Many states have passed rulings, policies and laws that have negatively affected the way we run our businesses. Over the last few years, the state of Missouri has been dealing with a law that required us to collect sales tax on all of our services. All of the income that we collected for any type of service was subject to sales tax. We were very fortunate that Missouri Senator Will Kraus sponsored a bill to eliminate that sales tax on lessons. The article below written by Missouri Senator Will Kraus explains the situation.
ARTICLE WRITTEN BY MISSOURI SENATOR WILL KRAUS
In my time as Chairman of the Senate Ways and Means committee, one of the most disappointing actions by our government I’ve witnessed is the continual overreach into taxpayers’ pockets.
After changing their interpretation of the law, the Department of Revenue (DOR) began auditing studios and gyms and claiming huge amounts of back taxes for not collecting sales tax on classes. Because they were never notified of the change in law, gym owners across the state were shocked when they were given bills, some of which totaled hundreds of thousands of dollars.
It is distressing that our Department of Revenue is actively seeking to reinterpret tax law to gain as much revenue as possible, in ways that are so damaging to our state’s economy. Our government should be looking to boost jobs and the small businesses creating them instead of imposing burdensome regulations and overreaching into business owners’ pockets.
On May 13, the Senate passed Senate Bill 1025, pushing back against the Department of Revenue’s (DOR) perpetual quest for more revenue. The bill would restore instructional classes given at dance studios, gymnastics facilities and other fitness facilities to the same designation as educational classes and other services, the classification they held before DOR reinterpreted a sales tax law in 2008. As many of you know, the governor vetoed this common sense measure on June 28, 2016.
On September 14, 2016 the legislature convened its annual veto session and the veto of SB 1025 was the first bill the Senate addressed. The Senate voted to overturn the veto by a vote of 29-2, and the House followed suit later that day by finalizing the veto override by a vote of 124-31.
Senate Bill 1025 corrects the egregious revenue-grab attempted by the DOR, and will finally go into effect on October 14, 2016. As of that day, anyone providing instructional lessons will no longer be required to collect sales taxes on those classes. Sales taxes will still need to be collected on tangible items such as any equipment or gear sold, but the classes themselves will be tax free.
As a public servant, I cannot watch bureaucracy regulate our economy into the ground. I sponsored Senate Bill 1025 to prevent DOR from inflicting further damage on Missouri’s business owners and communities. Remaining diligent against this kind of government overreach, and keeping money in taxpayers’ pockets, is vitally important.
What we did as owners was to support Senate Bill 1025 and to ultimately be a part of the success of the bill passing. The action plan was based on where we were in the process.
When we first heard that a few gymnastics clubs in Missouri had been audited, we contacted our attorney and accountant for information and advice. Neither of those professionals were aware of the law and were not able to direct us. We strongly felt responsible to protect our company from a potential audit so we hired a tax attorney to interpret the law and guide us on how to be sure we were in compliance.
We testified at the Ways and Means hearing at our state capitol in support of SB 1025. In addition, our Department Leaders contacted their representatives prior to the hearing asking for their support. Our Office Manager wrote a letter as a parent and business woman in support of the bill. We presented her letter at the hearing.
We asked all of our families to call, write or email their representatives in support of the bill. We supplied them with sample letters and dialogue for the phone calls. THE SENATE PASSED BILL 1025.
We sent a petition to the governor that our families signed asking for him to pass SB 1025. I included a cover letter explaining our services and offering to visit him at his State Capitol office to discuss my concerns and to explain the reasons our services should not be taxed. THE GOVERNOR VETOED THE BILL.
Since the governor vetoed the bill, our last chance for the bill to pass was during the veto override session. We did a large campaign educating, explaining and reaching out to all of our customers. We asked them to contact their personal representatives through letters, emails and phone calls. A table was set up in our lobby with information and letters to sign. To make it easy on the parents and to guarantee that a large number of letters would be sent, we provided the letters, had the parents sign them, and our front office looked up the representative for each customer and mailed the letters.
I called each representative the day before the veto session to confirm they received the letters and asked that they support the people who support them. THE GOVERNORS VETO WAS OVERTURNED. SENATE BILL 1025 WAS PASSED.
We hosted Senator Will Kraus at our gym for a bill reenactment ceremony. It was a great opportunity to thank him and to thank our parents who worked to get this bill passed.
As of Oct. 14, 2016, we no longer have to collect sales tax on our instructional classes. The bill is very narrow including instruction/educational programs only. A letter ruling has been requested to help the owners understand exactly which services are taxed and which ones are not taxed. In the mean time, we have been advised by our tax attorney to be cautious and only exempt services that are in no question, considered instruction.
Our jobs include so much more than teaching gymnastics. Serving our students and their parents is a large responsibility and can involve tasks that are not the norm. Supporting and fighting for the rights of our parents by eliminating the sales task on our gymnastics classes was time well spent and the right thing to do. I hope that if you are dealing with a law that is unfair that our journey can assist you in fighting the good fight.