Up to 20 percent of sales-tax revenue lost by a local government is not an easy situation for its leaders to face. Neither is asking voters to approve paying a tax to make up for a budget shortfall when they could be getting a tax break as a result -- depending on where they buy a car, truck, RV or boat.
Now, anyone who lives in Missouri and buys a vehicle from a dealer in the state will pay all applicable sales taxes, including those levied by local governments. But if they cross the Mississippi River, in some cases, they'll cut their taxes almost in half.
The situation stems from a state Supreme Court ruling earlier this year. The court decided local governments no longer could charge sales tax on vehicles purchased out-of-state or on person-to-person sales. The only tax individuals pay if they live in Cape Girardeau, for example, but buy a car or truck in Marion, Ill., is a state use tax of 4.225 percent, vs. if they live and buy in Cape Girardeau, where they'll pay 7.795 percent.
It's an issue local car dealers aren't talking about openly with their potential customers. If someone knows they can save thousands of dollars in taxes, they'll buy where that's possible, dealers say.
"To be frank, I think it hurts Cape," said Glyn Jarrell, owner of Bud Shell Auto World in Cape Girardeau. "I mean, I hate to see people pay more tax, but it sure would help local dealers and the county."
The amount of revenue local governments are losing, which varies depending on how much vehicle sales activity a municipality has -- combined with what some local and state government officials and car dealers see as an uneven playing field -- is prompting talk of placing a use tax on ballots in April.
A use tax would allow local governments, such as the city of Cape Girardeau and Cape Girardeau County, to levy a tax that would mean everyone, regardless of where they purchased a vehicle, would pay the full amount of sales tax charged in that particular area. A use tax in the county, for example, would be 1 percent, and in the city, 2.75 percent.
A use tax, defined by the Missouri Department of Revenue as a tax "imposed directly upon the person that stores, uses, or consumes tangible personal property in Missouri," would have to be approved by voters.
Approximately 40 Missouri counties have a use tax. A few were able to add use taxes in November elections, but, overall, most voters said they did not want one when the question was placed on the ballot. Commissioners in local counties are concerned businesses are being hurt by the tax situation and shortfalls as a result of the ruling. But they aren't eager to ask residents to approve a use tax.
"We're caught in the middle," said Cape Girardeau County Commissioner Paul Koeper. "We are not the driver of this, but we still have to protect what we have in this county."
Local government officials also do not want voters to have the impression they are asking for a new tax.
"I think if we are going to ask for this, we all need to get together on it in some way," said Scott County Presiding Commissioner Dennis Ziegenhorn.
Cape Girardeau County Presiding Commissioner Clint Tracy agrees.
He and Koeper know the only way a use tax can be approved is if the situation is understood by voters. Cape Girardeau County voters narrowly defeated a 0.5 cent use tax in 1996.
"Technically, this would not be a tax increase," Tracy said. "It would be recouping what we had before."
The Missouri Association of Counties estimated the loss of revenue for Cape Girardeau County this year would be about $250,000. For the city of Cape Girardeau, the amount is nearly $280,000.
Local governments have until Jan. 22 to decide whether they'll place a use tax on the ballot. But local officials and business organizations say there are a lot of discussions to be had first.
"From our standpoint, there are business groups around the state that are wondering if it's going to be addressed by the state legislature, and is there a way to work with the governor to address it that way," said John Mehner, president of the Cape Girardeau Area Chamber of Commerce.
State Sen.-elect Wayne Wallingford, R-Cape Girardeau, is a supporter of the state legislature re-establishing governments' ability to collect sales tax on out-of-state purchases.
"There were cities and counties that were counting on that money, budgeting that money to provide services," Wallingford said. "Now, suddenly, it's gone."
The legislature passed a bill this year to allow local governments to collect sales tax on vehicle purchases, but it was vetoed by Gov. Jay Nixon. Some House Republicans attempted to override the veto but could not come up with enough votes.
Perry County Clerk Randy Taylor said last week that officials in Perryville and Perry County are discussing placing a use tax on the ballot. Cape Girardeau city manager Scott Meyer has said a use tax is also something "being bantered about" in city hall. Bollinger County officials also are said to be examining the issue.
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