Tax Law

Missouri Tax Law

Tax Day may come once a year but your responsibilities as a Missouri taxpayer can be a daily chore. Your daily tax responsibilities can be as mundane and automatic as paying sales and excise taxes on groceries, gasoline and meals at fast food restaurants. If you’re not a direct-hire employee at your company, you may have a more important daily responsibility like budgeting your paychecks for income tax payments later on.

Whether you live in Kansas City, St. Louis or Springfield, you’ll need to account for the various state and federal taxes in your budget, including everyday sales and gasoline taxes. It can be easy to get lost in all of the taxes you’ll owe, so use the information in LawInfo’s Missouri tax law articles to become familiar with them and to avoid penalties.

Missouri Progressive Income Taxes

Some states charge a flat income tax rate regardless of how much income you report. Missouri, however, uses a progressive income tax system that charges taxpayers higher rates based on bracketed income ranges. Taxpayers who earn over $1,000 in taxable income must pay an increasing tax rate on the excess income over the previous bracket’s maximum income. Additionally, you will have to pay a flat dollar amount that increases with each bracket.

For example, say that your taxable income for 2016 was $20,500. This places you in the last bracket at a rate of six percent of the excess over $9,000, plus $315. To calculate your tax, you would:

  • Subtract $9,000 from $20,500 to get $11,500.
  • Multiply $11,500 with 0.06 (the 6 percent tax rate) to get $690.
  • Add $315 with $690 to get $1,005 as your income tax.

The Missouri Department of Revenue provides an income tax calculator which automatically does the math for you.

Missouri Employer Tax Withholding

Independent contractors are solely responsible for withholding their income and paying taxes. Most employees in Missouri, however, aren’t responsible for withholding for taxes. Employers who directly hire their employees are responsible for withholding certain percentages of employee paychecks for federal and state taxes.

How much of an employee’s paycheck is withheld is based on their payment schedule and the number of dependents the employee may claim. Missouri publishes annual withholding tax tables based on daily, weekly, bi-weekly, semi-monthly and monthly paycheck schedules. Each table lists the specific taxable income ranges and the exact dollar amount to be withheld depending on how many dependents are claimed.

If the employer withholds too much for the year’s tax requirements, the employee will receive a refund of the excess withheld. If too little is withheld, however, the employee will be responsible for paying the balance owed.

Missouri Sales and Use Taxes

Retail sales and leases of goods and services in Missouri are charged with a state sales tax at a rate of 4.225 percent. If goods or services are used in Missouri but the states sale tax isn’t collected on the transaction, the buyer is charged a use tax at the same rate. Use taxes are typically collected on Internet purchases from out-of-state sellers or vendors.

Local governments in Missouri may charge additional sales and use taxes. Missouri’s Department of Revenue published a new report of every county’s tax rates every quarter.

Missouri Sin Taxes

“Sin” taxes are levied on consumer products like alcohol and tobacco wherever these things are legalized. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Sin taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.

Missouri’s sin taxes include:

  • $0.0085/cigarette, or $0.17/pack of 20 cigarettes total, which is subdivided into:
    • $0.0045/cigarette, or $0.09/pack of 20 cigarettes for the State School Money Fund.
    • $0.002/cigarette, or $0.04/pack of 20 cigarettes for the Health Initiatives Fund.
    • $0.002/cigarette, or $0.04/pack of 20 cigarettes for the Fair Share Fund.
  • 10 percent of the manufacturer’s price for other tobacco products.
  • $2/gallon of liquor.
  • $0.42/gallon of wine.
  • $0.06/gallon of beer.
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