MERCHANTS CLAIM TAX `OUTDATED'

CAPE GIRARDEAU -- Critics claim the city's merchant license tax on businesses has become a burden.

Formulated in 1936, some say the tax is outmoded, that the license tax schedules on blacksmiths, corn doctors, feather renovators, hucksters and tinners, as itemized in the municipal regulations, are out of touch with the times.

The detractors' main grievance is that the tax is unfair to businesses, with a few companies shouldering a disproportionate amount of the load. Some businesses, presently not paying the tax, should be included as a way of reducing the injustice, they say.

Several lawsuits have been filed and are pending against the city. Most have been filed by auto dealers, following a decision to pay their taxes but under protest. They seek equalization of the tax burden.

"I contend I am in full favor of paying it (the merchant license tax) as long as it is collected fairly among all the merchants," said Bob Neff of Ford Groves, a local auto dealer. "I don't want to pay an exorbitant percentage of the tax compared to other merchants."

"What you have now is so many exclusions and some others not paying a fair share. The tax needs to be spread out more and let everyone pay a fair share. That way the city won't lose revenue."

The city has a stake in its claim to the money. The tax boosts the city general revenue fund substantially, with $491,000 expected currently. City officials become very concerned about any talk that could result in reduced tax income.

"We have to be careful about what changes we could make so they will provide the city with an equal amount of revenue, along with a potential growth factor," said Al Stoverink, finance director.

Businesspersons protesting the tax are not ready to recreate the Boston Tea Party at the Cape Girardeau riverfront to air their tax grievances. Parties involved in the controversy indicate now they are willing to sit around a table to discuss options.

Along with the high cost of litigation, a new factor leading to resolution involves efforts by the Chamber of Commerce as a mediative catalyst in the matter. Its retail steering committee is surveying local businesses currently to find answers and options to the challenge.

The survey form being distributed to chamber members cites the ordinance's unfairness and inequity, and calls for a joint effort in its revision if support merits. Alternatives in assessment include a payroll tax on total wages, a net earnings tax, or a fixed gross earnings tax for businesses.

As written in 1936, the assessment basis for businesses is either a flat annual fee, ranging from $5 to $300, or $1 for each $1,000 in gross receipts, with no cap on the amount paid. The law excludes several professions.

Thirty percent of local businesses pay the flat fee. The other 70 percent pay 96 percent of the taxes.

Stoverink said the law is similar to ones applied by other Missouri communities. But he suspects few cities have no cap limiting the gross revenue tax paid by a particular business; Cape Girardeau has no cap.

The auto dealers claim the dominant inequity is that only two percent of the total 1,252 taxpayers pay 34 percent of the collected taxes. "Of the many businesses that qualify, you have a handful of discount stores and auto dealers paying a greater proportion of the tax," Neff said. "If you spread it out, no one pays an exorbitant amount. It's just not fair the way it's set up. We're unduly burdened."

He believes part of the parity process will involve eliminating some of the exclusions now on the books. "You will find that when they wrote the law in 1936 they added many exclusions and now there are some businesses that did not exist then," Neff asserted. "Some trades like blacksmiths no longer exist. The law made sense then but not now."

Some of the exceptions, such as priests, teachers and ministers, share validity. Critics contend that other exclusions, such as lawyers, certified public accountants, surgeons and doctors, should be added to the list of taxpayers with other service providers. Stoverink pointed out that the exclusion list is state-mandated and changing the list would take a legislative act.

According to city documents, the license revenue is making a solid contribution to city coffers, with a respectable growth rate in the last decade. The total revenue more than doubled from fiscal year 1980-81 to 1988-89, rising from $251,000 to $507,000. Last year's total was off slightly, dropping $16,000 to $491,000. The totals include taxes paid under protest, which last year amounted to $38,000.

If the pending lawsuits can be settled, the taxes paid under protest can be added to the general fund without restriction. City attorney Warren Wells is handling the litigation.

"We have indicated we would like to see the results of the chamber survey and mood of the community," the attorney said. "We are interested in working with merchants if there is a consensus among them, if it is possible or appropriate to do that. We have a financial concern, needing to maintain our revenue level."

The survey is scheduled to be completed by Feb. 8, and results be compiled that month.

Don Hilleary, a St. Louis attorney, is handling the lawsuits for the local auto dealers. He refused to talk about the legal action, saying he could not comment on pending litigation.

Part of the litigation from the auto dealers contends that the merchant license tax is an unsanctioned sales tax. The dealers claim that the tax is invalid and unenforceable without voter approval. Original cases have been decided in favor of the city, but the claimants have filed more motions with new claims.

In another suit, Erb Industrial Equipment Co. of Cape Girardeau claims the tax is unconstitutional because it is not applied uniformly. Filed in 1986, the suit had a trial scheduled in 1989 which was delayed. Erb alleges it is not one of the types of businesses named in the statute to be taxed and that similar businesses to Erb are not assessed taxes.