Gov. Jay Nixon’s veto last week of a bill to reinstate a sales tax on out-of-state vehicle purchases is disappointing, Presiding County Commissioner John Griesheimer said Tuesday.
This is bad news for counties, such as Franklin, that need the sales tax revenue from those vehicle sales, Griesheimer noted.
Sales taxes from vehicle sales were a significant portion of the county’s revenue, Griesheimer said. However, it is difficult to say how much revenue the county has lost since it stopped collecting those taxes.
In addition to hurting the county’s revenue, the inability to collect that sales tax also puts local vehicle dealers at a competitive disadvantage, Griesheimer said. People will go across state lines to buy vehicles to avoid paying sales tax instead of shopping locally, he added. This creates an uneven playing field for local dealerships, he said.
Griesheimer said there is still hope in getting a bill passed this year even though there are only about four weeks left in the legislative session.
Instead of the Legislature trying to override the veto, Griesheimer said he has heard that a new bill is in the works in hopes of gaining the governor’s approval.
The Missouri Supreme Court ruled last year that counties and cities cannot collect sales tax on vehicle purchases when the transaction occurs out of state or between individuals.
The court made a distinction between a sales tax and a use tax. Counties and cities with a use tax can collect taxes on out-of-state vehicle purchases. A use tax is applied to products used in Missouri but bought in another state.
The city of Washington has a local use tax.
Franklin County does not have a use tax, but Griesheimer favors one, saying it may be needed if Congress allows taxes to be collected on Internet sales. A use tax would have to be approved by county voters.
The bill vetoed Friday by Nixon sought to get around the court ruling by applying sales taxes to the titling of the vehicle based on the residence of the purchaser, the Associated Press reported.
If the bill had passed, the sales tax would have been immediately reinstated but would have had to go up for voter approval between November 2014 and November 2016.
The AP reported that Nixon said the referendums on repealing the local taxes applied not only to vehicles bought out-of-state, but also to in-state sales between two individuals. He also said that a provision allowing a citizen-led initiative to repeal local taxes charged to vehicle titling could have the effect of repealing the tax both for out-of-state and in-state purchases, thus potentially costing local governments more money.