The Supreme Court ruling that limits the collection of local sales taxes on many vehicles would take a bite out of the city’s budget, officials said.
The Supreme Court ruling in Craig A. Street v. The Department of Revenue declared that local sales taxes can only be levied on the sale of motor vehicles, boats, recreational vehicles and trailers that are sold by businesses within the state.
According to information provided to the Missouri Municipal League from the Missouri Department of Revenue (DOR), in 2011 the city received $242,872 in sales taxes remitted from vehicle and marine sales.
The ruling went into effect March 21.
City Administrator Russell Rost said an estimated 21 percent of those taxes were collected on sales from vehicles purchased out of state or from individuals. The city would have received $50,003 less if the Supreme Court decision had been handed down prior to 2011.
He said it is difficult to estimate future taxes, but said the city will lose funds due to the decision.
“It is going to affect our taxes — no doubt,” Rost said.
State and local sales taxes for motor vehicles, boats, trailers and recreational vehicles are collected at the time of registration. The Supreme Court ruled that the local sales tax — county, municipal or other entities — can’t be collected on vehicles purchased outside of Missouri.
Vehicles purchased from individuals also are not subject to municipal taxes.
State sales taxes, at the rate of 4.225 percent, still will be collected on all vehicles registered to Missouri residents.
For example, if a vehicle is purchased in Illinois the buyer is not subject to the municipal sales tax, only state sales tax. If a vehicle is purchased in Missouri, for the same price, the buyer still is required to pay the local sales taxes.
According to DOR figures, the city of St. Louis collected $2.3 million in sales taxes from the sale of vehicles and marine sales. Kansas City collected $2.7 million.
“That is based on current sales,” said Rost. “You would expect that (Supreme Court decision) to impact any city close to the border.”
Including Union, Rost added.
He further explained that it is not unlikely for people in this area to travel to Illinois to purchase a car or boat.
There are some municipalities and counties that still will receive local taxes for vehicles purchased out of state, including the city of Washington.
Those are counties and cities that impose a voter-approved local option use tax.
The city of Washington currently has a 2 percent option use tax. That means Washington could still collect 2 percent in taxes on vehicles purchased by city residents, even if the vehicle came from out of state or from a private individual.
There are only 176 entities within the state that impose those voter-approved taxes.