JEFFERSON CITY, Mo. — With a few changes to Missouri statute, the law regarding taxation on vehicle sales will be clearer and “right the status quo,” according to those who testified before a House committee.
On Tuesday, the House Ways and Means Committee took public testimony on HB 1, sponsored by GOP Rep. Becky Ruth. In the 45-minute hearing, roughly half a dozen people spoke in favor of the measure at the center of the extraordinary session.
“I believe House Bill 1 will provide clarity to the citizens of Missouri,” Ken Zellers, acting director of the Department of Revenue (DOR), said.
At issue is state statute regarding the trade in of a vehicle — including cars, boats, or motors — and whether Missourians could credit proceeds of multiple vehicles sold against the purchase of a new one.
The Missouri Supreme Court ruled in June that the statute “unambiguously permits the sale proceeds of only one vehicle to reduce the purchase price of a newly purchased vehicle for the purposes of calculating sales tax.” This meant the court interpreted the statute to be a “one-for-one” sort of deal when trading in a vehicle for another and using that credit to offset some of the cost.
Before the ruling, individuals could trade in multiple vehicles when purchasing a new vehicle and only pay sales tax on the balance difference. After the ruling, people could only subtract the value of one vehicle against the cost of a new vehicle when computing sales tax.
Following the ruling, Gov. Mike Parson called lawmakers into a special session to handle the issue.
HB 1 would solidify in state statute that more than one vehicle trade in can be computed against the cost of a new vehicle when computing sales tax. Those seeking to utilize the provision would still have a 180 day window before and after the purchase of the new vehicle to offset the sales tax owed.
“By passing this legislation those people impacted by [the Missouri Supreme Court] ruling would still be able to take advantage of the 180 day [period] and receive the refund due to them,” Ruth told the committee. “In addition, if we wait, those people being impacted would not be able take that credit and offset the sales tax like those before them and possible those after them, which could set up for more lawsuits.”
And it’s not just cars and trucks that fall under that statute — it is boats, motorcycles, and more.
“It definitely affects us,” Jeremy Anderson, general manager of Big Thunder Marine and a board member of Lake Ozark Marine Dealer Association, testified.
He noted the way boats are titled complicate this issue. A boat will have its own title, an outboard engine will have a title, and a boat trailer will have a title.
“We will take in three — a boat, an outboard, and a trailer — and they might trade it in on one inward boat, which has one title. So, we are not able to give them the full trade value for their entire trade in,” Anderson said.
DOR estimated there are about 14,000 transactions annually that involve multiple vehicles being traded in. Without the passage of legislation, those people would collectively pay up to $3 million more in taxes per year, according to the fiscal note.
Democrats, who have voiced opposition to the issue being the subject of special session, expressed concern during the hearing. Rep. Sarah Unsicker was unsuccessful in adding an amendment that would limit the measure to individuals and businesses with fewer than 12 employees.
Ultimately, HB 1 passed the Ways and Means Committee with a 6-4 vote; GOP Rep. Shane Roden joined the Democrats in voting no. The bill passed Rules – Legislative Oversight with a 6-3 vote Tuesday afternoon and now moves to the House floor for discussion.