LOCAL GOVERNMENTS MAY NET $500,000 FROM USER TAX

Cape Girardeau city and county officials are praising a new local use tax on out-of-state sellers, because it will bring a much needed boost in sales tax revenues that have showed signs of leveling off the last few years.

Although the exact impact on local governments of the 1.5 percent use tax will depend on how much is collected and the exact distribution formula, Cape Girardeau Assistant City Manager Al Stoverink and Cape County Presiding Commissioner Gene Huckstep foresee revenues increasing about 5 percent.

It's been estimated by some governmental interest groups that the tax could raise an additional $230,000 a year for the city and another $150,000 annually for Cape Girardeau County.

Under another rough formula, distributed by the Missouri Department of Revenue, Cape Girardeau could receive $350,000 a year from the tax and the county, an extra $215,000.

Whatever the final amount is, however, it is good news for the local governments.

"I think it could certainly delay for some period of time the need for additional operating revenues, which was fast beginning to approach us, with sales tax growth having reached a plateau," declared Stoverink. "This will be a shot in the arm that will allow us to meet the growing service demands and inflationary impacts without having to approach the people for a general operating tax increase in the near future."

Huckstep added, "Any additional money that would come in would be a good deal. It will certainly help us. Everything we touch seems to be going up; the cost of business is going up all the time."

Huckstep said he is anxiously awaiting definite information about the use tax and what kind of impact it will have on Cape County. Like the city of Cape Girardeau, the county has faced flat sales tax growth.

The local use tax, included in a large bill passed in May by the General Assembly, was signed into law this week by Gov. John Ashcroft. Under present law, a use tax for the state was in effect at 4.225 percent, but there was no provision for local governments. Most cities have a 1-cent sales tax, and counties have a half-cent sales tax to fund general operating expenditures.

Duane Benton, director of the Missouri Department of Revenue, said the use tax will likely generate $50-60 million a year that will be placed into a fund and distributed monthly to local governments. The tax does not take effect, however, until July 1, 1992.

A use tax is just like a sales tax, except instead of being charged by sellers in Missouri, it is charged by out-of-state sellers doing business with Missouri residents.

Benton said a key issue in the discussion about the use tax was fairness. Benton said business owners frequently ask him why someone from Missouri can purchase something out of state and pay less sales tax. For example, under present law, if a Missouri resident purchases something in the state they are charged the state sales tax of 4.225 percent plus all local taxes that are in effect. But, if they were to purchase the item from an out-of-state vendor to use in Missouri, they would only pay the state sales tax.

Benton said the difference does not amount to much on small items, but when it comes to large purchases of equipment or products, it can give the out-of-state bidder an advantage.

In signing the bill, Ashcroft proclaimed the use tax would remove the tax advantage for out-of-state sellers. "These changes could be considered a `home field' disadvantage for Missouri businesses," said the governor.

But not everyone is singing the praises of the new law, especially large businesses that will wind up paying a large part of the 1.5 percent tax. Associated Industries of Missouri, which represents major industries in the state, advised its members in a memo that it could amount to a $60-80 million tax increase for the state's businesses.

Cape Girardeau Chamber of Commerce President Bob Hendrix said he had received encouragement from city officials to support the bill, but added he had received some concerns from a few businesses.

"Right now we are trying to see what the impact will be to the local business community," said Hendrix. "A percent and a half is not a lot of money if it's on a pack of cigarettes. But on a big piece of equipment, it can have quite an impact.

"It kind of depends on whose ox is being gored."

Hendrix noted that the use tax was just one part of a larger bill, and said he gets suspicious when items like this are included in "Christmas tree" bills.

"This is one of those things that has snuck by and we have not had a chance to study the repercussions. When you put this in a Christmas tree bill it gives you an idea they are trying to sneak something by. It's a sneaky way to do business."

Rep. Larry Thomason, D-Kennett, who was executive director of the Kennett Chamber of Commerce before winning his House seat three years ago, said when the use tax was presented to the legislature, it was never portrayed as a big tax increase for business.

He noted the emphasis was more on fairness for Missouri businesses and increased revenue for local governments.

"If anybody would have stood up on the floor of the House and said there was that kind of a tax increase in this bill, I don't think it would have stood a chance," said Thomason.

Cape Girardeau City Manager J. Ronald Fischer said he was delighted the governor signed the bill. "It is a positive thing for the merchants in the state of Missouri. Prior to this year, people could order out of catalogs and save this tax.

"It's a heck of a deal for the city," Fischer said.

Benton said the impact on mail-order sales remains to be seen. He explained that some mail-order companies charge sales tax for the state, but others do not. "Some mail-order companies pay us, but there is a question of whether we can enforce it or not," said Benton.

Benton is president of the Multistate Tax Commission, an organization backing a North Dakota case they hope will eventually result in a court decision giving states the power to enforce the use-tax collections.

In discussing the impact of the local use tax on Cape Girardeau, Stoverink stressed it will not provide funds for major capital improvements the city needs, and will not ease the crunch of the new fiscal year budget, because the tax does not take effect for a year.

"Passage of this legislation and the governor's signing of it is a significant step forward for us and also puts our local retail merchants on a more competitive basis with catalog sales, for example," said Stoverink. "This is positive all the way around for Cape Girardeau. This will have a positive impact on our ability to meet service demands the next few years.

"We are busting at the seams with demands being placed on city government," he noted, adding that revenue has not kept pace with those demands. This additional revenue will help the city keep pace with its growing needs, he said.