Sergio sits down and simplifies Missouri Use Tax. He also answers if you need to file or not.
Almost everyone knows what sales tax is, you can even ask my kids. In an effort to fight off the spending at Target and the dreaded $1 section (strategically placed just inside the entrance), I used sales tax as a learning experience for my children. My children are fully aware of the dollar section and almost always want something from it. We had previously let them know they should put these things on their birthday or Christmas list, or bring their own money. Well they couldn’t wait for their birthday, so the next time we went to the store they marched in with a $1 in hand. As we got inside the door, they raced to the section and proudly picked something out and announced they were “Buying This!”. Then reality popped their bubble. I slowly and quietly explained to them that the price on the item is $1, but they really need about $1.08 to pay for the item because of sales tax. I then asked them if they brought any other money beside the sole dollar bill in their hand. Needless to say, they learned what taxes are, and are not huge fans.
But what about use tax. Use tax is basically a replacement for sales tax when you buy something from a vendor who does not have a Missouri filing requirement. Hence, the vendor does not charge you sales tax. This does not mean the item is not subject to Missouri taxes. In these instances the customer (i.e. you), is required to self-report and remit tax on the purchase. This is called use tax. This has become a bigger and bigger issue as internet purchases continue to increase.
There is an exemption for use tax. If your total non-taxed purchases, per calendar year, are less than $2,000, you do not “owe” any use tax. If your purchases are greater than $2,000 you should self-report by filing and paying use tax on your purchases.
But what about those purchases under $2,000? Do you need to file a return? While there is no formal requirement, we always suggest that a business should file a use tax return and check the box that purchases were less than $2,00 for the year. Why? When you file a return you have started the statute of limitations. Meaning, if you are selected for a Missouri sales and use tax audit, they can only go back to “open” years (typically three). However, if you have not filed a return, the statute has not started, so technically Missouri could go back to the beginning of your business’ creation and assess tax. They seldom do this, but they typically go back more than the 3 “open” years.
We hope this helps, if you need more information or help with use tax, please contact one of our professionals at 636.498.1900.
All the best,