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Potentially conflicting proposed legislation affecting cities: Implementing Wayfair

Updated: Jun 29, 2022

This legislative session, there are bills in both the House and the Senate that are aimed at implementing what is commonly referred to as the “Wayfair tax.” The name is derived from a 2018 United States Supreme Court decision (South Dakota v. Wayfair, Inc.) that determined that online retailers need not have a “physical presence” in a state to be subject to that state’s sales taxes. This decision subjected companies like Wayfair and Etsy, who conduct their businesses strictly online, to taxation by the states. Since the Supreme Court’s decision, nearly every state has enacted legislation to implement Wayfair, except Missouri. HB 554 and HB 555 are proposed legislation to implement Wayfair in Missouri. However, both bills contain troubling language.

The house bills treat the Wayfair tax as a “new” tax, bringing it within the provisions of the Hancock Amendment, which requires citizens to vote on any new tax before it can be implemented. This is potentially problematic in that it will require cities that currently have use taxes, and therefore have everything they need to collect taxes on internet sales from both in-state and out-of-state retailers, to go back to their voters or risk losing possible additional revenue provided by the scope of the new use tax. Obviously, if municipalities must ask their voters to re-vote on these sales and use taxes, there is always the possibility for confusion and that the tax would not pass. In that case, under HB 554 and HB 555, cities would revert to their current use tax and continue collecting as they do now. HB 555 got off to a slow start, but it is now on the House perfection calendar and will likely pass the House soon. HB 554 has already passed the House. Therefore, if you are concerned about the provisions of these bills, we urge you to contact your Senator immediately.

Conversely, there is a bill pending in the Senate – SB 153 – that does not treat the Wayfair tax as a “new” tax, and therefore, does not require an additional vote on already-approved use taxes. This bill has already passed the Senate, and of the various Wayfair tax bills, SB 153 is the only one supported by the Missouri Municipal League. As it stands now, it appears that it will be a race to the finish line between SB 153, HB 554, and perhaps HB 555. The legislative session ends on May 14, so stay tuned!

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