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Missouri Senate Bill 87 Makes Significant Changes to Sales and Income Tax Law

July 19, 2019

Passed by the Missouri legislature and signed into law on July 11, 2019, Senate Bill 87 (SB 87) modifies and adds several provisions related to Missouri taxation. Specifically, the bill made revisions and additions that will impact sales and income tax for many businesses. SB 87 will go into effect on August 28, 2019.

Sales Tax Provisions

SB 87 added section 144.088, RSMo, which requires any seller who provides a sales receipt or sales invoice to a purchaser to include on sales receipts or invoices the total rate of all sales tax imposed on the sale. This total rate must include and specifically spell out all applicable state and local sales taxes. This provision applies to any seller with more than $500,000 in goods or services sold per year.

SB 87 also modified section 144.190, RSMo, regarding refunds for erroneously paid taxes. Current law allows a taxpayer to receive a refund for any tax, penalty or interest that has been paid more than once or has been erroneously or illegally collected or computed, provided a claim for refunds is filed within three years from the date of overpayment. This section has been modified to extend the statute of limitations from three years to 10 years.

Income Tax Provision

The legislative changes for income tax are a reaction to the federal tax reform. The Tax Cuts and Jobs Act amended Internal Revenue Code (IRC) Section 163(j) to set a new limitation on deductible interest expense for tax years beginning on or after January 1, 2018.  Any interest expense limited under 163(j) is carried forward indefinitely and will be deducted to the extent the interest expense falls below the limit imposed by 163(j).

Missouri SB87 includes language decoupling the Missouri state tax code from the IRC regarding the 163(j) interest deduction limitation. The new provision provides, for all tax years beginning on or after January 1, 2018, interest expense is subtracted only in the first taxable year the deduction would have been allowable if the limitation did not exist. Interest expense paid or accrued in the current taxable year, but not allowed as a deduction for federal tax purposes, will be subtracted for Missouri tax purposes. Interest expense paid or accrued in a previous taxable year but allowed as a federal carryforward deduction in the current taxable year, will be added back for Missouri tax purposes.

Although the 163(j) decoupling language applies to tax years beginning on or after January 1, 2018, the law is not effective until August 28, 2019.

For more information on how these modified tax provisions may impact you or your business, contact our experts.

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