COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:4964H.02P Bill No.:Perfected HCS for HB 2382 Subject:Taxation and Revenue - General; Taxation and Revenue - Sales and Use; Utilities;
Department of Revenue
Type:Original Date:March 21, 2022Bill Summary:This proposal modifies the definition of "sale at retail" for the purposes of
sales taxes on certain purchases of utilities.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2023FY 2024FY 2025
General Revenue
*(Could exceed
$16,073,532)
(Could exceed
$7,468,881)
(Could exceed
$7,468,881)
Total Estimated Net
Effect on General
Revenue
*(Could exceed
$16,073,532)
(Could exceed
$7,980,324)
(Could exceed
$7,468,881)
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025School District Trust
Fund (0688)
*(Could exceed
$5,186,723)
(Could exceed
$2,489,627)
(Could exceed
$2,489,627)
Parks And Soils State
Sales Tax Funds
*(could exceed
$518,673)
(could exceed
$248,963)
(could exceed
$248,963)
Conservation
Commission Fund
*(could exceed
$648,340)
(could exceed
$311,203)
(could exceed
$311,203)
Total Estimated Net
Effect on Other State
Funds
*(could exceed
$6,353,736)
(could exceed
$3,049,793)
(could exceed
$3,049,793)
*The proposal allows for refunds on certain taxes remitted. Current statutes allow for 10 years
of amended returns; however, court decisions limit the refund period to 15 months. Therefore,
FY 2023 represents 15 months’ worth of refunds plus 10 months of current impact from the sales
tax exemption allowed by this proposal. DOR notes prior to April 30, 2021, hotels were able to
request a refund of their utility tax, but based on a decision in a recent lawsuit, they became
subject to the tax. Therefore, if passed DOR notes this would only allow a refund back to May 1,
2021.
Numbers within parentheses: () indicate costs or losses. L.R. No. 4964H.02P
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2023FY 2024FY 2025FTE Changes – DOR*10 FTE0 FTE0 FTETotal Estimated Net
Effect on FTE10 FTE0 FTE0 FTE
*Oversight assumes all of the prior years (10 years) refunds would be processed in FY 2023 –
therefore, DOR would not require the additional FTE beyond FY 2023.
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☐ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Local Government*(Could exceed
$20,902,494)
(Could exceed
$10,033,197)
(Could exceed
$10,033,197)
*The proposal allows for refunds on certain taxes remitted. Current statutes allow for 10 years
of amended returns; however, court decisions limit the refund period to 15 months. Therefore,
FY 2023 represents 15 months’ worth of refunds plus 10 months of current impact from the sales
tax exemption allowed by this proposal.
FISCAL ANALYSIS L.R. No. 4964H.02P
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ASSUMPTION
Section 144.010
Officials from the Department of Revenue (DOR) note this proposal modifies the definition of
“sale at retail” found in section 144.010, and adds a sales tax exemption to section to 144.011,
regarding the purchases of utilities by transient guest accommodations. The utilities exempt
include electricity, electrical current, water and gas used to heat or cool a guest’s
accommodations. Utilities purchased by hotels, motels, and transient accommodation
establishments are currently subject to sales tax, but this proposal would make these utilities an
exemption.
This proposal allows this exemption for the sleeping rooms, meeting and banquet rooms as well
as customer space rented by guests. It should be noted this applies to hotels, motels, bed-and-
breakfasts as they are classified as transient. It is unclear if this exemption would be allowed to
short-term rentals, such as VRBO or Airbnb. If these types of properties are allowed the
exemption, the calculated estimate would be expected to be higher.
The Department found research that indicates the average utility cost for a hotel room is $2,196
per room per year. The Department was unable to determine the current number of sleeping
rooms or conference/banquet rooms in the state but DOR was able to find information on the
number of sleeping rooms (113,371) in the 12 largest cities in the state.
City# Hotel
Rooms
St. Louis40,000 Springfield6,395 Columbia3,600 Jefferson City 1,270 Lake of the Ozarks1,304 Joplin1,497 St. Joseph827 Cape Girardeau801 Kirksville415 Warrensburg412 Kansas City34,000 Branson22,850 113,371
Using these 113,731 rooms DOR was able to calculate the estimated total utility costs per year of
$248,962,716.
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The current state sales tax rate is 4.225% and is distributed with 3% to General Revenue, 1% to
the School District Trust fund, 0.125% to the Conservation Commission and the 0.1% to the
Park, Soil & Water fund. When calculating the local impact DOR uses a 4.03% weighted
average. This proposal is expected to result in a loss of both the state and local sales tax on hotel
utilities.
This proposal has an effective date of August 28, 2022 and therefore DOR estimates only a 10
month impact in FY 2023 from the exemption. DOR calculated the following loss per fiscal
year.
FundTax RateFY 2023 ( 10 month)FY 2024 +GR0.03($6,224,068)($7,468,881)Education0.01($2,074,689)($2,489,627)Conservation0.00125($259,336)($311,203)DNR0.001($207,469)($248,963) Local0.0403($8,360,998)($10,033,197)
This proposal also adds language that allows any person who would be exempt from paying the
sales tax on hotel utilities starting August 28, 2022, to request a refund of the utilities they paid
prior to that date. Prior to April 30, 2021, hotels were able to request a refund of their utility tax
but based on a decision in a recent lawsuit, they became subject to the tax. Therefore, if passed
DOR notes this would only allow a refund back to May 1, 2021.
Therefore, these qualifying establishments could seek a refund from May 1, 2021 to August 28,
2022 (15 months). This refund is projected to be a loss to the following funds:
FundTax Rate
FY 2023
(refunds)
GR0.03($9,336,101)Education0.01($3,112,034)Conservation0.00125($389,004)DNR0.001($311,204) Local0.0403($12,541,496)
While this proposal does not limit when a person could apply for the refund, for the simplicity of
the fiscal note DOR will show all of the refund impact FY 2023.
As noted previously, the projected impact is expected to exceed the estimated amounts due to the
limited number of hotel rooms DOR used in the calculations. Additionally, if short-term rentals L.R. No. 4964H.02P
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are allowed to receive the exemption, DOR would expect an even greater loss of revenue. The
impact is projected:
Estimated Impact by Fund FY 2023*FY 2024 +General Revenuecould exceed($15,560,169)could exceed($7,468,881)Education (SDTF)could exceed($5,186,723)could exceed($2,489,627)Conservationcould exceed($648,340)could exceed($311,203)DNRcould exceed($518,673)could exceed($248,963)Total State Losscould exceed($21,913,905)could exceed($10,518,674) Local Sales Tax Losscould exceed($20,902,494)could exceed($10,033,197)*Assumes all refund claims are received during FY23.
The DOR notes this refund will be claimed on the existing sales tax refund form. DOR notes
that they would need 1 FTE for every 1,100 refund claims received a year. Due to the expected
volume of refund requests, DOR estimates they would start with hiring 10 FTE and add
additional FTE as the number of refund claims increases.
Oversight assumes refunds would be processed in FY 2023 – therefore, DOR would not require
the additional FTE beyond FY23. Oversight will show the abovementioned (10) FTE for
purposes of this fiscal note for FY23 only. If multiple bills pass which require additional staffing
and duties at substantial costs, DOR could request funding through the appropriation process.
Officials from the Office of Administration - Budget and Planning (B&P) note this proposal
would exempt the utilities for transient accommodation establishments from state and local sales
tax. Utilities include electricity, electrical current, water, and gas. Qualifying uses include all
guest accommodations, including sleeping rooms, meeting and banquet rooms, and any other
space rented by guests and are included in the charges made for accommodations.
B&P notes that the last use “included in the charges made for accommodations” could include
any service offered by establishments. Including pools, restaurants, bars, lobby/congregation
areas etc. as long as the cost of the item is included in the price paid by a guest.
B&P further notes that this exemption would apply to hotels, motels, bed-and-breakfasts, as well
as other accommodations classified as transient. It is unclear if this would also apply to Airbnb
or other short-term rentals.
Based on research, B&P determined that the average utility cost for a hotel is $2,196 per room
per year. B&P was unable to determine the total number of hotel rooms in Missouri. However
based on additional research, B&P found that there are more than 113,371 hotel rooms located in
12 largest areas of the state. Table 1 lists the number of hotel rooms for portions of Missouri. L.R. No. 4964H.02P
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Table 1: Hotel Rooms
by City
St. Louis40,000 Kansas City34,000 Branson22,850 Springfield6,395 Columbia3,600 Jefferson City 1,270 Lake of the
Ozarks1,304
Joplin1,497 St. Joseph827 Cape
Girardeau801
Kirksville415 Warrensburg412 113,371
B&P further notes that this number does not include banquet and conference rooms, nor other
services areas that would be exempted under this proposal.
Based on the information above, B&P estimates that this proposal could exempt at least
$248,962,716 (113,371 hotel rooms x $2,196 avg utility cost) from state and local sales tax.
B&P notes that the state sales tax rate is 4.225% and the population weighted local sales tax rate
for 2021 was 4.03%. Therefore, B&P estimates that this proposal could reduce TSR by an
amount that could exceed $10,518,675 annually.
In addition, this proposal would allow qualifying establishments to request a refund for any sales
taxes paid prior to August 28, 2022. B&P notes that business were notified that this sales tax
was due beginning April 30, 2021. Therefore, there could be up to 15 months (April 30, 2021
through August 28, 2022) of refunds allowable under this proposal. For the purpose of this fiscal
note, B&P will reflect all refund claims as occurring in FY23. However, it is possible that
refund claims could occur over multiple fiscal years. Therefore, B&P estimates that qualifying
establishments could request more than $13,148,343 in refunds.
B&P further notes that the exemption would begin August 28, 2022. Therefore, FY23 will see a
reduction for 10 months, in addition to the refund claims for the prior ten years. Based on the
information above, B&P estimates that this proposal could reduce GR by an amount that could
exceed $15,560,170 and TSR by an amount that could exceed $21,913,905 in FY23. In addition,
this proposal could reduce local revenues by an amount that could exceed $20,902,495 in FY23.
Once refund claims have been paid, this proposal could reduce GR by an amount that could
exceed $7,468,881 and TSR by an amount that could exceed $10,518,674. This proposal could L.R. No. 4964H.02P
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also reduce local revenues by an amount that could exceed $10,033,197 once refund claims have
been paid. Table 2 shows the estimated impact by fund.
Table 2: Estimated Impact by Fund FY 2023*FY 2024 +General Revenuecould exceed($15,560,170)could exceed($7,468,881)Education (SDTF)could exceed($5,186,723)could exceed($2,489,627)Conservationcould exceed($648,340)could exceed($311,203)DNRcould exceed($518,672)could exceed($248,963)Total State Losscould exceed($21,913,905)could exceed($10,518,674) Local Sales Tax
Losscould exceed($20,902,495)could exceed($10,033,197)
*Assumes all refund claims are received during FY23.
Officials from the Missouri Department of Conservation state the proposal would have an
unknown fiscal impact but greater than $250,000. The Conservation Sales Tax funds are derived
from one-eighth of one percent sales and use tax pursuant to Article IV Section 43 (a) of the
Missouri Constitution. Any change in sales and use tax collected would affect revenue to the
Conservation Sales Tax funds. However, the initiative is very complex and may require
adjustments to Missouri sales tax law, which could cause some downside risk to the
Conservation Sales Tax. The Department assumes the Department of Revenue would be better
able to estimate the anticipated fiscal impact that would result from this proposal.
Oversight notes that the Conservation Sales Tax funds are derived from one-eighth of one
percent sales and use tax pursuant to Article IV Section 43 (a) of the Missouri Constitution, thus
MDC=s sales taxes are constitutional mandates. Therefore, Oversight will reflect the B&P’s and
DOR’s fiscal impact estimates for MDC’s funds.
Officials from the Department of Natural Resources defer to the Department of Revenue for
the potential fiscal impact of this proposal.
Officials from the City of Kansas City state this legislation would have a negative fiscal impact
in an indeterminate amount on Kansas City.
Officials from the City of Springfield anticipates a negative fiscal impact from this bill but
cannot determine the amount of impact because it has no data regarding the amount of sales that
would become exempt from tax.
Oversight notes the above local political subdivisions stated this proposal would have a negative
fiscal impact on their respective organizations of an indeterminate amount. Therefore, Oversight
will note B&P and DOR’s estimates for local political subdivisions on the fiscal note. L.R. No. 4964H.02P
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Officials from the City of Claycomo assume the proposal will have no fiscal impact on their
organization. Oversight will note B&P and DOR’s estimates for local political subdivisions on
the fiscal note.
Oversight only reflects the responses received from state agencies and political subdivisions;
however, other cities and counties were requested to respond to this proposed legislation but did
not. A listing of political subdivisions included in the Missouri Legislative Information System
(MOLIS) database is available upon request. L.R. No. 4964H.02P
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FISCAL IMPACT – State GovernmentFY 2023
(10 Mo.)
FY 2024FY 2025GENERAL REVENUECosts – DOR §144.010 p. (5) Salaries$219,400$0$0 Fringe Benefits$196,851$0$0 Equipment and Expense$97,112$0$0Total Costs – DOR$513,363 $0$0FTE Changes – DOR10 FTE0 FTE0 FTERevenue Reduction - §144.010 Sales
tax exemption and refunds p. (3-7)
(Could exceed
$15,560,169)
(Could exceed
$7,468,881)
(Could exceed
$7,468,881)
ESTIMATED NET EFFECT ON
GENERAL REVENUE
(Could exceed
$16,073,532)
(Could exceed
$7,468,881)
(Could exceed
$7,468,881)
SCHOOL DISTRICT TRUST FUNDRevenue Reduction - §144.010 Sales
tax exemption and refunds p. (3-7)
(Could exceed
$5,186,723)
(Could exceed
$2,489,627)
(Could exceed
$2,489,627)
ESTIMATED NET EFFECT ON
SCHOOL DISTRICT TRUST FUND
(Could exceed
$5,186,723)
(Could exceed
$2,489,627)
(Could exceed
$2,489,627)
PARKS AND SOILS STATE SALES
TAX FUNDS
FISCAL IMPACT – State Government
(continued)
FY 2023
(10 Mo.)
FY 2024FY 2025Revenue Reduction - §144.010 Sales
tax exemption and refunds p. (3-7)
(could exceed
$518,673)
(could exceed
$248,963)
(could exceed
$248,963)
ESTIMATED NET EFFECT ON
PARKS AND SOILS STATE SALES
TAX FUNDS
(could exceed
$518,673)
(could exceed
$248,963)
(could exceed
$248,963) L.R. No. 4964H.02P
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CONSERVATION COMMISSION
FUND
Revenue Reduction - §144.010 Sales
tax exemption and refunds p. (3-7)
(could exceed
$648,340)
(could exceed
$311,203)
(could exceed
$311,203)
ESTIMATED NET EFFECT ON
CONSERVATION COMMISSION
FUND
(could exceed
$648,340)
(could exceed
$311,203)
(could exceed
$311,203)
FISCAL IMPACT – Local GovernmentFY 2023
(10 Mo.)
FY 2024FY 2025LOCAL POLITICAL
SUBDIVISIONS
Revenue Reduction - §144.010 Sales
tax exemption and refunds p. (3-7)
(Could exceed
$20,902,494)
(Could exceed
$10,033,197)
(Could exceed
$10,033,197)
ESTIMATED NET EFFECT ON
LOCAL POLITICAL
SUBDIVISIONS
(Could exceed
$20,902,494)
(Could exceed
$10,033,197)
(Could exceed
$10,033,197)
FISCAL IMPACT – Small Business
This proposal may impact hotels, motels, or other transient accommodation establishments that
include utility costs in the charge made for such accommodations.
FISCAL DESCRIPTION
The proposed legislation modifies the definition of "sale at retail" for the purposes of sales taxes
on certain purchases of utilities.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Department of Natural Resources
Missouri Department of Conservation L.R. No. 4964H.02P
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Department of Revenue
Office of Administration - Budget and Planning
City of Kansas City
City of Claycomo
City of Springfield
Julie MorffRoss StropeDirectorAssistant DirectorMarch 21, 2022