COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:1303S.01I Bill No.:SB 185 Subject:Taxation and Revenue - Sales and Use; Utilities Type:Original Date:February 17, 2025Bill Summary:This proposal authorizes a sales tax exemption for certain broadband
equipment.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2026FY 2027FY 2028
General Revenue
Could exceed
($2,073,994)
Could exceed
($4,977,586)
Could exceed
($4,977,586)
Total Estimated Net
Effect on General
Revenue
Could exceed
($2,073,994)*
Could exceed
($4,977,586)
Could exceed
($4,977,586)
*Oversight notes the fiscal impact for FY2026 is lesser because FY2026 is a partial year (5
months).
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028School District Trust
Fund (0688)
Could exceed
($691,331)
Could exceed
($1,659,195)
Could exceed
($1,659,195)
Conservation
Commission Fund
(0609)
Could exceed
($86,416)
Could exceed
($207,399)
Could exceed
($207,399)
Parks and Soils State
Sales Tax Fund(s)
(0613 & 0614)
Could exceed
($69,133)
Could exceed
($165,920)
Could exceed
($165,920)
Total Estimated Net
Effect on Other State
Funds
Could exceed
($846,881)*
Could exceed
($2,032,514)
Could exceed
($2,032,514)
*Oversight notes the fiscal impact for FY2026 is lesser because FY2026 is a partial year (5
months).
Numbers within parentheses: () indicate costs or losses. L.R. No. 1303S.01I
Bill No. SB 185
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February 17, 2025
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on FTE 000
☒ 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 2026FY 2027FY 2028Local GovernmentCould exceed
($3,083,338)*
Could exceed
($7,400,011)
Could exceed
($7,400,011)
*Oversight notes the fiscal impact for FY2026 is lesser because FY2026 is a partial year (5
months). L.R. No. 1303S.01I
Bill No. SB 185
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February 17, 2025
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FISCAL ANALYSIS
ASSUMPTION
Section 144.812 - Sales and Use Tax Exemption for Certain Broadband Equipment
Officials from the Office of Administration - Budget and Planning (B&P) note beginning tax
year 2026, this proposal would exempt all machinery and equipment used to provide broadband
from state and local sales/use tax. B&P notes that this proposal would include equipment used at
the broadband service provider (such as software and hub equipment), equipment used outside
(such as fiber and poles), and equipment used within a customer’s house (such as modems).
B&P is unable to determine exactly how much is spent each year to provide broadband internet
service. However, B&P does have data on the amount of federal grants received by broadband
providers since 2019. Based on industry research, labor accounts for approximately 60% of
broadband production costs.
For the purpose of this fiscal note, B&P will use federal grant data to estimate the potential sales
tax loss. However, B&P notes that this is only partial data and does not account for continuing
costs faced by service providers running networks. Therefore, it is likely that the actual impact
will exceed (maybe significantly) the impacts estimated below.
Based on multiple sources, B&P was able to determine the following federal grants were
awarded to Missouri broadband providers. B&P then split the grants between labor (60%) and
equipment (40%).
Table 1: Estimated Broadband GrantsTax
YearFederal GrantsEst. LaborEst. Equipment
2019$30,301,421 $18,180,853 $12,120,568 2020$137,577,527 $82,546,516 $55,031,011 2021$39,629,766 $23,777,860 $15,851,906 2022$94,975,079 $56,985,047 $37,990,032 2023$364,829,766 $218,897,860 $145,931,906 2024$457,790,308 $274,674,185 $183,116,123 2025$421,776,466 $253,065,880 $168,710,586 2026$395,565,663 $237,339,398 $158,226,265
B&P notes that total investment amounts for 2026 and later are not yet known. Therefore, for
tax year 2026, B&P will reflect the potential loss as the range between current known grants and
the highest amount awarded (TY 2024). For tax years 2027 and later, B&P will reflect a range
between the lowest (TY 2019) and highest (TY 2024) grant years. L.R. No. 1303S.01I
Bill No. SB 185
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Using only the portion of the federal grants used on the purchase of equipment (i.e. 40%), B&P
estimates that this proposal could exempt between $158,226,265 and $183,116,123 in taxable
sales during calendar year 2026. For calendar years 2027 and beyond, B&P estimates that this
proposal could exempt $12,120,568 to $183,116,123 from taxable sales annually. Table 2 shows
the estimated impact by calendar year.
Table 2: Estimated Sales Tax Loss by Calendar Year CY 2026CY 2027 +State FundsLowHighLowHighGeneral Revenue($4,746,788)($5,493,484)($363,617)($5,493,484)Education($1,582,263)($1,831,161)($121,206)($1,831,161)Conservation($197,783)($228,895)($15,151)($228,895)DNR($158,226)($183,116)($12,121)($183,116)Total State
Revenues($6,685,060)($7,736,656)($512,095)($7,736,656)
Local Funds Local Sales Tax($7,056,891)($8,166,979)($540,577)($8,166,979)
Based on historical sales tax data, sales tax collections in a calendar year are split 50/50 between
fiscal years, with revenue distributions running one month behind collections. Therefore, B&P
estimates that this proposal could reduce TSR by and amount that could exceed $2,785,442 to
$3,223,607 in FY26. In future years, this proposal could reduce TSR by an amount that may
exceed $512,095 to $7,736,656 annually. Table 3 shows the estimated impact by fiscal year.
Table 3: Estimated Sales Tax Loss by Fiscal Year FY 2026FY 2027State FundsLowHighLowHighGeneral Revenue($1,977,828)($2,288,952)($363,617)($5,493,484)Education($659,276)($762,984)($121,206)($1,831,161)Conservation($82,410)($95,373)($15,151)($228,895)DNR($65,928)($76,298)($12,121)($183,116)Total State
Revenues($2,785,442)($3,223,607)($512,095)($7,736,656)
Local Funds Local Sales Tax($2,940,371)($3,402,908)($540,577)($8,166,979)
Officials from the Department of Revenue (DOR) note This will provide a sales tax exemption
for all machinery and equipment used to provide broadband communication services. DOR is
unable to determine how much of the product outlined in this proposal is sold annually in
Missouri. L.R. No. 1303S.01I
Bill No. SB 185
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February 17, 2025
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DOR, however, can find data on the amount of federal grants received by broadband providers.
Below is a chart of the federal grants received in Missouri and split between labor costs and
estimated equipment costs. Based on additional research DOR knows that about 60% of
broadband production costs is labor. Therefore, the department assumes the grants are split as
follows:
Table 1: Estimated Broadband GrantsTax
YearFederal GrantsEst. LaborEst. Equipment
2019$30,301,421 $18,180,853 $12,120,568 2020$137,577,527 $82,546,516 $55,031,011 2021$39,629,766 $23,777,860 $15,851,906 2022$94,975,079 $56,985,047 $37,990,032 2023$364,851,264 $218,910,758 $145,940,506 2024$457,790,308 $274,674,185 $183,116,123 2025$421,776,466 $253,065,880 $168,710,586 2026$395,565,663 $237,339,398 $158,226,265
DOR notes that these grants are given to install and create a broadband network. It should be
noted that these networks will take ongoing maintenance in future years. Therefore, any impact
projected estimate could be exceeded.
DOR notes that the amount of funding spent on broadband in the future is unknown. As shown
above the amount of funding can vary widely year over year. For the fiscal note, DOR will show
the impact for each year as the lowest year (2019) to the highest year (2024) of grants received in
Missouri.
The exemption will begin on January 1, 2026. Using the data above DOR estimates the impact
as follows:
Estimated Sales Tax Loss by Tax Year
TY 2026 + LowHigh Est. Investment$12,120,568 $183,116,123 General Revenue3%($363,617)($5,493,484)School District1%($121,206)($1,831,161)Conservation0.125%($15,151)($228,895)Park, Soil & Water0.10%($12,121)($183,116)TSR($512,095)($7,736,656) Local Sales Tax4.46%($540,577)($8,166,979) L.R. No. 1303S.01I
Bill No. SB 185
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It should be noted that sales tax is remitted one month behind collection and therefore this will
impact state revenue for only 5 months in FY 2026. When converting from tax year to fiscal
year DOR uses a 50% in the first year and 50% in the second fiscal year.
Estimated Sales Tax Loss by Fiscal Year FY 2026 (5 months)FY 2027+State FundsLowHighLowHighGeneral
Revenue($151,507)($2,288,952)($363,617)($5,493,484)
School
District($50,503)($762,984)($121,206)($1,831,161)
Conservation($6,313)($95,373)($15,151)($228,895)Park, Soil &
Water($5,050)($76,298)($12,121)($183,116)
Total State
Revenues($213,373)($3,223,607)($512,095)($7,736,656)
Local Funds Local Sales
Tax($225,240)($3,402,908)($540,577)($8,166,979)
This will require DOR to update the department’s forms ($2,200), DOR’s website and its
computer programs ($7,327).
Oversight notes the DOR requests one-time cost for website income-tax changes and updates to
comply with the proposed language; however, Oversight notes that DOR receives appropriation
for routine website updates and will not show those costs in the fiscal note.
Oversight notes using the data provided by Office of Administration - Budget and Planning, the
average amount of federal grants used on the purchase of equipment from 2023-2025 was
$165,919,538. For purposes of this fiscal note, Oversight assumes this proposal could exempt at
least $165,919,538 in taxable sales each year. Oversight notes the following estimated impact by
fund/fiscal year:
FundFY 2026 (5 months)FY 2027+General Revenue($2,073,994)($4,977,586)School District Trust Fund($691,331)($1,659,195)Conservation($86,416)($207,399)Parks & Soils($69,133)($165,920) Locals($3,083,338)($7,400,011) L.R. No. 1303S.01I
Bill No. SB 185
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Oversight is unable to determine the amount of qualifying items sold in the future, therefore,
Oversight will show a fiscal impact that could exceed the figures estimated above.
Officials from the Department of Natural Resources defer to the Department of Revenue for
the potential fiscal impact of this proposal.
Oversight notes the Park, Soil, and Water Sales Tax funds are derived from the one-tenth of one
percent sales and use tax pursuant to Article IV Section 47 (a) thus DNR’s sales taxes are
constitutional mandates. Oversight assumes the proposed sales tax exemption may decrease the
amount of sales tax revenue distributed to this fund. Therefore, Oversight will reflect the fiscal
impact estimated above for DNR’s funds.
Officials from the Missouri Department of Conservation assume an unknown fiscal impact.
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. The Department defers to the
Department of Revenue as it is responsible for tax collection and 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 of the Missouri Constitution, thus MDC=s sales taxes are constitutional
mandates. Oversight assumes the proposed sales tax exemption may decrease the amount of sales
tax revenue distributed to this fund. Therefore, Oversight will reflect the fiscal impact estimated
above for MDC’s funds.
Officials from the City of Kansas City assume the proposed legislation has a negative fiscal
impact of an indeterminate amount.
Oversight notes the above local political subdivision stated this proposal would have a negative
fiscal impact on their respective city of an indeterminate amount. Oversight assumes the
proposed sales tax exemption may decrease the amount of sales tax revenue distributed to
various local political subdivisions. Therefore, Oversight will note the fiscal impact estimated
above for all local political subdivisions on the fiscal note.
Oversight only reflects the responses received from state agencies and political subdivisions;
however, other local political subdivisions 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. 1303S.01I
Bill No. SB 185
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FISCAL IMPACT – State GovernmentFY 2026
(5 Mo.)
FY 2027FY 2028GENERAL REVENUE FUNDRevenue Reduction - §144.812 - Sales
& Use Tax Exemption for Certain
Broadband Equipment
Could exceed
($2,073,994)
Could exceed
($4,977,586)
Could exceed
($4,977,586)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND
Could exceed
($2,073,994)
Could exceed
($4,977,586)
Could exceed
($4,977,586)
SCHOOL DISTRICT TRUST FUNDRevenue Reduction - §144.812 - Sales
& Use Tax Exemption for Certain
Broadband Equipment
Could exceed
($691,331)
Could exceed
($1,659,195)
Could exceed
($1,659,195)
ESTIMATED NET EFFECT ON
SCHOOL DISTRICT TRUST FUND
Could exceed
($691,331)
Could exceed
($1,659,195)
Could exceed
($1,659,195)
CONSERVATION COMMISSION
FUND
Revenue Reduction - §144.812 - Sales
& Use Tax Exemption for Certain
Broadband Equipment
Could exceed
($86,416)
Could exceed
($207,399)
Could exceed
($207,399)
ESTIMATED NET EFFECT ON
CONSERVATION COMMISSION
FUND
Could exceed
($86,416)
Could exceed
($207,399)
Could exceed
($207,399)
PARKS AND SOILS STATE SALES
TAX FUNDS
Revenue Reduction - §144.812 - Sales
& Use Tax Exemption for Certain
Broadband Equipment
Could exceed
($69,133)
Could exceed
($165,920)
Could exceed
($165,920) L.R. No. 1303S.01I
Bill No. SB 185
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FISCAL IMPACT – State GovernmentFY 2026
(5 Mo.)
FY 2027FY 2028ESTIMATED NET EFFECT ON
PARKS AND SOILS STATE SALES
TAX FUNDS
Could exceed
($69,133)
Could exceed
($165,920)
Could exceed
($165,920)
FISCAL IMPACT – Local GovernmentFY 2026
(5 Mo.)
FY 2027FY 2028LOCAL POLITICAL
SUBDIVISIONS
Revenue Reduction - §144.812 - Sales
& Use Tax Exemption for Certain
Broadband Equipment
Could exceed
($3,083,338)
Could exceed
($7,400,011)
Could exceed
($7,400,011)
ESTIMATED NET EFFECT ON
LOCAL POLITICAL
SUBDIVISIONS
Could exceed
($3,083,338)
Could exceed
($7,400,011)
Could exceed
($7,400,011)
FISCAL IMPACT – Small Business
Certain small businesses that sell certain broadband equipment would no longer need to collect
sales tax on these items.
FISCAL DESCRIPTION
For all tax years beginning on or after January 1, 2026, this act authorizes a state and local sales
tax exemption for machinery and equipment used to provide broadband communications service
by a broadband communications service provider, as such terms are defined in the act.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space. L.R. No. 1303S.01I
Bill No. SB 185
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February 17, 2025
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SOURCES OF INFORMATION
Office of Administration - Budget and Planning
Department of Revenue
Missouri Department of Conservation
Department of Natural Resources
City of Kansas City
Julie MorffJessica HarrisDirectorAssistant DirectorFebruary 17, 2025February 17, 2025