COUNTY TO FIGHT USE-TAX ORDER; JONES SAYS PAYING OF INTEREST `RIDICULOUS'

JACKSON -- Cape Girardeau County will go to court in hopes of forcing the state to keep its hands off use-tax revenue collected by the county.

"We're going to sue them," Presiding Commissioner Gerald Jones said Thursday. "We're going to file an injunction."

In March the Missouri Supreme Court declared the use tax unconstitutional. The 1.5 percent tax was levied in 1992 on residents and businesses that bought products from other states and used them in Missouri.

Only the portion of the tax designated for local governments was thrown out by the high court. Municipal and county officials around the state were expecting to have to pay back the use tax collected, which is estimated at $200 million statewide. But Cape Girardeau County officials are enraged over news that they are going to have to pay interest on the money collected.

The county has more than $837,000 set aside in use-tax revenue.

The state Department of Revenue is telling local governments that they will have to pay 12 percent interest on revenue collected before 1996, and 9 percent on revenue collected after 1996.

"Not only are they going to make us pay it back; they're going to charge us interest," Jones said. "This is so ridiculous. It's unbelievable."

Jones said state officials told the Missouri Association of County's board of directors Wednesday that local governments are being considered delinquent taxpayers and are being charged accordingly.

"We say we're not delinquent, and they say this applies to us," Jones said.

The interest for taxes collected from 1993 to 1996 "comes to $100,000 a year," Jones said. "That's $300,000 in interest alone. Does that sound like some idiotic, bureaucratic way of dealing with taxpayers' money?"

With the 9 percent interest rate tacked on, the total interest could come to about $500,000 on the $837,000, he said.

"That's like buying a house," he said.

The use-tax revenue is in an escrow account earning 6.125 percent interest, Jones said.

"They're going to charge us twice what we've made," he said. "It's really, really dumb."

The state's plan for now is to withhold sales-tax disbursements to local governments until the use-tax revenue is repaid. For Cape Girardeau County, the state sales tax averages about $21,000 a month, said Kay Dinolfo of the Missouri Department of Revenue.

County officials are especially upset because they say the state won't allow them to return the revenue in one lump sum and save the interest.

"We could write them a check tomorrow," said county Auditor H. Weldon Macke. "We don't want to pay any danged interest."

Dinolfo said the sales-tax revenue withheld from local governments will be pooled and disbursed to businesses that apply for refunds plus interest on the use tax. The interest they receive on those refunds would be the same interest allotted to any individual determined to be due a tax refund, she said.

The statute of limitations on the refunds is three years, Dinolfo said, so claims for refunds dating from before that period will not be honored.

"The withholdings will happen for as long as we have refunds," she said. "When the refunds stop, the withholdings will stop."

Dinolfo said quite a few applications for refunds have been made totalling about $30 million. "Some of that is actually use-tax money that was paid under protest," she said.

Macke said the state is jumping the gun.

"I think the Department of Revenue ought to hold off until they get their act together," he said. State officials should meet with local governments to explain how the refunds will work, said Macke.

He also pointed out that the state has no way of knowing how many businesses will apply for refunds or what those refunds will total.

Macke said counties were warned that about half the use-tax revenue would be refunded.

"What happens to the other 50 percent? Do we get that back or does that go back into their coffers? There's no one to tell us," he said.

Jones said commissioners had planned to use the money for major road improvements and an addition to the county juvenile detention center.

Jackson and Cape Girardeau city officials also held onto their cities' use-tax revenue.

Steve Wilson, Jackson city administrator, said his city hadn't been informed of the state's plan to collect interest. "That's not going to make a lot of people happy in the municipality business," Wilson said.

Jackson had set aside the $215,000 it received in use-tax revenue, Wilson said, "because we knew that there was at least some potential for a change in that collection process."

Wilson said he won't be surprised if the Missouri Municipal League or other agencies join Cape Girardeau County in taking legal action against the state. If action is taken, he said, "then the mayor and the council will take a long look" at joining in.

Cape Girardeau has approximately $1.7 million in use-tax revenue set aside, said John Richbourg, city finance director. "It's in a bank account earning interest," Richbourg said. "Quite a few cities spent it, but we didn't."