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Galloway recommends ending sales tax remittance discount, implementing internet sales tax

JEFFERSON CITY, Mo. — An audit of Missouri’s sales and use tax collections found no significant deficiencies, but it recommended the state implement an internet sales tax and alter the timely sales tax remittance discount.

State Auditor Nicole Galloway, a Democrat making a 2020 gubernatorial bid, gave the Missouri Department of Revenue (DOR) a rating of “good” for the 2018 fiscal year sales and use tax operations. Overall, the report found “no significant deficiencies in internal controls, no significant noncompliance with legal provisions, and the need for improvement in management practices and procedures.”

However, the audit noted DOR can’t determine the impact of more than 200 sales and use tax exemptions on state and local revenue because the majority of exemptions aren’t tracked. The state has 214 sales and use tax exemptions but only tracks the fiscal impact for three of them. 

The audit scrutinized the impact of the timely sales and use tax remittance discount given to businesses. State law allows retailers to retain 2 percent of the sales and use taxes collected if they remit the taxes to the DOR within a specific time frame. In FY 2018, that 2 percent totaled about $124 million. 

“As I have done before, I am urging legislators to change the law to limit the discount that benefits the state’s largest retailers. The state must do a better job determining which policies are working and which aren’t,” Galloway said.   

The audit also recommended Missouri charge tax on online purchases made from out-of-state sellers or participate in the Streamlined Sales and Use Tax Agreement.

None of the recommendations fall under the discretion of DOR. All would require action by the General Assembly to implement.