Learn About The Tax And Business Climate Of Missouri

Monika Miles

This month we travel to the “Show Me” state of Missouri. The people of Missouri have earned their motto as the “Show Me” state for their very practical skepticism of the fads that sweep other parts of the country. This attitude manifests itself in the state government’s approach to business encouragement and regulation. So, let’s look at the state and see how their approach could help your business.

The state is the 21st most extensive by area and is geographically diverse. North of the Missouri River, the state is primarily composed of rolling hills of the Great Plains and south of the Missouri River, the state is dominated by forests. The Mississippi River forms the Eastern Border of the State, eventually flowing into the swampy Missouri Bootheel.

The agricultural and recreational industries are supported by an abundance of freshwater in the state from the Mississippi River, Missouri River and the Lake of the Ozarks, with numerous small tributary rivers, streams and lakes. As we review below, the freshwater resource supports a robust and diverse industrial and agricultural business base.

Missouri’s culture blends elements from the Midwestern and Southern United States that attracts a diverse group of people. The musical styles of ragtime, Kansas City jazz and St. Louis Blues developed in Missouri. The well-known Kansas City-style barbecue and lesser known St. Louis style barbecue can be found across the state.

Business Climate

Missouri’s farmers produce a wide range of staples for the American and export markets, including beef, soybeans, pork, dairy products, hay, corn, sorghum, cotton, rice and eggs. It is ranked 6th in the nation for the production of hogs and 7th for cattle. It is also ranked in the top 5 states for the production of soybeans and fourth in the nation for the production of rice. Missouri has the second-largest number of farms of any state after Texas.

We cannot discuss Missouri businesses without a nod to St. Louis, a major center of beer brewing. Anheuser-Busch is the largest beer producer in the world and calls Missouri its home.

Not all of Missouri’s resources are above ground. Missouri mines vast quantities of limestone, lead, coal and crushed stone.

But, Missouri is more than agriculture and nature resources to support its businesses. Missouri has a growing science and biotechnology field. Monsanto, one of the largest gene companies in America, is based in St. Louis. Some other large companies based in Missouri that diversify its industrial base include Express Scripts, Emerson Electric, Edward Jones and O’Reilly Auto Parts.

Tax Climate

Missourians are subject to numerous tax brackets and taxable events. Personal income tax in the state is taxed in ten different earning brackets, ranging from 1.5% to 6%.

Missouri’s state sales tax rate is 4.225% and the average local sales tax rate is 3.66%. This yields a combined state and average local sales tax rate of 7.89%, which ranks 14th highest among states levying a sales tax.

The state taxes gasoline at 17.3 cents per gallon, which ranks 47th highest nationally. Its cigarette tax stands at 0.17 cents per 20-pack. This ranks 50th highest nationally.

For businesses, the top corporate income tax rate is 6.25%, which ranks 15th highest among states levying a corporate income tax.

Missouri does not tax all business sales, however. The software industry is a growing sector in the state and is a popular destination for outside companies to sell software products into the state. Software downloaded electronically, whether it is prewritten or custom, is not taxable. Software-as-a-Service is not taxable either. Digital products are also not taxed in the state.

Tax Incentives and Credits

Tax credits provide incentives to support specifically targeted business growth and activities in Missouri. If you are eligible for a tax credit, Form MO-TC must be completed and attached to your tax return. All supporting documentation or additionally required forms, schedules, certifications, etc. must be included with your Form MO-TC and your tax return. Some of these incentives include:

Affordable Housing Assistance Program– This housing production tax credit is used as an incentive for Missouri businesses and/or individuals to participate in affordable housing production. This state tax credit is earned by an eligible donor for the donation of cash, equity, services, or real or personal property to a non-profit community-based organization for the purpose of providing affordable housing assistance activities or market rate housing in distressed communities.

Family Farm Breeding Livestock Program– The Missouri Agricultural and Small Business Development Authority provides Missouri tax credits to Missouri’s lenders who make loans to small farmers for breeding livestock.

Historic Preservation Tax Credit– Missourians believe that preserving Missouri’s history and culture is vital to growing the economy and attracting talent. This program incentivizes developers to maintain the integrity of historic buildings, while giving them new life. Any taxpayer is eligible to participate in this program. Not-for-profit and government entities are ineligible. Any participation by non-for-profit entities, including but not limited to ownership interest, capital contributions, distribution of tax credits, incurrence or payment of rehabilitation expenses, lease to a tax-exempt entity, may result in the reduction of tax credits. Taxes are never simple!

Random Facts

  • Missouri has been called the “Mother of the West” and the “Cave State.” However, Missouri’s most famous nickname is the “Show Me State,” as Missourians are known for being skeptical.
  • Missouri hosted the 1904 Summer Olympics in St. Louis, the first time the games were hosted in the United States.
  • Missouri is home to several American icons from U.S. president
  • Harry S. Truman (1945-1953), storyteller and philosopher Mark Twain and Walt Disney who created the concept of the family friendly theme park. Twain was best known for his stories, The Adventures of Tom Sawyer and The Adventures of Huckleberry Finn, and filmmaker, animator and businessman, Disney spent part of his childhood in Marceline and Kansas City before venturing into the theme park business.

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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