State refunds part of overpaid taxes

Not all businesses were notifed they had paid too much.
Thursday, August 16, 2007 | 12:00 a.m. CDT; updated 12:47 p.m. CDT, Thursday, July 3, 2008

JEFFERSON CITY — For about five years, Missouri quietly held on to millions of dollars in overpaid taxes from consumers who shopped and dined in the state.

Now, the state has quietly paid part of that money back to businesses. But because of state law, most consumers never will see even a penny of those sales tax refunds.

The retention and return of overpaid sales taxes came to light as part of an Associated Press inquiry into an unusually large spike in Missouri’s annual sales tax refunds during the recently concluded 2007 fiscal year.

The state paid out $88.4 million in sales and use tax refunds last year — an amount nearly triple the $31.6 million refunded in 2006 and 75 percent higher than the average annual sales tax refunds during the past five years.

Part of the reason for the increased refunds is that the state returned about $19 million to telephone companies under a 2002 Missouri Supreme Court ruling that is just starting to kick in, said Department of Revenue spokeswoman Maura Browning. That court case was public, though the department had not previously publicized the refund payments.

But after the AP’s inquiry, the Revenue Department also acknowledged that it had stopped notifying businesses in 2002 that they had overpaid state sales and use taxes.

“Those funds were simply kept by the state, and a taxpayer may not have known that he or she had overpaid,” Browning said.

Missouri was scrapped for money at the time. To try to balance the budget, then-Gov. Bob Holden withheld money from colleges and most state agencies and urged departments to save money.

Many of the top spots at the Revenue Department turned over when Gov. Matt Blunt took office in 2005, and the state’s finances have since improved to where it now has a surplus. Late last year, an attorney from outside the department brought the previous policy change to the attention of the state’s current tax administrators, Browning said.

“The director felt that it was inappropriate and it was not fair for the department to know that it had received excess payment but not to notify the taxpayer,” Browning said.

The Revenue Department mailed out letters in December offering businesses refunds or credits against future sales taxes for their overpayments during the past three years, the maximum time period allowed under state law.

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