Holden's tighter tax exemption would cost truckers
Tuesday, January 28, 2003
Dave Rollet says Gov. Bob Holden's proposal of ending what he calls a trucking industry tax loophole would do a good deal more than hurt his Perryville, Mo.-based transportation company.
"It would kill us," said Rollet of Rollet Brothers, a small trucking company that runs about 40 tractor-trailers. "It would really break us, with fuel costs the way they are and the economy the way it is, it would be just enormous."
As part of his plan to close the state's $1 billion budget shortfall, Holden wants to stop Missouri's sales tax exemption for so-called "common carriers" -- companies that ship other companies' goods across state lines. Those companies pay no sales tax when they buy new trucks and truck parts or get truck repairs.
The tax break originally was intended to help companies such as United Parcel Service or Federal Express, according to Holden spokeswoman Mary Still. And the state law originally relied upon the federal Interstate Commerce Commission's definition of a common carrier.
Looser definition today
But in 1995, the federal government deregulated much of the trucking industry and disbanded the commission. Responsibility for defining a common carrier fell to the Federal Highway Administration.
Today, the definition of a common carrier is much looser, and almost any company that has trucks can claim the tax exemption, said Todd Iveson, deputy director of the state Division of Taxation.
More than 13,000 registrations -- new or used trucks or trailers -- got Missouri tax exemptions over the first 10 months of last year.
Holden's proposal indicates that tightening the exemption would raise about $9.8 million for the state.
Area trucking companies, however, said it shouldn't be up to them to make up for what they believe to be bad budgeting by the state.
"I haven't seen anything in any of Holden's proposals that shows any stomach for governance," said Owen Elfrink, who owns Elfrink Transportation in Cape Girardeau. "I look at a proposal at a proposed $19 billion budget that's a billion in the red. To me, that's simple: That's a 6 percent cut across the board. That's how a business would look at it, and that's how our folks in Jefferson City should address is."
Elfrink runs about 35 trucks and operates in Southeast Missouri, Southern Illinois and western Kentucky, shipping commodities from plastics and rubber to other material. He pointed out that trucking companies already pay a 12 percent federal excise tax for the same thing the governor wants to tax for state purposes.
"It would be a huge impact on our business," Elfrink said. "It's going to limit us on how much we could invest in our company. It would be a huge deterrent to capital investment. I feel bad about the budget shortfall, but it shouldn't be up to the trucking industry to make up for it."
'It's ultimately passed on'
Besides, Elfrink said, he believes Holden knows the end result anyway: "Any thinking person understands businesses don't pay the taxes anyway. It's ultimately passed on to the customer. Holden's plan is a camouflaged way to tax the people of Missouri some more."
But Iveson said it's not that simple. He said there are people claiming this exemption based on the fact that they have a Yellow Pages listing or a page on the company Web site. At one time, he said, companies had to file fee schedules with the government and meet safety standards to earn the common carrier designation. But those requirements no longer apply.
Division of Taxation director Stan Farmer used a fictional delivery company to illustrate what he considers a problem.
"When the exemption was originally set up, their business was to haul for others," Farmer said. "Now this trucking company is in the business of hauling its own goods most of the time, but occasionally hauls goods for someone else. That's the type of company Holden wants to cut out of the tax break."
Iverson said the governor wants to keep the exemption for some companies that benefit from it. Most moving companies, for example, would not be affected by Holden's proposal. Most other trucking companies would.
Of Missouri's neighbors, only Arkansas and Kentucky don't have common carrier tax exemptions.
Doug Lipps, general manager of Jerry Lipps Trucking in Cape Girardeau, said he believed it would be applied broadly. He also said the trucking industry already pays its fair share of taxes, so he fails to see how it could be a tax loophole.
According to the Missouri Motor Carriers Association, the state's trucking industry paid about $754 million in federal and state roadway taxes and fees, which is about 41 percent of all taxes and fees paid by motorists. That's in spite of traveling only 12 percent of all vehicle miles, the association said.
"We don't need any more taxes," said Lipps, who oversees the 75-truck company. "It's more money out of our pockets and ultimately more money out of the taxpayers' pockets. What we pay is plenty enough."
Business editor Scott Moyers contributed to this report.