Legislators in support of the bill believe the state could be losing more than $40 million in general revenue, since Missouri does not currently have a mechanism to effectively collect a tax on Internet sales.
Legislative staff estimates are unsure about the precise impact joining the agreement would have on Missouri's general revenue. Former Missouri representative Mike Sutherland gave a "conservative" estimate of a $20 million increase in revenue for the state. However, Sutherland said it is possible the state could bring in around $200 million in revenue, but it is unlikely that the state would see any major difference in revenue within the first year due to a lag in the process of joining the compact.
The House Tax Reform Committee hearing held Wednesday was a mirror image of its predecessor last year, with two bills presented allowing Missouri to join in an agreement with other states over Internet sales tax policy. The agreement is a collection of states whose purpose is to reform state tax policy in order to make them more consistent, according to the Streamlined Sales Tax Governing Board, which is in charge of the compact.
Committee chair Doug Funderburk, R-St. Peter's, said joining the agreement would create a level playing field for Missouri business.
"Sales tax revenue is the life's blood of many of our cities and municipalities," Funderburk, one of the sponsors, said. "This would eliminate the competitive disadvantage other states have (over Missouri)."
Funderburk said he hoped to hold a committee vote on the bills next week and that he was working on a substitute for his bill that would make joining in the compact revenue neutral for the state, but not local governments. This would allow the legislature to consider lowering the sales tax, Funderburk said, but the changes are still under consideration.
So far, 24 other states have joined together in the agreement including some of Missouri's neighboring states such as Kansas and Iowa. One of Missouri's U.S. senators, Roy Blunt, is currently part of a bi-partisan effort in Washington D.C. to create a similar agreement at the federal level, which, if adopted, would supersede the current agreement among the states.
"This is a chicken and the egg kind of process, and someone has to go first," former Iowa Speaker of the House Christopher Rants said. "So far, the 24 other states have gone first."
Rants, a registered lobbyist, also said the committee should look past the impact the bill would have on big companies and think about how it would affect Missouri's smaller businesses, saying they deserved a "competitive marketplace."
Rep. Margo McNeil, D-St. Louis County, is the sponsor of a second bill proposing the same agreement. Funderburk said the effort to have Missouri join the compact is bi-partisan and that his bill is identical to McNeil's.
As part of the agreement, Missouri would pay TaxCloud, a certified service provider, a rate equal to what other member states pay from the new source of Internet sales revenue. The provider would act as an intermediary between the state and participating companies, providing audit protection for businesses while keeping track of the numerous sales tax rates around the state, all of which vary by city, county and other area divisions.
Both sponsors said their legislation was not creating a new sales tax or altering the state's tax code outside of creating a mechanism for the state to collect money that it, so far, has been unable to receive.
Missouri's General Assembly has debated joining the compact over the past few legislative session but without results. Although House and Senate committees approved the proposal two years ago, it did not receive a chamber vote. During last year's session, the proposal was passed through a House committee, but no further action was taken, effectively killing the bill.
Similar to last year, no testimony was presented in direct opposition to the measure. Funderburk said there is no organized opposition effort, but that he believes any opposition to the bill stems from his colleagues not understanding that the bill does not create a new sales tax.
Funderburk said his plan for the bill was to "break the ice" during the 2011 session and then educate his fellow legislators this session before making a full effort to pass the bill next year. However, Funderburk said the process had been moving quickly on the legislation and he expects to bring it before the House chamber soon.