Show Me the money...Tax refunds available to Missouri businesses

by Karen E. Culp

SBJ Staff

Missouri businesses that paid a local use tax are entitled to refunds after a Jan. 27 Missouri Supreme Court decision found the statute that created the tax to be unconstitutional.

Businesses may request refunds for the past two years, but taxpayers requesting refunds through December 1995 had until Jan. 30 to file for that year's refund. To receive a refund, businesses must file form 472-B with the Missouri Department of Revenue, said Jay Wunderlich executive director of the Taxpayers Research Institute of Missouri.

The local use tax was instated in 1991 in order that municipalities in the state of Missouri could impose a use tax of 1.5 percent, said Kay Dinolfo, spokeswoman for the Department of Revenue. The use tax was imposed on out-of-state purchases, and was usually paid by larger taxpayers, Dinolfo said, such as businesses.

"The state collected those funds and then distributed them back to the cities and counties," Dinolfo said.

As soon as the tax was instated, Associated Industries of Missouri began to issue warnings to municipalities to place in escrow the tax money because of an impending lawsuit it had filed. That original lawsuit was Associated Industries of Missouri vs. Director of Revenue.

The Department of Revenue also issued warnings for municipalities to place in escrow the use tax revenue, Wunderlich said.

When the initial AIM case was appealed to the Missouri Supreme Court the first time, the court upheld the statute that created the use tax as constitutional, according to the opinion handed down by Supreme Court Judge Stephen N. Limbaugh Jr.

AIM's argument was predicated on the fact that the use tax, with its 1.5 percent rate, was higher than the sales tax in 115 municipalities in Missouri. However, the court ruled that since the statewide burden of use tax was less than the statewide burden of local sales taxes, the statute would stand.

The United States Supreme Court then reversed the Missouri decision, rejecting the Missouri Supreme Court's statewide-burden approach, the opinion said. The Supreme Court did not consider a specific remedy but remanded the case to the Missouri Court for further proceedings.

Missouri then vacated its prior mandate and remanded the case to Cole County Circuit Court, which again ruled the tax was constitutional. On appeal, the Missouri Supreme Court held that the law could not be "constitutionally applied as written."

Following this decision, the director of revenue asked for an agreement with municipalities to reimburse the director for the refund money if the local use tax was found unconstitutional and refunds were required.

A number of political subdivisions "refused or otherwise failed to execute the required agreements," the opinion states, so the General Assembly provided that the director could withhold future distributions to account for those funds, in the event the tax was found unconstitutional.

The conclusive ruling on this case held that the director must provide refunds for payments made prior to the decision in the 1996 AIM case. The director may also withhold amounts otherwise due to political subdivisions to cover the expenses of the refunds, if necessary.

So far, the director has received about 10,224 applications for refunds, Dinolfo said. The total amount of money to be refunded, if requests are made for all of it, would be $143.7 million. [[In-content Ad]]