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Missouri S.B. 398: Collecting motor vehicle sales tax to become dealer responsibility

Aug 18, 2023

On July 6, 2023, Missouri enacted Senate Bill 398, affecting motor vehicle dealers’ responsibility for collecting sales tax. Even though the effective date of the law is technically August 28, 2023, from a practical standpoint the effective date is “as soon as” the Department of Revenue develops and implements a “modernized integrated system for the titling and issuance of vehicle registrations.”

In other words, this alert is an opportunity for you to get familiar with the rules before the department announces an implementation date in the near future.

What’s changing

S.B. 398 created the “Motor Vehicle Financial Responsibility Verification and Enforcement Fund” as a first step in collecting delinquent sales tax from vehicle owners. Missouri is one of the few states that expects the buyer to pay the full vehicle sales tax along with the titling and registrations fees after the vehicle leaves the dealer’s lot. In nearly all states, these expenses are collected by the dealer.

This practice has led to a shortfall of millions of dollars in uncollected Missouri sales taxes and thousands of unregistered vehicles. Missouri’s plan to shift the sales tax responsibility to dealers will mitigate future delinquencies.

S.B. 398 details the administration of the department’s collection plan and how it will impact vehicle owners and dealers.

FAQs for your dealership

The following questions and answers will help determine whether Missouri sales tax collection requirements will be applicable to your dealership:

Q: What types of Missouri dealers will be obligated to collect Missouri sales tax under this new law?

A: New and used motor vehicle dealers, as well as powersport, wholesale motor vehicle, trailer and boat dealers.

Q: What types of vehicle transactions are affected?

A: Purchased or leased new/used motor vehicles, motorcycles, trailers, boats and outboard motors.

Q: Are residents from states other than Missouri required to pay Missouri sales tax if they travel to Missouri from another state to purchase a vehicle in Missouri?

A: The Missouri sales tax would not be imposed on the purchase of vehicles that are used and registered outside of the state, even if those vehicles are purchased from a dealership located in Missouri. The Missouri sales tax is only applicable to motor vehicles purchased or acquired for use on the highways or waters of this state, which are required to be titled under the laws of the state of Missouri, regardless of whether the buyer lives in Missouri.

Q: Is Missouri sales tax applied to online purchases if the vehicle is located in Missouri at the time of the purchase but ultimately delivered outside of Missouri?

A: No. If the vehicle is delivered and is planned to be registered in a state other than Missouri, the vehicle is not subject to Missouri sales tax. The sale would be sourced to the owner’s state of residence because the title transfers only when the dealer completes its obligations, regarding physical delivery of the property, and thus Missouri tax would not be applicable in the above scenario.  

However, a dealership should evaluate whether it may have economic nexus or physical presence in a state outside of Missouri that would require the dealership to collect the appropriate out-of-state and local sales tax on the transaction.

A dealership should also look at nonmotor vehicle sales (i.e., sales of parts or other merchandise) made outside of Missouri to determine whether a sales tax collection requirement exists.

How Wipfli can help

Wipfli’s professional team will continue to provide updates as Missouri Department of Revenue releases information. Dealers should review their accounting processes and systems so they are able to manage this new responsibility. Our dedicated team of tax consultants understand the nuances of each states’ requirements, and we’re ready to assist your company in mitigating risk and maintaining compliance. If you have any further questions or need assistance in implementing a process, please contact Wipfli.

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Author(s)

Keela Ross
SALT Director
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