On May 28, 2024, the Missouri Court of Appeals affirmed the lower court ruling that held the city of St. Louis’ earnings tax did not apply when employees were not physically working within the city of St. Louis. Accordingly, employees of city-based employers who were not physically working within the city limits were entitled to a refund for the days in which they were working remotely, including during the COVID-19 pandemic.
St. Louis Earnings Tax
Chapter 5.22 of the St. Louis City Ordinance Code (Ordinance) imposes a 1% tax on salaries, wages, commissions, other compensation, and net profits earned by its residents and “by nonresident individuals of the City for work done or services performed or rendered in the City.”1 Employers with employees working in the city of St. Louis are required to withhold the 1% tax on the employees’ earnings and city resident employers are required to withhold earnings taxes on all employees regardless of the employee work location.2
Nonresidents of the city can file and request any refund of amounts that were withheld based on days worked outside of the city of St. Louis. An employer must verify the days that were worked remotely and the request for refund must be submitted within one year from the original date when the return and taxes were due.
Boles v. City of St. Louis
In Boles v. City of St. Louis, the employees were nonresidents of the city who worked for city-based employers, in 2020 and 2021, and worked either on site in the city or remotely outside of the city.3 Their city-based employers withheld the 1% tax and the employees submitted refund requests for the number of days they worked remotely outside of the city.4 Despite having previously approved such refund requests, the city tax collector denied the refund requests except for requests for work while done traveling for business purposes.5 Employees brought suit-seeking refunds for the earnings tax paid for the days they worked remotely outside of the city. The trial court granted summary judgment in part and held that “the Ordinance’s language was clear and unambiguous, and the remote work and/or services at issue were not rendered in the city,” and thus, the nonresident employees were not liable for the earnings tax for the days they worked remotely outside of the city.6
The city tax collector appealed the decision raising two points: (1) the trial court erred in interpreting the meaning of the phrase, “services…rendered in the city” in the Ordinance to mean “services…done in the city,” and (2) the trial court erred because they were entitled to judgment as a matter of law in that the facts show employees rendered services in the city.7 The appeals court looked to the plain and ordinary meaning of “render” and “perform,” as well as the original intent of the Ordinance when enacted.8 As noted above, the appeals court agreed with the trial court in that the Ordinance’s language is clear and unambiguous, and the work done or services performed or rendered remotely by employees outside of the city are not subject to the earnings tax.9
The city did not appeal the ruling, and in response to the Court’s decision, the collector of revenue has issued a press release stating that the city will waive the statute of limitations for the 2020, 2021, and 2022 refunds for a period of 90 days, starting July 1 through September 30, 2024, so that workers who were taxed for remote work done outside the city can apply for refunds. The city has set aside $26 million for the refunds, which will be processed in the order in which they are received. Additional information will be provided on the collector of revenue’s website by July 1.
- 1Chapter 5, St. Louis City Revised Code, § 5.22.020.
- 2In addition, the payroll expense tax is a half of one percent tax that is paid by the employer for compensation paid to employees performing work or services in the City of St. Louis. Both the St. Louis earnings tax and payroll expense tax are filed and remitted together quarterly.
- 3Boles v. City of St. Louis, No. ED111495.
- 4Id.
- 5Id.
- 6Id. at 2.
- 7Id. at 5.
- 8Boles v. City of St. Louis, No. ED111495.
- 9Id.