The Devastating Impact of the Everything Tax
February 11, 2012
Posted by Kevin Fullerton
We recently received some disconcerting information from Mark O'Renick, CEO of Salva O'Renick, and Luke Davis, Director of Education and Outreach, regarding the pending Missouri Jobs & Prosperity Bill. What follows is their analysis of the potential harmful impacts of this pending legislation on our advertising and marketing community. Salva O’Renick is a Kansas City-based marketing and sales integration firm that helps companies optimize interactions with prospects and customers to create the ideal buying and selling environment.
Should you have any quesstions or would like to get involved, please contact me at 913-484-7408 or email@example.com.
~ Kevin Fullerton, AAF-KC President
The Missouri Jobs & Prosperity Bill, also known as the “Everything Tax”, is a proposed law that would eliminate Missouri's income tax, and replace it with a 7% state sales tax on virtually all goods and services within the state. This new sales tax would be on top of what is currently being charged by local government levels. The problem for those of us in our industry is the fact that, unlike the current state sales tax that applies only to the sale of tangible goods, the Everything Tax would tax most services, including advertising, marketing, and public relations. It also taxes services that we all use in our daily lives, including healthcare, raising costs for citizens across the state.
Why is this bad?
If the Everything Tax passes, services that Missouri advertising companies provide would be subject to sales tax of up to 10% (with the state portion being 7% and the remainder comprised of already existing local sales taxes). This covers the full range of services Missouri firms provide, from marketing consulting, design, content development, public relations, research, data analysis, event planning and more. Having to charge a sales tax of 10% would put Missouri firms at a competitive price disadvantage against firms in every other state (because no other state currently taxes marketing, advertising and PR services).
A potentially even bigger problem is the complexity that taxation of advertising (including media) would create in terms of calculation, collection and remittance. In recent years, three states have put regulations in place taxing the sale of advertising and related services. In each case the laws were later repealed because the results were all the same – businesses left for more tax-friendly states, taking jobs and revenue with them. In Florida, the law became so complicated and unpopular that it was repealed only six months after taking affect. That was not, however, before the state lost over 10,000 jobs and spent millions defending the law in the courts.
A similar attempt in Missouri would increase accounting and compliance costs and raise audit risk based on the inability to provide clear guidance on tax policy. Among the biggest concerns is the governing jurisdiction for Missouri agencies selling advertising services in other states, and for companies outside Missouri advertising in the state. The Coalition for Missouri’s Future, which is a broad based grass roots organization working to shed light on the impact of the Everything Tax, concludes that taxing advertising “would have substantial impact on the advertising industry” and that “Missouri businesses involved in the advertising industry will be put at a significant disadvantage compared to similar businesses operating in other, neighboring states that do not tax advertising.”
What can we do?
Service industries are lining up for exclusions from the proposed amendment. According to the Missouri Budget Project, services provided by accountants, architects, barbers, engineers, lawyers, payroll processing and real estate agents are exempt from the state sales tax. The advertising, marketing and PR community needs to come together on both sides of the state line to become aware of this proposal. There is talk of similar ‘fair tax’ proposals on the Kansas side as well.
The AAF-KC will continue to sort through this complex issue and provide relevant information to keep agencies up to speed. We will also be working with the ad community in St. Louis and the national AAF to gain additional support for our position against the Everything Tax initiative. We encourage individual companies to join the Coalition for Missouri’s Future to build an even broader show of support in opposition of the Everything Tax.
If you would like to get involved, or want more information please contact Kevin Fullerton, AAF-KC president, at 913-484-7408 or firstname.lastname@example.org. In the meantime, read through the attached documents provided by the Coalition for Missouri’s Future and other organizations to understand better the impact the Everything Tax would have on our industry and our community.