Fri, Mar 31, 2023
Big Sales Tax Changes in Missouri and Kentucky for 2023
It has been more than four and half years since the U.S. Supreme Court’s landmark ruling in South Dakota v. Wayfair drastically altered the extent to which states are permitted to impose a sales tax collection requirement on out-of-state sellers. Prior to the high court’s June 2018 decision, physical presence was the law of the land and companies could have unlimited remote sales into a state and still potentially avoid the responsibility of collecting and remitting that state’s sales tax if the company didn’t have offices, employees or property within the state.
The Wayfair decision cleared the way for states to legally compel companies with no physical presence to be required to register and collect sales tax once certain economic thresholds are exceeded. Many states were quick to act, enacting economic nexus provisions immediately after the Wayfair ruling was issued by the court. By the end of 2021, all states with a sales tax had enacted some type of economic nexus provision, although a few states (like Missouri) pushed the effective date of their new laws into 2022 and beyond.
Missouri’s Economic Nexus Law Effective January 1, 2023
Effective January 1, 2023, Missouri’s economic nexus provision went into effect. Missouri added this new provision by way of an update to its definition of what constitutes engaging in business activities within the state. Per Missouri statute 144.605(2)(e), Missouri’s new rule requires sellers with either 200 separate Missouri sales transactions or more than USD 100,000 in Missouri gross receipts from taxable sales of tangible personal property in the previous or current calendar year to register and collect Missouri sales tax. Therefore, even if the out-of-state business has no physical connection to Missouri, it will still have to collect and remit sales tax if it exceeds the sales thresholds set by the new rule.
The new economic nexus rules in Missouri will have a significant impact on companies that do business in the state, but do not have a physical presence. This is especially true for businesses that were not previously required to collect and remit Missouri sales tax. Those businesses will now have to comply with the new rules and will need to adjust their operations accordingly. To register for Missouri sales tax, dealers can utilize the state’s online registration system or submit Missouri Tax Registration Form 2643.
Kentucky Imposes Sales Tax on Most Services Effective January 1, 2023
In 2022, Kentucky passed House Bill 8 which expands the state’s sales and use tax base by adding a long list of newly taxable services. Below is a non-exhaustive list of services that are subject to Kentucky sales tax, effective January 1, 2023:
- Background checks
- Bodyguard services
- Cosmetic surgery services
- Condo time-share exchange services
- Event planning services
- Executive employee recruiting services
- Facsimile transmission services
- Interior decorating and design services
- Labor and services to commercial refrigeration equipment
- Labor to repair clothing, watches and jewelry
- Lapidary services
- Leisure, recreational and athletic instructional services
- Lobbying services
- Marketing services
- Massage services
- Meeting and event rentals
- Moving services
- Prewritten computer software access services
- Private investigation services
- Private mailroom services
- Process server services
- Recreational camp tuition
- Repossession services
- Research polling services
- Road and travel services
- Security monitoring services
- Specialized design services
- Tattooing and piercing services
- Telemarketing services
- Testing services
- Website design and development
- Website hosting services
The expansion of the services tax base in Kentucky is a significant change that will have an impact on businesses and consumers alike. Businesses that provide services that are now subject to Kentucky sales tax will need to adjust their pricing and accounting practices accordingly. Consumers will also need to be aware of the changes and will likely see an increase in the cost of these services.
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