Editorial

Sales-tax confusion

Efforts to give Missouri manufacturing a tax break on utilities was successful in this year's legislative session -- in a way, too successful.

Language was included in two bills exempting utilities and chemicals -- along with machinery, equipment and materials used for research and development related to manufacturing -- from sales taxes. However, county and city officials, including those in Cape Girardeau County, said a blanket sales-tax exemption would seriously curtail revenue. The county says it would lose $365,000 a year from sales taxes it collects on utilities purchased by the Procter & Gamble plant. Cape Girardeau would similarly lose an estimated $100,000 a year.

Taking these concerns into consideration, local legislators were successful in protecting the county and city sales-tax revenue in one bill, but another bill -- a major piece of legislation containing economic development incentives considered vital to business and industrial growth -- would eliminate county and city sales taxes as well as state sales tax from the exempted manufacturing expenditures.

The first bill has already been signed by Gov. Matt Blunt. The economic development bill is awaiting his signature. If he signs the second bill, there will be conflicting language regarding which sales taxes to exempt or collect.

It is the duty of the revisor of statutes and the Committee on Legislative Research to publish new laws that go into effect, and it is likely the laws regarding the sales-tax exemption would both protect local sales taxes as well as exempt them from the new manufacturing tax breaks.

Counties and cities would then choose, in most cases, to continue collecting the sales tax under the provisions of one law, while manufacturers would choose, in most cases, to refuse to pay the local taxes under the provisions of the other law, setting up a confrontation that would have be settled by courts.

The overall importance to Missouri's economy of the economic development incentives is likely to outweigh the concern over the conflicting language in the two bills regards sales taxes. The quickest remedy would be for the legislature to pass a corrective measure as early as possible in its session next year, since a legal challenge would likely take much longer.

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