USE-TAX DECISION

In July 1992, Missouri imposed a 1.5 percent tax for local governments on out-of-state purchases. The tax was added to the state's 4.225 percent use tax for out-of-state businesses selling their products in Missouri.

The idea behind the additional local tax was to reimburse cities whose local sales taxes suffered from the competition of out-of-state businesses, such as mail-order catalog companies. The state collected the money and used a formula to divide it between counties and cities.

But last week the Missouri Supreme Court threw out the 1.5 percent local use tax. Now local governments might have to pay back the money they have received since 1992. Unfortunately it is money already spent in 40 percent of cities and counties.

Officials in Cape Girardeau, Perry and Scott counties should be praised for setting aside the money and not spending it while the legal challenge of the tax worked its way through the judicial system. Cape Girardeau County has $836,800 in accumulated use-tax money that the county set aside in case it has to be returned. Perry County has $159,515 saved in use-tax money, and Scott County has $321,554.

The Missouri Department of Revenue now must decide if use-tax money will be refunded to the businesses that paid it. Collecting the money from cities and counties could take years. By ending the confusing use tax, the state now must wade through the confusion of how to get the money back to the businesses that paid the tax.

But the Missouri Supreme Court decision is foreshadowed by a 1994 U.S. Supreme Court ruling that tossed out the use tax for about half of Missouri's governments. With the tax applied in only half the cities and counties, it became impossible for Missouri to levy it fairly, the state Supreme Court judges ruled.

The Legislature can, if it chooses, take another shot at replacing what was, in the words of Judge Stephen Limbaugh Jr., "a patchwork tax scheme" with a tax that could be fairly applied.

In the meantime, many city and county governments in Missouri face the difficult task of paying back tax revenue they already spent.