair’s sales and use tax. Governor Mike Parson signed the bill on June 30, 2021. Missouri law defines marketplace intermediaries in the same two-part way as Kansas law, and these marketplace intermediaries are subject to the use tax on sales to Missouri residents. collect and collect the sale is deemed to be at the place to which the goods are dispatched or delivered or at which the buyer is taken into possession.
These requirements apply only to marketplace intermediaries whose gross revenue on sales to Missouri exceeds $ 100,000 in a rolling twelve month period at the end of each calendar quarter and will apply from the beginning of the second calendar quarter after the threshold is exceeded and applies continues for as long as the marketplace intermediary does business in Missouri or has a material association with Missouri.
The same $ 100,000 threshold would apply to sellers who do not use a Marketplace Facilitator. To promote efficiency, the MO DOR is designed to: (1) Work with the Board of Directors of the Streamlined Sales Tax Agreement (SSTA, an ongoing cross-state effort to pass uniform laws across states to address this issue) to enable sellers to use the certified service providers of the SSTA (third parties who fulfill the sales and consumption tax functions of a seller) and its central registration system or the MO DOR should work with certified service providers who are independent of the SSTA board; and (2) retain information for use by sellers to facilitate collection and the bridging burden (boundaries on Missouri tax jurisdiction and information about the sales and excise tax treatment of products or services in Missouri). As in Kansas, class action lawsuits against market brokers are ruled out, and buyers can continue to seek reimbursement of this over-levied use tax under the existing Refunds Act. Missouri SB 153 (2020-21) (effective January 1, 2023).
Offsets in Missouri at the additional taxes levied as a result of the above
Similar to Kansas, the offsets benefit individual income taxpayers:
- The reduced income tax rates introduced in 2017 have been expanded and will be continued in the calendar year 2024, with the highest individual income tax rate being reduced to 4.8% in 2024, provided that the already existing income targets are achieved. From 2025, further rate reductions of .01% will take place, apparently without sales target conditions.
- Deductions for federal income taxes paid and offsetting for federal income tax refunds received do not apply to federal refunds attributable to tax credits that reduced federal tax liability due to economic payments resulting from the Covid-19 pandemic.
- A non-refundable acquisition tax credit is added for Missouri, which reflects the state income tax credit for computation, but starts at 10% of the federal credit but can be increased to 20% of the federal credit when certain revenue thresholds are met.
SB 153 (2020-21) (valid from January 1, 2023, but the changes described in the second bullet point above take effect immediately).
Sellers who do business in Kansas or Missouri, either through or without a marketplace intermediary, through mail order, internet sales, or other methods that do not require a physical presence in the buyer’s state, must begin collecting and paying for the relevant sales or use taxes (or certify that your marketplace intermediary does), subject to the applicable thresholds and expiration dates described above. Kansas consumers may not see sales tax increases if sellers or marketplace intermediaries have already followed KDOR recommendations, but Missouri consumers should experience increased use taxes due to this legislation, but not before 2023.