St. Louis has paid nearly $41 million to non-city residents and businesses in refunds for remote work done outside the city for tax years 2020 through 2022.

That's a much larger impact to the city budget than officials had projected for the fiscal year that began July 1. In crafting the budget, City Hall had estimated there would be a $21 million hit to earnings revenue due to the refunds, plus $5 million in payroll tax refunds.

As of Jan. 2, the Collector of Revenue’s office said it had issued 44,774 checks totaling $40.7 million in earnings tax and payroll tax refunds as well as interest. A spokesperson said only a “couple hundred” refund requests are left to process for the three tax years and all of them involve problems such as taxpayers not getting the signature of their employer.

A spokesperson for Mayor Tishaura Jones referred questions to Budget Director Paul Payne, who said he’s working on a report covering the city’s finances in the second quarter covering October through December. He didn’t respond to questions submitted Monday morning.

Collector of Revenue Gregg Daly said while initial projections for tax refunds ranged from $25 million to $50 million for earnings and payroll tax refunds, the hope was that the final number would be close to the city Budget Office's $26 million estimate.

"The higher figure reflects the unprecedented nature of remote work during the covered period. There was no way of knowing how many people were working remotely from home, how much they were or were not going into the office, and who would apply for a refund beyond the taxpayers who had applied in protest," he said in a statement.

The 1% earnings tax is the city’s largest single source of revenue for the general fund . It generated $222 million in the previous fiscal year and pays for basic city services including law enforcement and infrastructure maintenance. The city’s payroll tax, which totals 0.5% and is paid by employers for wages earned in the city, generated $44 million in fiscal year 2024.

In a report submitted to city leaders on Oct. 22, Payne wrote that earnings tax refunds had totaled nearly $18 million at the end of the first quarter, with Daly reporting the total could double.

“Taking into account additional pending claims as well as the preliminary first quarter growth trend, results are on a pace to fall short of budget in the $15M range,” Payne wrote.

Payne, however, noted that spending on personnel was $15 million to $19 million lower than budgeted in the first quarter as a result of continued vacant positions.

The earnings tax issue dates back to January 2023, when St. Louis Circuit Court Judge Jason Sengheiser ordered Daly to refund $8,361 plus interest to six employees who lived outside the city but were working remotely for employers within the city limits in 2020. Their wages were taxed under the city’s 1% earnings tax. The city appealed, despite allowing refunds in prior years for remote hours worked outside the city. Daly's office denied those requests as telecommuting took off amid the Covid-19 pandemic.

A state appeals court in May 2024 upheld the trial court decision. The city could have appealed it to the Missouri Supreme Court. Instead the city and the plaintiffs in June 2024 announced a settlement in which Daly’s office would provide an “easy-to-understand process” for non-city residents to file first-time refund applications for remote work done outside the city for the years 2020, 2021 and 2022.

The Collector of Revenue figures for the refunds as of Jan. 2 do not include where the refund applications have come from, the number of remote workers and businesses that have received refunds, or the volume of refund requests by month.

Daly’s office released data showing that the number of earnings tax refund checks issued declined from 15,844 for tax year 2020 to 15,162 in tax year 2021 and 13,473 in tax year 2022. The numbers do not necessarily show a decline in taxpayers receiving refunds because taxpayers could have received more than one check for a year, a Collector of Revenue spokesperson said.