GOV. NIXON SIGNS BILL INCREASING DEPT. OF REVENUE ACCOUNTABILITY

JEFFERSON CITY, Mo. — Gov. Jay Nixon signed Senate Bill 18 into law today, requiring the Missouri Department of Revenue (DOR) to notify businesses of changes in tax law interpretation.

Bill sponsor Sen. Will Kraus (R-Lee’s Summit) said the law will help remedy the problem of DOR’s inconsistency in enforcing tax laws.

“Essentially, DOR has been practicing notification by audit,” Sen. Kraus said. “The department will interpret a tax law differently than it has in the past, or a court decision changes the way a tax law is interpreted. However, businesses are never notified that they should now be collecting more sales tax.”

Kraus learned about the practice of notification by audit when a constituent and owner of a Lee’s Summit gymnastics studio came to him. The DOR audited the studio, and the owner was informed he owed a large amount of back taxes. For years, the gym was not required to collect sales tax on lessons offered. However, when the studio was audited in 2012, the DOR applied tax laws differently by categorizing the studio as a place of recreation, which required more sales tax collection than the business’ previous designation. DOR never informed the owner of the changes, so he never made adjustments to the amount of sales tax collected.

Stories such as this one prompted Kraus to request the formation of a Senate interim committee tasked with studying Missouri’s tax administration practices. After conducting public hearings throughout the state and with the director of DOR, the committee produced a dozen recommendations for the legislature to update and clarify the tax code and improve tax administration practices.  These recommendations included clarifying the ambiguous business category of ‘recreation’ responsible for many of the complaints to the committee, and creating an Office of the Taxpayer Advocate.

“Based on conversations I’ve had with citizens and business owners throughout the state, the Department of Revenue is not being fair or consistent in enforcing tax laws,” Kraus said. “Senate Bill 18 is just one of many fixes needed to keep the DOR accountable.”

In addition to SB 18, the governor also signed House Bills 517 & 754 and House Bill 616 which were carried by Sen. Kraus in the Missouri Senate.  These bills contain several components including provisions that make it easier for businesses to operate in our state to helping taxpayers receive tax refunds in a shorter period of time.

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