A St. Louis circuit court judge is deciding if taxpayers living outside the city and working remotely due to the pandemic can file a lawsuit to reclaim city earnings taxes.
Circuit Court Judge Christopher McGraugh on Wednesday heard arguments by attorneys for St. Louis Collector of Revenue Gregory F.X. Daly. They cited Missouri tax law stating taxpayers must file individual lawsuits to seek any refund. Attorneys representing taxpayers argued the city changed its earnings tax refund forms to exclude teleworkers without any legislative approval.
“They changed the law without a change in the law,” Mark Milton, a lawyer for the taxpayers, told KMOX radio. “The executive branch changed the law without a change by the legislature.”
Milton and attorney Bevis Schock created stlrefund.com , a website to help workers who didn’t live in the city in 2020 but whose employers withheld the city’s 1% earnings tax. They seek refunds based on the days spent teleworking from locations outside the city, not including business travel days.
Prior to the pandemic, if a non-resident worked some days outside the city – whether teleworking from home or traveling for business – the employee could apply for a refund for the amount based on days worked outside St. Louis. But in tax year 2020, the city changed its policy and forms to only allow earnings tax refunds for travel and not allow for refunds for days spent teleworking or working outside the city.
“In short, without any change to the authorizing state statute and/or the earnings tax ordinance,” Schock and Milton’s website states, “the city now refuses to issue refunds for days spent working from locations outside the city of St. Louis, that is, teleworking – even though the work was performed or the services were rendered outside the city.”
David Luce, an attorney for the collector of revenue, said the pandemic forced changes in tax collection.
“The virtual world is not the world that’s surrounding your chair at your office,” Luce told KMOX. “It’s the virtual world that you’re entering into.”
The earnings tax provides about 36% of the city’s general revenue. Earnings tax collections dropped from $184 million in 2019 to $176 million in 2020, according to documents in the city’s fiscal year 2022 budget. Budget documents show a revised estimate of $187 million for 2021 and $178 million for 2022.
“And because people who live outside the city but work for an employer based here also pay the earnings tax, it helps distribute the cost of providing services they use as well as city residents,” St. Louis Comptroller Darlene Green wrote on the department’s website as the earnings tax was being renewed by city voters. The Missouri legislature passed a law in 2010 requiring earnings taxes to be renewed by a vote every five years. The tax was renewed in April with 79% of the vote. It also was renewed in 2011 and 2016.
Kansas City is the other Missouri city with a 1% earnings tax. It was renewed in April with 77% of the vote. Media outlets reported Kansas City was processing earnings tax refunds for non-residents working remotely for businesses located in the city.