AIM/TRIM Effort on Manufacturing Inputs Sales Tax Exemption and Franchise Tax Elimination Continue to Receive Attention

(March 30, 2007) This week, the House gave first round approval to HB 131, sponsored by Rep. Shannon Cooper (R-120, Clinton, pictured at left). This is the bill we drafted and have championed for the past two legislative sessions that would exempt all manufacturing utilities, chemicals, machinery and equipment used in manufacturing and processing from sales and use taxes. The bill was amended to include several different tax issues, but no problematic amendments were adopted. The bill now includes:

• Railroad rolling stock tax credit;
• Mass transit motor fuel tax exemption;
• Jackson County Sports Authority flow-through sales tax exemption;
• Broadcasting equipment sales tax exemption;
• Federal defense contractor sales tax exemption;
• Temporary storage use tax exemption;
• Flow-through exemption to provide a level playing field for Missouri suppliers on MoDOT contracts;
• Certainty in the taxation of coin-operated amusement devices; and,
  
• A provision requiring DOR to work on new rules for motor fuel tax exemptions and refunds.
  

Under the House rules, the bill was referred to the House Fiscal Review Committee and we prepared an analysis of the fiscal impact of all parts of the bill. The bill will actually generate additional state money through savings in the Highway Fund resulting from the flow-through exemption, while it will cost local governments. The cost to local governments for the bill without considering the MoDOT provision is approximately $5.3 million. The Committee approved the measure and the bill may now receive a final House vote when the legislators return next week.

If approved, the measure will then be sent to the Senate for further consideration. Senator Carl Vogel (R-6, Jefferson City, pictured at left), Chairman of the Senate Ways and Means Committee, has graciously accepted our invitation to handle the bill in the Missouri Senate and we are anxious to bring the bill before that committee for further action.

We will be asking you to contact your Senators when the time is right, so be prepared. In the meantime, if you see your senator or representative, please let them know how important this bill is to manufacturing and associated businesses in the state. We will need much support to get the bill passed in the Senate.

Senator Jason Crowell (R-27, Cape Girardeau, pictured at left) has also introduced SB 585 on this issue. We have provided Senator Crowell with the same language we drafted as a substitute for HB 131 - language that includes the reinstatement of the research and development sales tax exemption that was recently voided by the Missouri Supreme Court in the Emerson case. The bill will be heard by the Senate Ways and Means Committee on Monday, April 2, in Senate Committee Room 1. Also this week, Senator Crowell added this language to the economic development bill, HB 327.

In the same hearing on Monday, the Senate Ways and Means Committee plans to hear testimony on the House version of a plan to phase-out the Missouri Corporation Franchise Tax, also a top legislative priority of the Taxpayers Research Institute and Associated Industries of Missouri. HB 458, sponsored by Rep. Mike Sutherland (R-99, Warrenton, pictured at right), has advanced faster than other bills on this subject and is likely to be the vehicle for the issue this session. The Institute fully supports eliminating this tax and will work to see that the exemption is phased out in a manner that provides tax relief for all franchise taxpayers.