Section 4 Interstate Taxation of Banks

• Library: Tax Law 2009

Commercial banks, whether chartered by the United States or a state other than Missouri, with the main banking house or a branch located in Missouri are subject to the Missouri Bank Tax on the business generated at the physical location of the bank in Missouri. As noted in §18.1 above, the Riegle-Neal Act continued the status quo in 1995. In 1993, the General Assembly had addressed taxation of bank branch activity by adding § 148.097, now RSMo 2000, to allow for apportionment of the taxes with other states based on the bank’s property, payroll, and deposit factors. See also §18.13, infra.

But moving away from the “physical presence” of a bank or branch, the United States Supreme Court has developed limits on state sales and use tax on out-of-state mail-order houses. State courts have found holes in this tax regime for other taxes; this was the beginning point for states’ efforts to tax out-of-state banks. These states claimed, without success, the right to tax foreign banks on the income of bank credit card receivables paid by customers residing in the state. See, e.g., J.C. Penny Nat’l Bank v. Johnson, 19 S.W.3d 831
(Tenn. App. 1999) (overruling its state’s tax). But see Tax Comm’r of W. Va. v. MBNA Am. Bank, N.A., 640 S.E.2d 226 (W. Va. 2006) (sustaining the tax)...