A business-friendly proposal will appear on Missouri’s Nov. 8 general election ballot: Amendment 4, The Taxpayer Protection Amendment, which will protect Missouri consumers and businesses from a new sales tax on services we all use every day.
Amendment 4 would prohibit state and local governments from imposing a new sales or use tax on services. Missouri and its local governments mostly confine sales taxes to tangible goods, not services, which are activities that one person does for another person.
You might ask why Missouri needs Amendment 4 if our state doesn’t currently tax most services. The answer is that the threat is real and it’s here:
• Missouri legislation creating a new sales tax on services has been proposed the past seven years in a row. One year, it passed the Missouri House by a 90-65 vote and advanced to a Senate hearing. That’s too close for comfort with a bad idea.
• Unelected bureaucrats at the Missouri Department of Revenue are liberally interpreting the application of sales and use taxes to apply to certain services, such as yoga classes and dance studios. The most recent such interpretation to startle small businesses is a new tax on delivery charges. That case started with a St. Louis construction company seeking a refund on taxes paid for the service of delivery of heavy cranes and a welder. The state bureaucracy ruled against the company, and the Missouri Supreme Court this year upheld the bureaucrats’ position. In July, form letters signed by the Missouri Director of Revenue were sent to thousands of local businesses, warning that, “in general, if parties intend delivery to be part of the sale of tangible personal property, the delivery charge is subject to tax even when the delivery charge is separately stated.”
• Politicians in our neighboring states of Oklahoma and Illinois discussed just this year creating sales taxes on services to plug revenue holes. In Oklahoma, a new sales tax on services was proposed by that state’s conservative Republican governor, Mary Fallin, partly because it is easier there to expand the sales tax base than to raise the sales tax rate. The proposal didn’t pass in Oklahoma this session, but it will likely be back. Meanwhile, Illinois’ budget mess continues, as does talk of new sales taxes on services.
• Other states started collecting new sales taxes this year on every day services. For example, in North Carolina, sales taxes were previously applicable to parts for a car repair; but as of this spring, the North Carolina sales tax has been expanded to include the services of the mechanic making the repairs. In Washington State, the services of martial arts studios are subject to sales tax as of this year, and those small businesses report the price hikes have meant losing customers who cannot afford the new taxes.
A new sales tax on services would create new tax complexities for companies that are in the business of providing multiple professional services to Missourians. Let’s consider banks, because services are what banks primarily deliver to their customers. Consider how many services offered by Missouri banks could be impacted by new sales taxes on services: Checking and savings accounts. Personal and corporate lending and credit services. Trust management. Mortgages and real estate. Credit and debit cards. Plus, vehicle loans. Investments and asset management. Endowments and foundations. Retirement services. Travel agent services. Funeral and cemetery trust services. And, special services for certain customers, such as young people and members of the military. Foreign currency exchange. Private wealth management. Online and mobile banking services. Merchant services. Health savings accounts. Wire transfers.
In addition, there will be expensive and frequent accounting software changes to recognize the various taxes, and updates required when a jurisdiction adjusts its taxation structure. This can get very complex, very quickly. If a business provides services at offices in multiple taxing jurisdictions, the expense, staff time and general hassle is multiplied. For example, the City of Columbia and Boone County have a basic combined sales tax rate of 7.975 percent, but in special development retail districts, the combined sales tax rates are up 8.975 percent.
Amendment 4 is a pre-emptive strike to stop new sales taxes on services, because you do not wait until your house is ablaze to get a fire extinguisher. History and the record shows that the tax laws and rules will be interpreted by bureaucrats to maximize revenues, as has already happened for some services in Missouri, such as deliveries.
And who ultimately pays for new sales taxes on services? Missouri consumers.
Just think about the services Missourians use every day. There are services used by families, ranging from day care, to rent, to services of pediatricians and veterinarians, to tutoring and self-defense classes. There are the services used by individual consumers, ranging from haircuts to manicures to tattoos to dry cleaning to car repairs and funerals. There are services used by businesses of all sizes – the services of attorneys, accountants, bankers, insurance agents, specialized consultants, technology experts. It all boosts the bottom-line costs for consumers.
Sales taxes hit hardest on consumers least able to pay: Senior citizens, retirees, the disabled – many on fixed incomes that would be gobbled up by a new sales tax on services. Low- and middle-income families will lose a greater percentage of their hard-earned money if they are forced to pay a new sales tax on services. A new sales tax on services would be a cradle-to-grave tax, adding costs to the services of a physician or midwife delivering a baby – and to the eventual services of a mortician, headstone carver and gravedigger.
The answer is Amendment 4, The Taxpayer Protection Amendment, to protect Missourians from new sales taxes on services they use every day.
Learn more about Amendment 4, The Taxpayer Protection Amendment, at www.MOTaxpayerProtection.com
Scott Charton of Columbia is the communications director for Missourians for Fair Taxation