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Small business owners ask Senate committee for help with Department of Revenue

  

Saint Louis, Mo. — Two small business owners told the interim Senate committee on Tax Administration Practices that contradictory instructions from Missouri’s Department of Revenue could drive them out of business, fanning growing legislative ire with the state’s tax collector.

Heather Terry and her husband, Nick, told the committee that there were subject to an audit that took nearly two years had just recently came to an end. At the end of the audit, DOR told the Terrys that they needed to begin collecting sales taxes at their business, as well as foot the bill for uncollected sales taxes now owed to the state.

The Terrys operate a competitive cheerleading business called “Flipside Too.” Under Missouri law, the business is not required to collect sales taxes, but DOR’s audit decided differently. They told the Terrys they had to collect sales tax, which amounts to the couple charging about 10 percent more than their competitors, they say.

Sen. Will Kraus, Chairman
Sen. Will Kraus, Chairman

But when Heather Terry discovered that their competitors, as well as similar businesses like gymnastics, were not required to collect the tax, she began calling the department. Heather Terry eventually got word in writing from a DOR official that, in fact, her business did not need to collect a sales tax. But under legal advice, she has continued to do so, saying she’s worried about more audits or legal action from DOR.

“People see me charging this, and the other competitors aren’t, and they assume I’m pocketing the money or something,” Heather Terry said. “It just doesn’t seem fair to me that I’m forced to charge more, and when you’re a small business like mine, you can’t afford to lose those customers.”

The Terrys say their business has declined about 20 percent since they’ve begun charging higher prices. They also told committee members that they weren’t necessarily against charging the higher rate, but that they didn’t want to if gave their competitors an unfair advantage.

“I’m just tying to understand what we need to do,” Nick Terry said during his testimony. “It seems like it should be more clear what we are supposed to do, because we’re getting a different answer from one place and then a different answer from another.”

A bill before the legislature last year, Senate Bill 584, contained language specifically exempting businesses like personal trainers, gyms, and other fitness-related activities from charging a sales tax. Rep. Eric Burlison, R-Springfield, sponsored language in the House and his fellow Springfield-area Republican, Sen. Bob Dixon, sponsored the bill in the senate.

Had the bill passed, the state statute on charging sales taxes for activities like competitive cheerleading would have clearly exempted the Terrys. However, the bill was eventually loaded down with a sweeping array of tax exemptions for other industries on the final days of session. Gov. Jay Nixon vetoed the bill a few weeks later, calling it one of the “Friday Favors” bills that jeopardize state funds.

The committee is scheduled to meet one final time on September 10 where Sen. Will Kraus, chairman, says he expected DOR to be in attendance to answer concerns from the senators. He also said that if DOR declined to testify, he would speak with Senate Pro Tem, Tom Dempsey, about issuing a subpoena. Kraus said he was happy the Terrys came to testify so that lawmakers could begin making calls to DOR immediately on their behalf.