Missouri Governor Eric Greitens signed 77 pieces of legislation into effect on his last day in office. Among these pieces was a bill on Missouri’s corporate tax rate, meaning changes for Missouri business accounting. The tax rate for corporate companies will decrease from 6.25% to 4.0% beginning in the year 2020.
Besides the decrease, this legislation also:
- requires single-sales factor apportionment
- provides an expiration period for using other apportionment methods
- mandates market-based sourcing for sales of services or intangibles
- revises requirements for consolidated returns
- provides instructions for when a bracket is eliminated from the individual income tax table.
The Apportionment Method for Business Accounting
Starting in 2020, corporations must assign apportionable income to Missouri through a single-sales factor formula. They must multiply total income by a fraction equal to the percentage of sales in Missouri in order to factor their Missouri income. Not included in this formula is the location of property or employees. The legislation eliminates the option to use the Multistate Tax Compact’s three-factor (property, payroll, sales) apportionment method.
Corporations that petition to show their Missouri income by another method have new limitation. If the director of revenue allows another method, they may use that method for no more than five years. However, upon expiration of that period, they may petition to use the same or another method.
Rules for Sourcing
Starting in 2020, if the market for sales is in Missouri, taxpayers must source all sales of services or intangibles to Missouri. Until 2020, Missouri will provide cost-of-performance rules for sourcing those sales, but allows taxpayers to choose market-based sourcing.
Changes in Consolidated Returns
An affiliated group no longer needs to derive 50% or more of its income from Missouri sources to file a Missouri consolidated return. Also, an affiliated group may eliminate transactions between group members from the Missouri consolidated return.
Missourians’ Individual Income Taxes
A reduction in the state’s individual income tax rate was included in a bill that was not signed before the resignation of Greitens. A decision on that piece of legislation, as well as dozens of more bills that remain unsigned, will be decided by Governor Mike Parson.
But, the legislation on corporate taxes provides guidance for when the state eliminates an individual income bracket from the tax table. The top remaining tax rate will apply to all income over the second highest remaining income bracket.
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