An information campaign is under way to educate the public about a countywide use tax proposal that will be on the April election ballot.
County officials say the use tax could help generate more revenue to pay for critical services ranging from roads to law enforcement.
But convincing the public that the use tax is a good idea could be a challenge.
The “three-letter word ‘tax’ is taboo,” Second District Commissioner Mike Schatz said.
The countywide use tax would apply to all of Franklin County, including municipalities and unincorporated areas, Presiding County Commissioner John Griesheimer said.
Griesheimer expects the county commission to formally vote this month to put the measure on the April ballot.
Schatz stressed the importance of educating the citizens about the proposed use tax.
The plan is to form a committee to educate the public on the issue, Griesheimer said. He noted that the committee must be separate from the county to comply with the law.
On Monday, Mike Sutherland, a former state representative from Warren County, made a presentation to county officials on the tax.
Griesheimer said he may pay Sutherland out of his own pocket for the Monday presentation. But it is possible that Sutherland could be compensated through the Missouri Association of Counties, Griesheimer noted. The main point is that county tax dollars not pay for it, he added.
“He is the former chair of the joint committee on tax policy,” Griesheimer said. “He is very versed on tax issues.”
County commissioners plan to put a 1.5 percent countywide use tax on the ballot to provide more revenue for the county, which is saddled with $51.86 million in debt, including principal and interest, for new facilities. Those facilities were approved by previous commissioners, not the ones in office now.
“With the debt that we have and with the services we’re trying to provide, it’s a constant struggle every year trying to find the revenue to meet those needs,” Griesheimer said.
He added that the county is not trying to expand services but keep what it has. But he said the use tax could help the county generate revenue to convert more gravel roads to hard surface.
“I think the use tax is the only way to go,” Griesheimer said, adding, “It’s about the future of this county.”
A show of hands indicated that there is strong support among some county officials to put the use tax to a vote of the people in April.
‘No Double Taxation’
A use tax could be imposed on “the use, storage or consumption,” of products bought out of state and brought back to Missouri. But the use tax cannot be charged if sales tax was charged at the time of purchase, Sutherland said, adding, “Double taxation is not allowed.”
If the customer paid sales tax in Illinois, the use tax would not be paid in Missouri, Sutherland said
But if someone bought a car out of state, and brought it back home to Franklin County, then the use tax would have to be paid if no sales tax was collected there. Sales tax is generally not charged when someone buys a car out of state, Sutherland noted.
The use tax could also have big implications with more people shopping online these days.
“Only jurisdictions with a use tax can potentially collect taxes on remote sales,” Sutherland said.
First District Commissioner Tim Brinker said there are “boatloads” of large purchases made out of state and brought back to Franklin County.
Imposing a use tax can be good for local businesses because it takes away the incentive for people to buy items out of state to avoid taxes, Sutherland said.
For instance, Sutherland said automobile dealerships in the past have reportedly advertised that Missouri residents should shop for a vehicle in Illinois to avoid paying sales taxes.
Officials do not have an estimate on what the use tax would bring in, but Griesheimer said the collections would be divided equally between the county’s three sales tax funds — general fund, law enforcement and road and bridge.
‘Not a New Tax’
The city of Washington and the state of Missouri already collect a use tax. The state’s use tax is 4.225 percent and the city’s is 2 percent.
If the countywide use tax passes, Washington residents would have to pay the countywide use tax, the city use tax and the state use tax, Sutherland said.
Therefore, the proposed countywide use tax would not be a new tax but in addition to the use taxes already being charged by the city of Washington and the state, Sutherland noted.
The use tax could also apply when a company bought equipment in another state without paying sales tax and then brought it back to Franklin County.
In addition, it could apply when a Franklin County resident purchased an item online from a company that does not have a physical presence in the state.
But if a county resident bought an item online through a retailer that did have a physical presence in Missouri, such as Bass Pro Shops, then the use tax would not apply because sales tax would be charged.
The use tax proposal comes on the heels of a decision the state Legislature made about out-of-state vehicle sales last year.
The Missouri Supreme Court ruled that counties could not charge sales taxes when someone bought a vehicle out of state. However, counties and cities with use taxes were still able to collect revenue from those out-of-state sales since the vehicles were brought back to the jurisdiction for use.
The Legislature passed a bill last year that once again allows counties without a use tax to collect a sales tax, referred to as a titling tax, on vehicles that are purchased out of state. However, it is only allowed for a temporary time.
Under the bill, counties without a use tax must put to a vote of the people by November 2016 whether to continue collecting the sales tax on out-of-state purchases of vehicles, boats, trailers and outboard motors.
But instead of putting the titling sales tax to a vote of the people in April, the county is just going to put the use tax before voters.
It is fairer to put the use tax on the ballot as opposed to the titling sales tax for vehicles, Sutherland said.
That’s because the titling sales tax would only apply to vehicles, boats, outboard motors and trailers. The use tax would apply to those items as well as other purchases made out of state, such as equipment for a company.
The use tax protects all types of Missouri retailers from being put at a competitive disadvantage with out-of-state competitors, he added.
“It makes sense that every retailer needs to be treated fairly,” Sutherland said, adding, “It promotes doing business locally.”
The use tax must be the same rate as the sales tax so there is no advantage to either one, Sutherland noted.
Any current exemptions, such as for farm equipment, apply the same to use tax and sales tax.
If the use tax passes, then the county won’t have to worry about putting the titling sales tax for out-of-state vehicle purchases to a vote since that would be covered by the use tax.
However, if the use tax fails in April it can be put on the ballot again in November.
But if it fails again in November, then the county would have to put to a vote of the people by November 2016 whether to continue the titling sales tax for vehicles, boats, trailers and outboard motors, Sutherland said.
Part of the information campaign to pass a use tax must include a discussion of the benefits of doing so, officials say.
Passing a use tax could help prevent other types of taxes from going up, since the county would have another source of revenue, Sutherland said.
The counties of Warren, St. Charles and Washington already have a use tax, Griesheimer said.
Griesheimer has previously said that the use tax would only apply when more than $2,000 worth of goods were purchased. But Sutherland said the use tax is actually supposed to be paid from the first dollar. He added that paying the use tax is the responsibility of the individual.