This month we travel to the “Show Me” state of Missouri. The people of Missouri have earned their motto as the “Show Me” state for their very practical skepticism of the fads that sweep other parts of the country. This attitude manifests itself in the state government’s approach to business encouragement and regulation.
The state is the 21st most extensive by area and is geographically diverse. North of the Missouri River, the state is primarily composed of rolling hills of the Great Plains and south of the Missouri River, the state is dominated by forests. The Mississippi River forms the Eastern Border of the State, eventually flowing into the swampy Missouri Bootheel.
The agricultural and recreational industries are supported by an abundance of freshwater in the state from the Mississippi River, Missouri River and the Lake of the Ozarks, with numerous small tributary rivers, streams and lakes. The freshwater resource supports a robust and diverse industrial and agricultural business base.
Missouri’s culture blends elements from the Midwestern and Southern United States that attracts a diverse group of people. The musical styles of ragtime, Kansas City jazz and St. Louis Blues developed in Missouri. The well-known Kansas City-style barbecue and lesser known St. Louis style barbecue can be found across the state.
Business Climate
Missouri’s farmers produce a wide range of staples for the American and export markets, including beef, soybeans, pork, dairy products, hay, corn, sorghum, cotton, rice and eggs. It is ranked 6th in the nation for the production of hogs and 7th for cattle. It is also ranked in the top 5 states for the production of soybeans and fourth in the nation for the production of rice. Missouri has the second-largest number of farms of any state after Texas.
We cannot discuss the Missouri businesses without a nod to St. Louis, a major center of beer brewing. Anheuser-Busch is the largest beer producer in the world and calls Missouri its home.
Not all of Missouri’s resources are above ground. Missourians mines vast quantities of limestone, lead, coal and crushed stone.
But, Missouri is more than agriculture and nature resources to support its businesses. Missouri has a growing science and biotechnology field. Monsanto, one of the largest gene companies in America, is based in St. Louis. Some other large companies based in Missouri that diversify its industrial base include Express Scripts, Emerson Electric, Edward Jones and O’Reilly Auto Parts.
Tax Climate
The top individual income tax rate is 5.4% and the top corporate income tax rate is 4%.
Apportionment: Missouri taxpayers apportion income tax using a sales formula.
Missouri sources services using market-based sourcing.
Sales Tax Structure
The state sales tax rate is 4.225% and the highest combined rate is 5.375%.
Generally, sales of digital products delivered electronically are not subject to Missouri sales or use tax, provided there is no transfer of tangible personal property to the purchaser. Sales of prewritten (canned) computer programs delivered electronically are not subject to sales and use tax. Sales of custom computer programs are not subject to sales tax regardless of the method of transfer because the true object of the transaction is the provision of a service. Missouri does not impose sales and use tax on sales of software as a service. How products are produced, sold and delivered is critical to determining the tax status.
Missouri has an economic nexus law where if an out of state seller sells $100,000 into the state, sellers need to collect and remit sales tax on those transactions. This applies to sales in the current or previous calendar year, determined quarterly. Transactions that are included in the threshold include gross receipts from taxable sales of tangible personal property delivered into the state. Excluded transactions include exempt sales. This legislation goes into effect on January 1, 2023.
A marketplace provider that makes or facilitates more than $100,000 in the state in the current or previous calendar year (determined quarterly) must collect and remit sales tax on behalf of its third-party sellers. This requirement does not apply to certain advertising services, travel agency services, or third-party payment processors. Although marketplace sellers are relieved of the duty to collect or remit sales tax on sales made through a collecting marketplace, they may still be required to register with the state and report all Missouri sales. This legislation goes into effect on January 1, 2023.
Many states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. Missouri has a sales tax holiday from the first Friday in August and ending on the following Sunday. Purchases of clothing, school supplies, computers and certain other items defined by statute are exempt from sales tax for this time period only. Only purchases for personal use qualify. For more information on the sales tax holiday, click here.
Our team at Miles Consulting Group is always available to discuss the specifics of your situation, whether in Missouri or other U.S. States, and help you navigate the complex tax structures arising from multistate operations. Call us to help you achieve the best tax efficiencies.
Random Facts
- Missouri has been called the “Mother of the West” and the “Cave State.” However, Missouri’s most famous nickname is the “Show Me State,” as Missourians are known for being skeptical.
- Missouri hosted the 1904 Summer Olympics in St. Louis, the first time the games were hosted in the United States.
- Missouri is home to several American icons from U.S. president Harry S. Truman (1945-1953), storyteller and philosopher Mark Twain and Walt Disney who created the concept of the family friendly theme park. Twain, best known for his stories, The Adventures of Tom Sawyer and The Adventures of Huckleberry Finn, continues to be required reading in elementary and college classes. Filmmaker, animator and businessman, Disney spent part of his childhood in Marceline and Kansas City before venturing into the theme park business.
- Soybeans bring in the most cash for Missourians as a crop.
- The highest point of elevation is Taum Sauk Mountain at 540 meters (1,172 feet).
