USE TAX REVENUES IN ESCROW; SUIT FORCES COUNTY, CITY TO HOLD FUNDS

The city of Cape Girardeau, Cape Girardeau County, and most other local governments around Missouri have been receiving proceeds from a new use tax the last three months. And while the additional revenue is a welcome sight during tight economic times, many entities are going to wait for a court challenge to be resolved before spending the money.

Both Cape Girardeau City Manager J. Ronald Fischer and Cape Girardeau County Auditor H. Weldon Macke report that they are setting the funds aside in a special account for fear the money might have to be refunded after litigation is finished.

A use tax is just like a sales tax, only instead of being charged by sellers in Missouri, it is charged by sellers outside the state against residents of Missouri.

Some form of use tax has been in effect for years, however, legislation passed in 1991 that did not take effect until July 1 increases the use tax by 1.5 percent to be distributed to local governments. Previously, the tax only applied to the state sales tax.

Local governments in Missouri, many heavily reliant on the sales tax for much of its revenue base, have been struggling in recent years due to the economic downturn. Both Fischer and Macke point out that the additional money will provide relief.

In particular, the money will help the entities deal with rising costs for things like insurance and utilities.

And, with indications that the economy is starting to come around, the use tax money could be a bonus for local entities.

"We made the decision here locally to put it in a restricted fund and have not spent any of it," said Fischer. "If we get a negative decision from the courts, the Department of Revenue would have to refund the money it collected and we would have to refund the state."

Macke said the commission has a special escrow account set up and looks forward to getting a ruling soon. "We would like to have a ruling to decide whether we can feed it to the system or not," said Macke.

Cape Girardeau County's three checks from the use tax have totaled about $32,000. The city of Cape has received almost $50,000 for its general fund from the use tax and just over $12,000 from the quarter-cent sales tax for the city's share of the Cape LaCroix Walker Creek flood control project.

Macke said the county is hoping the use tax will amount to about $150,000 a year. Some initial formulas that were prepared showed the county getting about $215,000 a year.

The city was projected to get about $230,000 a year from the tax, however, some of the other formulas drafted when the law was passed showed the city getting as much as $350,000 a year in additional money.

The use tax, like all other sales taxes, are collected by the Missouri Department of Revenue and distributed to local governments on a monthly basis.