Missouri is considering the most dramatic sales tax overhaul any state has attempted in decades.
The Missouri House voted 95-59 to send a proposed constitutional amendment to the ballot that would direct future legislatures to cut personal income tax rates as state revenue increases — and allow the General Assembly to expand the sales tax to transactions involving any goods and services.
Governor Mike Kehoe has until May 22 to decide whether the measure will appear on the August 4 primary ballot or the November general election.
That deadline is days away. And the decision will set the stage for what could be the largest sales tax expansion in Missouri history.
This isn't a simple rate change. It's a structural overhaul of how Missouri funds its government.
Right now, Missouri collects billions in state income tax revenue every year. The proposal would chart a path to eliminate that entirely — and replace the lost revenue with an expanded sales tax base.
Lawmakers would have a five-year window to expand transaction-based taxes, like sales taxes, to make up for revenue lost by eliminating the income tax.
If approved by voters, Missouri would become the tenth state to eliminate its state income tax, joining neighboring Tennessee, which repealed its state income tax in 2021. SmartAsset
The key word in all of this: expand. Missouri's current sales tax applies to goods but exempts most services. To replace income tax revenue, lawmakers would almost certainly need to start taxing things that have never been taxed before — haircuts, legal services, accounting fees, medical visits, real estate transactions.
The scale of what's being proposed is hard to overstate.
The nonpartisan Missouri Budget Project said eliminating the income tax while increasing sales taxes will cost up to 80% of Missourians more overall, while blowing a $5 billion hole in the state budget. AccurateTax
The Missouri Budget Project estimates that 80% of Missourians would see their net tax cost increase. In comparison, the 20% of Missourians — defined as those making $300,000 or more — would see their overall taxes decrease. TaxHero
The math reflects a fundamental difference between how income taxes and sales taxes work. Income taxes are progressive — higher earners pay a higher percentage. Sales taxes are regressive — everyone pays the same rate, but lower-income households spend a larger share of their income on taxable purchases.
Eliminating one and expanding the other shifts the tax burden down the income scale.
Supporters argue the change would make Missouri more competitive.
Governor Kehoe called it "the first step in keeping our promise to make Missouri more competitive, attract jobs and investment, and let families keep more of what they earn." Republicans framing the proposal say it gives Missourians more control over what they're taxed on — you pay when you choose to spend, not just for earning a paycheck. Taxfyle
Opponents see it differently.
Senate Minority Leader Doug Beck called the proposed amendment the pave the way for the largest tax increase in Missouri history, warning it would mean more taxes for most Missourians — and that the people hit hardest are retirees, senior citizens, and disabled veterans who pay no income tax now but would pay higher sales tax on doctors' visits and prescription medicines. Quizlet
Democrats warned that if it passes, higher sales taxes will shift the tax burden to poorer Missourians who must spend most or all of their income on necessities — feeding their families, keeping a roof over their heads, buying medicine.
Here's the compliance reality that businesses in Missouri need to start thinking about now.
If the amendment passes and lawmakers follow through on expanding the sales tax base, virtually no industry is safe from review. Items likely to be taxed if the measure passes include haircuts, salon visits, and plumber services. SmartAsset
Industries currently protected by strong exemptions — agriculture, real estate, healthcare — would face enormous pressure. Many worry that should those exemptions disappear, it would hurt seniors and make people choose between meals and medication.
For businesses that currently provide tax-exempt services in Missouri, this is not a distant hypothetical. The five-year window for lawmakers to act starts the moment voters approve the amendment. Service businesses that have never had to think about sales tax collection could find themselves registering, filing, and remitting within the same legislative session.
Here's how the next several months play out:
If the income tax isn't eliminated by January 1, 2032, the tax may continue until it is ended. There's no automatic snap-back — the pressure to follow through would be sustained and political. Taxfyle
Missouri isn't the only state exploring this trade. The trend of shifting from income-based to consumption-based taxation has been building for years.
States like Tennessee — already income-tax-free — have become reference points for what this looks like in practice. And the argument that a consumption tax is simpler, more predictable, and harder to avoid has real appeal to both lawmakers and certain segments of the business community.
If Missouri voters approve this amendment, expect other states to take notice. It would be the most significant state-level tax restructuring in a generation — and a signal to legislatures across the country that voters are open to rethinking how government gets funded.
If you operate a business in Missouri — especially a service business currently exempt from sales tax — now is the time to understand what this proposal could mean for your compliance obligations. Book a free consultation with our team at sales.tax. We'll walk through your exposure and help you prepare for whatever the ballot brings.