THE USE-TAX FIASCO

Something called the use tax has been in the news quite a bit recently, but most Missourians are probably confused about what it is and probably aren't concerned that it affects them. In fact, the latest developments regarding the use tax will hit taxpayers squarely in the pocketbook as the Missouri Department of Revenue pursues a policy gone amok.

In simplified terms, here is the situation:

Missouri imposed a 1 1/2-cent use tax, which is like a sales tax, in 1992 on out-of-state purchases of products used in Missouri. Revenue from the use tax was divided among the state, counties and cities. However, a legal challenge to the use tax was raised almost as soon as it went into effect. As a result, many local governments, including Cape Girardeau County, the city of Cape Girardeau and the city of Jackson, all held their portion of the revenue in escrow until the legal dispute was resolved.

That resolution came in March when the Missouri Supreme Court held that the portion of the use tax that produced revenue for counties and cities was unconstitutional. This meant the revenue collected by those entities since 1992 would have to be paid back. Ultimately, the refunded revenue is to be used to satisfy claims from businesses who paid the tax while it was in effect.

All three local entities -- the county, Cape Girardeau and Jackson -- wisely set aside the use-tax revenue from the start. Other cities weren't so prudent and spent the funds hoping the legal decision would be in their favor.

Now the Department of Revenue has come calling -- but with an ironic twist. The revenue department is telling the local entities they not only have to pay back the money, but they also have to pay penalties for being delinquent taxpayers. Can you believe that? The penalty is the same as for any other past-due tax bill: 12 percent on anything collected before 1996, and 9 percent on anything collected since the first of the year.

Cape Girardeau County has some $837,000 it is willing to send to the Department of Revenue today. The city of Cape Girardeau has approximately $1.7 million in use-tax revenue it has set aside, and Jackson is ready to pay back the $215,000 it received from the use tax. But now the state says it won't accept the paybacks without the penalties. Presiding Commissioner Gerald Jones says that could be as much as $500,000 for the county.

Yes, each of the entities that reserved the use-tax funds while the dispute was being settled earned interest on the escrowed funds, but certainly not at rates as high as the Department of Revenue's penalties.

The whole issue is likely to wind up back in the courts. Legal steps are being taken to prevent the Department of Revenue from following through on its ridiculous attempt to brand local-entity recipients of use-tax funds as deadbeat taxpayers. In reality, those entities that set aside the funds rather than spending them were acting responsibly on behalf of taxpayers.

Whose minding the store in Jefferson City that something like this could possibly happen? One quick answer: Gov. Mel Carnahan is the chief executive of this state. Why isn't he taking charge over at the Department of Revenue?