United States

Missouri enacts corporate income and sales and use tax changes


On June 1, 2018, former Missouri Governor Eric Greitens signed Senate Bill 884, providing a number of amendments to the state’s corporate income tax, and Senate Bill 768, addressing tax provisions related to telecommunications businesses.

Highlights of the bills are listed below:

Senate Bill 884

Apportionment methodology

Senate Bill 884 eliminates the option to utilize the Multistate Tax Compact’s three-factor (property, payroll and sales) apportionment method and effectively mandates the single-sales factor apportionment method for tax years beginning on or after Jan. 1, 2020. Under the single-sales factor method, Missouri taxable income is based exclusively on the percentage of sales made in Missouri, not the location of property or employees. Industry-specific apportionment may still be applicable.

Sourcing rules

For tax years beginning on or after Jan. 1, 2020, market-based sourcing provisions apply to all income sources. Previously, Missouri adopted cost-of-performance sourcing for sales other than tangible personal property but allowed for market-based elections.

Consolidated returns

Senate Bill 884 removes the requirement that an affiliated group have greater than 50 percent of its income from Missouri sources to file a Missouri consolidated return. In addition, all transactions between affiliated members of the affiliated group should be eliminated on the Missouri consolidated return. Previously, intercompany transactions were not eliminated in the Missouri consolidated return.

Tax rates

The Missouri corporate tax rate will decrease from 6.25 percent to 4.0 percent for tax years beginning on or after Jan. 1, 2020.

Senate Bill 768

Property tax

Beginning on or after Jan. 1, 2019, “telephone companies” can make a one-time election to have their property assessed under 1) the current method, or 2) in the same manner as railroads for property consisting of land and buildings and under a standardized depreciation schedule for all other property.

Sales and use tax

Senate Bill 768 provides that the term "product" includes telecommunications services and the term "manufacturing" includes the production, or production and transmission, of telecommunications services. That provision is consistent with Missouri Supreme Court rulings in Southwestern Bell Telephone Co. v. Director of Revenue and DST Systems Inc. v. Director of Revenue which determined that manufacturing shall include the production and transmission of telecommunication service, allowing for property and equipment used to transmit such service to be exempt from sales and use tax.


Senate Bill 884 brings significant changes to the corporate income tax beginning for 2020 tax years, providing time to engage in appropriate tax planning. Additionally, the affirmation of the Missouri Supreme Court decisions on the applicability of what is considered manufacturing and production may create opportunities for telecommunications taxpayers to determine whether certain purchases used to create a product or service are exempt from the sales and use tax. Taxpayers with questions about these tax bills should contact their Missouri tax advisers.




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