Missouri reduces rate, adopts single factor and market sourcing, more

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June 2018


On June 1, 2018, Missouri enacted legislation (S.B. 884) that, effective for tax years beginning on or after January 1, 2020, reduces the corporate income tax rate from 6.25% to 4%, requires the use of a single-sales factor apportionment formula, and requires market-based sourcing for sale of other than tangible personal property. In addition, the legislation requires  the elimination of transactions between affiliated group members on a consolidated state income tax return and eliminates the requirement that an affiliated group must derive at least 50% of its income from in-state sources in order to file a consolidated return.

The takeaway

The market sourcing provisions taking effect in 2020 are similar but not identical to those in effect for electing taxpayers. The pre-2020 rules provided for a broader ‘throw-out’ rule where the state of assignment cannot be determined or reasonably approximated. Throw-out will apply in a more limited context in 2020.

Other Missouri tax bills that have yet to be signed by the governor include a measure (H.B. 2540) that would increase the pass-through entity income deduction, lower the top personal income tax rate, and phase out the federal tax deduction.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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