VIENNA — Beginning Jan. 1, 2026, contractors operating Missouri license offices will face new financial penalties for excessive transaction processing errors, according to a letter received this week by the Maries County Commission from the Missouri Department of Revenue (DOR).

The Oct. 30 letter, signed by Amy McLain, acting administrator of the DOR License Offices Bureau, outlines a new policy assessing liquidated damages for offices whose reviewed transactions exceed a five percent error rate. The measure, the department says, is meant to encourage contractors to “proactively improve operations and maintain contractual compliance.”

Liquidated damages are a specific, pre-determined amount of money that one party must pay to another if they fail to meet certain terms of a contract, such as deadlines, performance standards or accuracy requirements.

They are not considered a penalty, but rather a way to compensate for losses that are difficult to calculate precisely. In other words, they represent a reasonable estimate of the harm caused by a contract breach.

In this case, liquidated damages are meant to cover the department’s costs for correcting mistakes made by the local license office when processing transactions. Instead of suing or calculating the exact cost of every error, the DOR uses this fixed amount as compensation for the extra work and administrative time required to fix those errors.

For several years, the DOR says it relied on other methods to improve accuracy, including providing detailed reports such as the Show Stoppers Report, which tracks transaction errors. Despite those efforts, McLain said in her letter, “transaction error rates remain unacceptably high.”

Under the new system, if a contractor’s reviewed transactions exceed the five percent error threshold, the office will face several escalating actions. Liquidated damages will be assessed at $22 per error over the five percent limit, calculated on a quarterly basis. In addition, the contractor will be placed on probation for three quarters, during which time they must demonstrate measurable improvement. To avoid suspension, the contractor is required to reduce errors by at least 50 percent from the prior quarter. Continued non-compliance, such as failing to reduce error rates below five percent while on suspension, may ultimately result in termination of the license office contract.

The letter emphasizes that liquidated damages are not classified as a penalty but as compensation for “losses incurred in corrective actions needing to be completed by the Department due to the contractor’s breach.”

The DOR provided the Vienna License Office their 2025 error data for the first two quarters of the year. The office processed 36 transactions per quarter, with nine errors in the first quarter and ten errors in the second, meaning a 25 percent error rate in the first quarter and 27.78 percent in the second.

If the new policy had already been in place, the Vienna office would have been assessed $154 in damages for the first quarter and $176 for the second.

The letter references Section 2.3.6 of the state contract (#CDOR230059), which requires contractors to ensure staff are trained to process transactions correctly, provide customer service, and comply with all federal, state and local regulations. Contractors are responsible for the cost of training and education.

Offices that exceed the 5 percent threshold will receive a notice of violation, enter a minimum three-quarter probation period, and be required to submit an action plan within ten business days.

Failure to meet improvement targets results in a 90-day suspension and potential deduction of points in future contract bids. Repeated non-compliance can lead to contract termination.

McLain’s letter indicates that more information defining what qualifies as a “transaction error” will be released soon.