Missouri lawmakers send fewer tax changes to Gov. Nixon

JEFFERSON CITY, Mo. -- The Republican-controlled Legislature sent narrowly targeted tax-code changes to Gov. Jay Nixon this year hoping to avoid a repeat of last year, when the Democrat vetoed numerous tax measures he said were special-interest giveaways not accounted for in the budget.

Nixon's veto pen also might get a rest because lawmakers failed to pass some of the larger tax exemptions he criticized last year, including one for utilities, before the session ended Friday.

And the measures they passed -- such as a fuel tax exemption for watercraft -- were more narrowly tailored.

Sen. Will Kraus led a committee that met over the summer to hear from businesses, individuals and accountants about the state's tax code.

He said the legislative session was a success in terms of tax measures that would rein in decisions by the courts and the Department of Revenue to collect sales taxes on items that were previously exempt. He also said veto overrides could be easier this year.

"If you look at what we passed this year, it was primarily protecting taxpayers from our own Department of Revenue's overreach," the Lee's Summit Republican said Wednesday. "It was a pretty successful session... there's always things that don't get done, but there's always next year."

Nixon already has signed the priciest tax-related measure that got to his desk: Extending an option for calculating corporate income tax to technology and service-based businesses, such as H&R Block and Cerner, which testified in support of the bill.

The measure initially was part of last year's tax-overhaul bill, but Nixon said the estimated $15 million cost was not accounted for in general revenue and needed more public discussion.

Nixon said the bill's costs still aren't dealt with in the budget. He said he signed it because it clarifies tax law and levels the playing field for technology and service-based businesses, but warned it may require him to withhold more revenue from next year's budget.

"I don't know what all they did today," Nixon said Friday after lawmakers adjourned. "I assume they did some things today that are not free."

Nixon is considering other tax-policy changes approved by lawmakers in separate, narrowly tailored bills rather than in one omnibus bill.

One would require the Department of Revenue to notify businesses when changes are made to tax policies that will allow the department to start collecting sales tax on previously exempt services or products.

Another bill would grant a sales tax exemption for commercial laundries.

Lawmakers also passed sales tax exemptions for mandatory gratuities, aircraft purchased by non-Missouri residents, manufactured homes, and fuel for boats.

Another bill sent to Nixon would require employers to withhold income taxes only from employees' reported cash tips.

Some of the bills came amid the fallout of the Senate shutting down during the Legislature's final week over the forced passage of a contentious right-to-work bill.

The House stripped amendments off several Senate measures before sending them to the governor Friday.

Observers also noted a change in House committee structure made it more difficult to tack on additional provisions.

The slowdown in the Senate also doomed some of the costliest measures vetoed by Nixon last year.

Those measures included exemptions for equipment purchased by utilities to transmit power, which had a price tag of $25 million; fitness and gymnastics classes, $26 million; and equipment and utilities used by grocery stores and other retailers to prepare food, which would have cost $10 million.

Supporters questioned the estimated costs of those exemptions, saying they would again push for their passage next year.

The exemptions for commercial laundries and fitness classes are being sought by groups that say the Department of Revenue only recently has begun collecting taxes on their services. Republicans dub the department's practice "notification by audit" and are pushing to end it.

"It will at least stop the practice of surprising business owners with the erroneous tax policy that they're using," said Rep. Eric Burlison, R-Springfield. "It's not going to stop them from creatively changing tax policy, but at least it will stop them from notifying businesses while they're being audited."