Report No. 2010-06
January 2010
Complete Audit Report

The following findings were included in our audit report of the Department of Revenue, Sales and Use Tax Collections.

The Department of Revenue (department) does not track and report information regarding all sales and use tax exemptions. As a result, the cost in terms of reduced state revenue for each exemption cannot be determined. In addition, the department does not routinely report the amount of timely discounts taken by businesses to the General Assembly for its consideration. State law allows businesses remitting sales and use taxes to retain 2 percent of taxes payable to the department if the business remits payments in a timely manner. According to a November 2008 report, 26 of 46 states that impose state sales taxes allow businesses a discount and/or compensation for recording and remitting sales tax collections. However, Missouri is one of only 13 states that has not established a ceiling to limit the amount of taxes businesses are allowed to retain. Of the eight contiguous states, three do not allow businesses to retain any compensation, and four have established ceilings. These discounts reduce the amount of sales and use taxes received by the state and local governments. Approximately $93 million and $92 million in state and local sales tax revenues were collected from purchasers but retained as timely discounts by businesses remitting sales and use taxes in fiscal years 2008 and 2007, respectively. Effective July 1, 2010, House Bill No. 683 allows motor vehicle dealers to collect motor vehicle sales taxes from customers and retain 2 percent of the taxes collected. The law did not establish a ceiling to limit the amount of taxes withheld. In fiscal year 2008, approximately $254 million and $34 million in motor vehicle sales taxes were collected and remitted to state funds and local political subdivisions, respectively.

State law does not require vendors to return sales and use tax refunds and related interest to the original purchaser when applicable, resulting in a windfall for the vendor. State law authorizes the department to issue sales and use tax refunds due to an overpayment of sales or use taxes. The department distributed sales and use tax refunds, including interest, of approximately $69 million and $88 million, during fiscal years 2008 and 2007. It should be noted that for some refunds the vendor is the original purchaser, some are the result of taxpayer errors and estimates, and in other circumstances the sales and use taxes were not collected from a purchaser, and as a result, refunds should be retained by the vendor. In addition, the General Revenue Fund does not receive reimbursement from local funds for their proportionate share of interest paid on refunds of sales and use taxes.

The department has not developed procedures to adequately monitor the department's regional tax assistance centers.

Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov