08/29/2023 - Jefferson City, MO
State Auditor Scott Fitzpatrick today released the annual review of the
Missouri Department of Revenue (DOR) sales and use tax. As found in previous
audits, the report notes Missouri has the most generous timely sales and
use tax
discount in the nation, and recommends a cap on the amount of discount retained
by businesses each month.
"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. 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," said Auditor
Fitzpatrick.
Under Missouri law, businesses
remitting sales and use taxes are allowed to retain 2 percent of sales taxes
payable to the DOR if the business remits payments in a timely manner. The
state originally established the discount so businesses could recover a portion
of their costs for compliance with state sales tax laws and to encourage timely
remittance of sales and use taxes.
For fiscal year 2022, this resulted in businesses retaining $158 million of
sales and use tax collections.
In designating
Missouri's discount as the most generous in the nation, the report notes that
while some other states may have a higher percentage discount, they put a cap
on the amount of the discount that can be retained by businesses. According to
the Federation of Tax Administrators, 27 other states have similar vendor
discounts with nine having a lower discount rate than Missouri and 18 having a
ceiling to limit the amount of discount businesses can retain.
The report uses
the example of the state of Arkansas, which has a similar 2 percent timely
discount rate but also has a cap of $1,000 per month. If Missouri had a similar
cap in place it would have resulted in an additional $93.2 million in state and
local tax revenue during fiscal year 2022.
The audit
recommends that the General Assembly evaluate the timely sales tax discount and consider
the implementation of a monthly cap on the amount of discount retained. The
report also notes the DOR is not required to report and does not routinely
report the amount of timely discounts retained by businesses to the General
Assembly, and recommends changes to state law to require the department to
report annually.
The complete audit of the DOR sales and use tax
can be found here.