Situated at the crossroads of America’s heartland, the Show-Me State is celebrated not only for its scenic rivers and rolling hills but also for its dynamic economic landscape. However, maneuvering through the complexities of sales tax in Missouri demands comprehending its unique rules and regulations. Ecommerce businesses must grasp the concept of What is Sales Tax in Missouri to effectively navigate this component of the state’s economic structure.
This guide breaks down everything you need to know about Missouri’s sales tax, from determining the right sales tax rates to understanding exemptions and filing processes. By the end of this comprehensive guide, you’ll be equipped to handle Missouri’s sales tax with confidence and ease.
Sales Tax Nexus in Missouri
When a business creates either a physical or economic nexus, it is required to collect sales tax in Missouri.Physical Nexus
A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax. The factors that determine a physical nexus in Missouri include:- Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business. This includes owning or leasing real or tangible personal property within the state.
- Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
- Employees, independent contractors, agents, or other representatives operating on your behalf for more than 2 days.
- Presence at Trade Show: If you go to a trade show in Missouri for a short time (up to 14 days) and don’t sell anything or take orders, you don’t have to worry about nexus. But if you do start taking orders or making sales, then nexus applies.
Economic Nexus
States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus. Beginning January 1, 2023, the threshold for economic nexus in Missouri for remote sellers is $100,000 in gross in a calendar year. For any remote seller or marketplace facilitator that meets this threshold, they are required to collect and remit vendor’s use tax. In Missouri, use tax is a type of sales tax that is imposed on out-of-state businesses. While the nexus criteria mentioned above generally apply to most businesses, additional methods exist for establishing sales tax nexus. To access a comprehensive list of these rules, please refer to the governing laws for economic sales tax nexus requirements in Missouri.
Missouri Sales Tax on Goods and Services
One of the first things you need to know is whether the goods you’re selling or services you’re offering are taxable in Missouri.Tangible Products
Almost all goods are taxable in Missouri, including:- Cosmetics
- Electronics
- Clothing – Clothing sales in Missouri are usually taxed because they’re considered physical items.
- Furniture
- Jewelry
- Automobiles
- Home Goods
- Groceries – Grocery food is taxed at a reduced rate of 1.225%
- Feminine Hygiene Products – this includes tampons, pads, liners, and cups
- Non-Reusable Items Furnished to Guests in Hotels and Motels – this includes soap, shampoo, tissue and other toiletries in hotel rooms
- Textbooks – Students can buy required textbooks tax-free with proof of enrollment. The bookstore needs a list of books each semester from the school or department. This exemption doesn’t apply to local sales taxes.
- Medical Devices
- Agricultural Supplies – this includes seeds, fertilizers, and machinery used directly in farming
Services
In Missouri, the majority of all service-based transactions, such as professional services, advertising, and cleaning services, are not subject to sales tax. However, there are specific situations where certain services are taxable. For instance, taxable services are:- Admissions to places of amusement, entertainment and recreation, games, and athletic events;
- Utilities like electricity, water, or gas to domestic, commercial or industrial users
- Phone, mobile, and telegraph services
- Hotel stays, restaurant meals, and drinks from places like hotels, diners, and bars
- Transportation services like taxis, rideshares, buses, etc.
Software-As-A-Service (SaaS)/Digital Products
Saas is not taxable in the state of Missouri. Digital products (i.e., ebooks, downloadable video content, mobile apps) are also not taxable.Shipping/Handling
Shipping and handling charges in the state of Missouri are not taxable.Sales Tax Permits and Licenses in Missouri
Now that you’ve got a handle on when sales tax nexus applies and which products are taxable in Missouri, the next important step is getting your Missouri Seller’s Permit, also known as a sales tax permit.Seller’s Permit
You can register for a Missouri sales tax permit online or submit a form by filing the Missouri Tax Registration Application (Form 2643) and emailing it to the State. Ensure you have specific information on hand when registering for a seller’s permit, including, but not limited to:- Business Identification Information (name, address, phone number, email address)
- Business Entity Structure (sole proprietorship, partnership, corporation, LLC, etc.)
- Federal Employer Identification Number (EIN or FEIN)
- Owner/Partner/Officer Information
- Business Activity Details (description of products or services sold, sales volume, date of the first sale or the expected date to start dates)
Resale Certificate
A resale certificate is a document that allows businesses to buy products without paying sales tax on them, as long as they plan to resell those items to customers, who will then pay the tax. As a seller, you can also accept resale certificates from others looking to buy for resale. In Missouri, sellers use resale certificates to buy goods from their suppliers that they intend to resell. The issuance of the certificates is always done in good faith that the seller would report tax on the final sale of the items. You can fill out the Sales and Use Tax Exemption Certificate (Form 149) provided by Missouri if you have a sales tax permit in the state after you receive your sales tax permit. If you don’t want the hassle of registering, sign up for our all-inclusive service that includes sales tax registration.Streamlined Sales Tax (SST)
The Streamlined Sales Tax (SST) is an initiative to simplify and standardize sales tax regulations across multiple states. However, Missouri is not a party to this program, meaning it does not follow the uniform rules and definitions established by SST.Calculating and Collecting Sales Tax in Missouri
Sales Tax Computation
In Missouri, sales tax isn’t just one simple rate; it’s a combination of state and local taxes. To figure out the total sales tax for your calculation, you’ll need to add up the rates for the state, county, and city (if applicable) where your transaction occurs. Use TaxHero’s Missouri Sales Tax Calculator to compute for sales tax. Here’s an example. Suppose an out-of-state seller satisfies the economic nexus criteria in Missouri and sells to a customer in St. Louis, MO, with a ZIP code of 63103. In that case, the seller has to charge the customer a total sales tax, which can be broken down as follows:
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Origin-based vs. Destination-based
When making in-state sales, it is important to determine if you are located in an origin-based or destination-based state to figure out what rate to charge for sales tax. Missouri is an origin-based state, meaning sales tax is determined based on the buyer’s location. That means for a Missouri-based seller, sales tax is generally based on the location of the buyer when selling within the state. For out-of-state or remote sellers, the sales tax rate is always determined by the buyer’s location. For instance, if you’re selling a product from New Jersey to a customer in St. Louis, Missouri, where you have nexus, you’d apply St Louis’ sales tax rate to that sale. To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.Filing and Remitting Sales Tax Returns in Missouri
The next step after collection is filing and remitting your Missouri sales tax returns. Filing and remittance can vary in frequency, typically monthly, quarterly, or annually. It’s crucial to keep accurate records of your sales and tax collections, utilize a Missouri sales tax calculator to ensure accuracy, and adhere to the filing schedule set by the state to remain compliant with Missouri’s sales tax regulations.- Annual filing: For companies who collect less than $200 sales tax per quarter.
- Quarterly filing: If you collect $500 or less in sales tax per month. The quarters are: January-March, April-June, July-September, and October-December.
- Monthly filing: If you’re collecting $500 or more in sales taxes each month.
Due Dates
In Missouri, the due date falls on the last day of the following month. For instance, sales tax collected in January is due by February 28th (or 29th if it’s a leap year) for monthly filers. However, if this day is a holiday, weekend, or in the rare occurrence of a natural disaster, the deadline is typically extended to the next business day. For instance, if you’re a monthly filer and filing sales tax for the month of April, and the May 31st deadline falls on a holiday or weekend, you’ll have until June 1st, the following business day, to submit.Filing Sales Tax Returns
To file your sales tax return for Missouri, a few options are available:- File online through Mytax Missouri. If out of state/remote seller, fill out the vendor’s use tax form online.
- File by mail – You can use Form 53-1 and file and pay through the mail.
- File with TaxHero – Let TaxHero take care of it so you don’t have to worry about missing a payment or return.
Timely Filing Discount
Some states offer a discount to businesses for collecting, filing, and remitting sales tax on time as an incentive to process sales taxes promptly. In Missouri, if you pay your sales tax on time, you get a timely filing allowance of 2% on the sales tax you owe. Here’s how it works: Say you owe $100 in sales taxes. You multiply $100 by 2%, which gives you $2. So, you subtract $2 from your original $100 tax, and now you only have to pay $98. It’s a little reward for paying on time!Sales Tax Holiday
Currently, for 2023 – 2024, the planned sales tax holidays in Missouri are:
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Missouri Sales Tax Penalties
Like in most states, sales tax is a big part of how Missouri generates revenue. Thus, maintaining compliance with sales tax regulations is of utmost importance. Failure to do so can lead to consequences and sales tax penalties. Therefore, it is crucial always to ensure you are up-to-date in filing, collecting, and remitting sales tax to the state. Here are the specific penalties for non-compliance with sales tax regulations in Missouri:- Civil penalties amounting to 5% of the tax due per month or fraction (maximum 25%);
- On the criminal side, offenses can be classified as either misdemeanors or felonies, depending on the severity and specific circumstances.
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