On July 6, Governor Nixon signed SB 18 and HB 517 which provide for a variety of taxpayer friendly changes to Missouri tax laws.
SB 18 requires the Department of Revenue to communicate changes in interpretations of sales and use taxation of personal property or services. The Department is required to notify sellers if the modification is one that would not have been expected based on prior laws and regulations. If the seller is not notified of the change and has not previously remitted tax or received prior notice for the item which is the subject of the change, the seller is not liable for the tax until notified. The notification may be by mail, email, or secure electronic direct communication. The Department is also required to provide information regarding sales and use tax law modifications on its website.
There are a number of changes in HB 517. There are modifications or clarifications to overpayment interest, tip withholding, refund claim statute in certain circumstances, sales tax on mandatory gratuities, and sales tax communication by sellers.
Interest will now be paid on overpayments that have not been refunded within 45 days of the date the return or claim for refund was filed. Prior law paid interest on refunds not paid within 90 days. The bill also requires the Department to record and deposit all funds received within two business days.
State income tax withholding reported on tips will be limited to the greater of the amount reported to the employer in a written statement or the amount collected by the employer and remitted to the employee. If tips are shared, the amount reported by the employer must be limited to the amount of tips actually received by the employee. Currently, Missouri follows federal rules on how to determine taxable tips.
The new law now allows a taxpayer to claim a credit or refund after the statute expires if the taxpayer amends or the IRS changes the tax return after the time has expired. The claim for refund or credit must be filed within one year of the amendment or change.
Mandatory gratuities collected by restaurants are not subject to state sales tax when they are reported by the employee and the employer withholds state income tax.
A seller will be able to advertise that the required sales tax will be assumed or absorbed into the sale if the amount of tax is stated on the invoice or receipt. Failure to do so will result in the seller being guilty of a misdemeanor.
For more information, please contact:
Ross E. Hewitt III, CPA
Partner and Director of Tax Services