Tax-cut plan would benefit some retailers, not others

Less than half of Cape Girardeau's retail businesses would experience a gross-receipts tax cut if voters approve a use tax on the April ballot, city officials say.

Those businesses that pay the bulk of the gross-receipts tax won't see any decrease in their tax bills, officials acknowledge.

The city council has agreed to replace the current business-license-related tax with a $40 flat fee for those businesses with less than $1 million in gross receipts. Those companies that generate $1 million or more would continue to pay a tax of $1 for every $1,000 of gross receipts, city officials said. The tax rate based on $1,000 of gross receipts dates to the city's adoption of a business license law in 1941, newspaper records show.

Last year, 959 retailers paid the city's gross-receipts tax, city manager Scott Meyer said. More than 700 of those retail businesses reported less than $1 million in annual gross receipts. A total of 283 businesses paid less than $40.

Under the tax cut plan, 444 businesses would see a decrease in their license fee, Meyer said.

Scott Shivelbine of Shivelbine's Music Store welcomed the tax cut, although he acknowledged his business won't benefit from it.

"I am glad they are doing it for the little shops, like the corner grocery store," he said.

He argued, however the tax still would be discriminatory.

"It doesn't completely level the playing field," he said, explaining it only applies to retail businesses.

In addition, the tax is levied differently for various types of businesses.

According to the city's code of ordinances, a wide range of businesses, from banks and barbers to hospitals and health clubs, pay a flat $40 fee.

In contrast, businesses such as Shivelbine's pay a tax based on how much revenue they earn.

Shivelbine said the gross-receipts tax, paid annually as part of the business license renewal process, can be a burden on small businesses. Shivelbine said $1 million in gross receipts "sounds like a lot, but it isn't." When the cost of goods and operating costs are factored in, many businesses see little profit, he noted.

Small businesses like his won't see a tax cut under this plan, he said.

Shivelbine isn't alone in his criticism of the gross-receipts tax. City officials and Cape Girardeau Area Chamber of Commerce president and CEO John Mehner said they have regularly heard complaints over the years from business owners who think the tax is not applied fairly.

The proposed tax cut won't be implemented unless voters approve the use tax measure. The use tax, equivalent to a sales tax, would apply to purchases made out of state. It largely would be paid by Cape Girardeau city businesses, which already pay state and county use taxes on such purchases, officials said.

A small part of the use tax revenue would replace about $135,000 the city would lose as a result of the tax cut, officials explained.

Last year, the tax generated $1.28 million in revenue for the city. Even with the tax cut, the city would realize more than $1 million annually from the gross receipts tax -- most of it from major retailers, said John Richbourg, city finance director.

Ward 4 Councilwoman Loretta Schneider had expressed concern the plan could result in a tax increase for in-home businesses that now pay as little as $10 a year. But Meyer said those businesses won't see any increase as long as they demonstrate annually their gross receipts are small enough to warrant such a low fee.

Meyer said those business owners will pay a $40 flat fee, but would be credited with a refund back to their accounts if warranted by their reported gross receipts.

Anne Foust, who creates and sells jewelry from her home, said she would be opposed to paying more than the $10 she is charged for a business license. She said her business doesn't make enough to warrant paying a higher fee.

She said she diligently tries to meet city regulations, but added some in-home businesses ignore licensing rules.

"There are a lot of people who are not buying a business license," she noted.

City staff kicked around the idea of a gross-receipts tax cut among themselves last fall. Meyer said he subsequently discussed the proposal with city council members in one-on-one meetings.

Such meetings are common practice at city hall. Mayor Harry Rediger said he meets weekly with the city manager, and other council members typically have individual sessions once a month or more frequently as needed.

Meyer said, "There were a lot of things discussed."

City officials considered the possibility of exempting the first $1 million in gross receipts from the tax for all retail businesses before settling on the more limited tax cut.

Rediger said officials had to consider the city's revenue needs in contemplating a tax cut.

"Our general revenue is really tight," he noted.

Rediger and Meyer said the gross-receipts tax cut is designed to help small businesses.

"We are trying to make it easier and better to do business in Cape Girardeau," Meyer said.

But Rediger acknowledged the promised tax cut also could help convince voters to approve the use tax measure.

"We are searching for 'yes' votes, no question about it," he said.

mbliss@semissourian.com

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