Analyst: Use tax may help businesses in region

A proposed use tax could make it easier for local businesses to compete with online retailers, but for most purchases, its potential benefits may depend on consumers' diligence, a policy analyst said.

David Stokes of the Show-Me Institute -- a not-for-profit think tank that studies state and local policy issues in Missouri -- was one of two participants in a panel discussion Thursday night at the Southeast Missouri Pachyderm Club's regular meeting.

Stokes and John Mehner of the Cape Girardeau Area Chamber of Commerce answered questions and discussed some of the pros and cons of a proposed use tax that voters will consider when they go to the polls April 8 in Cape Girardeau County, Jackson and the city of Cape Girardeau.

The use tax is, in essence, a sales tax on goods and services purchased out of state or online, Stokes explained.

Someone who spends less than $2,000 on out-of-state purchases in a given year would not be subject to the tax, which Mehner said does not apply to items taxed at the point of sale, such as those bought in retail stores.

For instance, a T-shirt bought at a mall in Illinois -- where sales taxes are applied at the time of purchase -- would not be subject to the use tax, but a T-shirt bought online would.

"This is never going to be in addition to a sales tax that you're paying someplace," Mehner said.

The tax applies only to end users, Mehner said. Items purchased for resale are not subject to the tax.

Pros

Mehner said the chamber of commerce supports the tax because it helps level the playing field for local businesses that have to compete with online retailers.

"On the pro side of this issue, it is an issue that discourages people from spending money outside the area," he said.

Mehner said he personally is willing to pay the tax to help local businesses.

"I am absolutely willing to do that so that the playing field is level for them," he said.

Unless a city or county has adopted a local use tax, it cannot impose local sales taxes on out-of-state car purchases, Stokes said.

He said in the St. Louis area, Illinois car dealers are taking advantage of that by running television ads enticing Missourians to buy vehicles from them to avoid paying sales taxes.

"It's a problem that's increasing," Stokes said.

The use tax would close the loophole and take away the incentive to buy vehicles outside the state, he said.

Cons

One down side to the use tax is that it represents a tax increase for local residents who make out-of-state purchases, Mehner and Stokes said.

"Anybody that tells you this is not a tax increase is not being honest with you," Mehner said.

Stokes said enforcement is another concern.

"I think enforcement would be very difficult at the individual, residential level," he said.

Imposing the tax on car buyers is easy, because Missouri residents have to register their vehicles in the state, which they cannot do without paying the tax, Stokes said.

For other goods and services, compliance is less likely, he said.

"Nobody's going to keep all their receipts for the course of the year," Stokes said.

Mehner disagreed, noting that income taxes are self-reported, and most people file tax returns every year.

"I have faith that the people in here will do the right thing," he said.

epriddy@semissourian.com

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