12 CSR 10-2.017 - Transient Employer Financial Assurance Instrument for Employer's Withholding Tax

Current through Register Vol. 46, No. 24, December 15, 2021

PURPOSE: This rule establishes guidelines for filing financial assurance instruments to secure payment of withholding tax by out-of-state transient employers.

PUBLISHER'S NOTE: The secretary of state has determined that the publication of the entire text of the material which is incorporated by reference as a portion of this rule would be unduly cumbersome or expensive. Therefore, the material which is so incorporated is on file with the agency who filed this rule, and with the Office of the Secretary of State. Any interested person may view this material at either agency's headquarters or the same will be made available at the Office of the Secretary of State at a cost not to exceed actual cost of copy reproduction. The entire text of the rule is printed here. This note refers only to the incorporated by reference material.

(1) Out-of-State Transient Employer Defined.
(A) Transient employer means an employer as defined in sections 143.191, 287.030 and 288.032, RSMo making payment of wages taxable under the Missouri income tax law, the Workers' Compensation Law and the Missouri employment security law who is not domiciled in Missouri and who temporarily transacts any business within Missouri. The transaction of business is considered temporary at any time it cannot be reasonably expected to continue for a period of at least twenty-four (24) consecutive months.
(B) Transient employers shall not include any employer who is not subject to Missouri income tax because of the provisions of 15 U.S.C. 381.
(C) Every transient employer shall file with the director of revenue a financial assurance instrument including, but not limited to, a cash bond, surety bond or an irrevocable letter of credit as defined in the Uniform Commercial Code Section 400.5-103, RSMo.
(2) Types of Financial Assurance Instruments. Financial assurance instruments which may be posted to secure payments of taxes by out-of-state transient employers shall be in the form of a surety bond, cash bond or an irrevocable letter of credit issued by any state or federal financial institution, or any other financial assurance instrument which is deemed acceptable by the director of revenue. Other financial assurance instruments will be reviewed for approval on a case-by-case basis.
(A) A surety bond shall be issued by an insurance company licensed for bonding in Missouri on behalf of the applicant on the form provided by the Department of Revenue. An example of this form is printed with this rule. The form shall bear the seal of the insurance company, the effective date and be accompanied by a power of attorney letter if signed by the attorney-in-fact. It also shall contain the signature of the applicant.
(B) A cash bond shall be paid to the director of revenue in the form of a cashier's check, money order or certified check and be accompanied by a notarized cash bond form provided by the Department of Revenue. An example of this form is printed with this rule.
(C) An irrevocable letter of credit issued by any state or federal financial institution may be submitted to the Department of Revenue on a form provided by the department. An example of this form is printed with this rule.
1. The letter of credit shall be irrevocable and the beneficiary shall be the Department of Revenue. Payment shall be made immediately upon presentment of a demand for payment signed by the director of revenue or a designated representative.
2. All letters of credit shall conform to the Department of Revenue's required format. A standard letter of credit form embodying this format shall be provided by the Department of Revenue. All letters of credit shall be accompanied by an authorization for release of confidential information allowing the director of revenue or a designee to release confidential tax information to the issuing bank.
3. A demand for payment upon a letter of credit shall be presented for payment only for reasons that bond proceeds are needed to satisfy any delinquencies or claims as provided for in section 285.230, RSMo.
4. Letters of credit shall have a term of one (1) year and shall be automatically renewable on an annual basis for an additional one (1) year. A letter of credit may be cancelled by the issuer sixty (60) days after written notice is delivered to the Department of Revenue. Upon the notice of cancellation, the transient employer shall be required to file a new financial assurance instrument on or before the expiration of the sixty (60)-day period. If the required financial assurance instrument is not received within that time period, the employer commits the crime of failure to file a financial assurance instrument if the employer knowingly fails to comply.
5. If a transient employer ceases business or desires to substitute a financial assurance instrument for his/her letter of credit, the director of revenue shall retain the letter of credit for a period of ninety (90) days or until the director of revenue is satisfied that no claims exist against the letter of credit.
6. A transient employer shall be required to increase the amount of the letter of credit in any situation where the employer would be required to increase its financial assurance instrument as provided for in section 285.230, RSMo. This additional instrument may be satisfied by increasing the letter of credit or submitting an additional financial assurance instrument.
(3) Amount of Financial Assurance Instrument. The amount of the financial assurance instrument shall be determined by the director of revenue. This financial assurance instrument shall not be less than the average estimated quarterly withholding tax liability of the taxpayer, but in no case less than five thousand dollars ($5,000) nor more than twenty-five thousand dollars ($25,000).
(A) Example 1: Mr. Kansas Contractor has been awarded a contract to renovate a building in Kansas City, Missouri. Mr. Kansas Contractor has employed ten (10) Missouri residents to assist in the renovation. The employees are being paid four hundred dollars ($400) in wages per week. Each employee is married, claiming one (1) personal exemption and no dependent exemptions. Mr. Kansas Contractor is required to post the minimum five thousand dollar ($5,000) financial assurance instrument.
(B) Example 2: Mrs. Illinois Drywaller accepts a contract to drywall several new apartment complexes in St. Louis, Missouri. Mrs. Illinois Drywaller hires numerous Missouri resident drywallers to assist in the work. Mrs. Illinois Drywaller's Missouri monthly withholding is twenty-three hundred dollars ($2,300). Mrs. Illinois Drywaller is required to post a financial assurance instrument in the amount of six thousand nine hundred dollars ($6,900). The six thousand nine hundred dollars ($6,900) is the approximate amount of withholding for these employees for one (1) calendar quarter.
(4) General Financial Assurance Instrument Examples. The following are general examples illustrating the out-of-state transient employer financial assurance instrument requirement:
(A) Example 1: Mr. Jones, an out-of-state contractor, has been awarded a contract to perform work in Missouri. He must obtain and file an application for a Missouri Employer's Withholding Tax Number. Furthermore, he does not meet the criteria to be exempt from the financial assurance instrument requirement. Mr. Jones, therefore, must submit a financial assurance instrument with the application before he can obtain his Missouri Withholding Tax Identification Number;
(B) Example 2: Mrs. Davis is an out-of-state contractor whose principal place of business is in a county of another state which borders Missouri. Mrs. Davis is a transient employer and must file an application for a Missouri Employer's Withholding Tax Number. Mrs. Davis has not been under contract to perform work in Missouri for at least sixty (60) days each year for the past two (2) calendar years and, therefore, must submit a financial assurance instrument with the Missouri Tax Registration Application; and
(C) Example 3: Mr. Smith, an out-of-state contractor, has been awarded a contract to perform work in Missouri. Mr. Smith is a transient employer and must file an application for a Missouri Employer's Withholding Tax Number. Mr. Smith does meet all the criteria for exemption from the financial assurance instrument requirement. Therefore, he is not required to file a financial assurance instrument with the application but must notify the Department of Revenue of his exemption status.
(5) Replacing or Applying for Return of Financial Assurance Instrument.
(A) If a cash bond is replaced by a different type of financial assurance instrument, the cash bond will be refunded to the taxpayer; provided, all taxes due are paid and the taxpayer files a request for refund on the forms provided by the Department of Revenue.
(B) If a surety bond is replaced by a different type of financial assurance instrument, the surety bond will be cancelled; provided, the issuing insurance company provides the Department of Revenue with a written notice sixty (60) days prior to the cancellation date. This cancellation shall not affect any liability incurred or accrued prior to the termination of the sixty (60)-day period.
(C) If an irrevocable letter of credit is replaced by a different type of financial assurance instrument, the irrevocable letter of credit will be returned to the issuing financial institution; provided, the financial institution provides the Department of Revenue with a written notice sixty (60) days prior to the cancellation date. Cancellation shall not affect any liability incurred or accrued prior to the termination of the sixty (60)-day period.
(6) Exemptions From the Out-of-State Transient Employer Financial Assurance Instrument Requirement. Employers meeting all the following criteria are not required to file a transient employer withholding tax financial assurance instrument:
(A) The principal place of business of the employer must be in a county of another state which borders Missouri;
(B) The employer must have been under contract to perform work in Missouri for at least sixty (60) days each year for the past two (2) calendar years immediately preceding the employer's initial application for exemption from the transient employer bonding requirements; and
(C) The employer must have in his/her possession a tax clearance issued by the Department of Revenue stating that the transient employer has complied with the tax laws of this state and with the provisions of the Workers' Compensation and employment security laws during the period set out in subsection (6)(B) of this rule. On or before January 31 of each year, except January 31 following the year during which the employer meets these criteria, the employer shall submit a request to the Department of Revenue for a renewed tax clearance.
(7) Certification of Workers' Compensation Insurance. Every transient employer shall certify to the director of revenue that the employer has sufficient Workers' Compensation insurance either through a self-insured plan or through a private company (carrier). A transient employer shall provide the Department of Revenue with a copy of its Workers' Compensation insurance policy. The insurance policy shall be forwarded to the Division of Workers' Compensation of the Missouri Department of Labor and Industrial Relations for verification of the insurance policy.

Notes

12 CSR 10-2.017
AUTHORITY: sections 143.961, RSMo 1986 and Senate Bill 4477 of the 87th General Assembly to be codified as section 285.230, RSMo in 1994.* Original rule filed Aug. 8, 1989, effective Nov. 26, 1989. Emergency amendment filed Aug. 18, 1994, effective Aug. 28, 1994, expired Dec. 25, 1994. Emergency amendment filed Dec. 9, 1994, effective Dec. 26, 1994, expired April 24, 1995. Amended: Filed Aug. 18, 1994, effective Feb. 26, 1995.

*Original authority: 143.961, RSMo 1972 and 285.230, RSMo 1988, amended 1994.

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