Citing a significant loss in sales tax revenue from motor vehicles sales bought out of state due to a 2012 court decision, Warren County officials are considering placing a use tax on the April ballot.
Warren County Presiding Commissioner Arden Engelage said about one-third of Missouri’s counties have a use tax in place, including St. Charles, but Warren County does not.
Engelage estimated the county will lose about $176,000 this year in sales tax revenues as a result of the court ruling. He said if voters don’t approve the use tax measure this spring, the county will be forced to raise property taxes to offset the loss.
“We’ll have to raise property taxes 1 1/2 percent in the county,” he said.
The property tax rate increase would go into effect at the end of 2013, he said.
The loss of revenue stems from a January 2012 decision by the Missouri Supreme Court which ruled that Greene County, which includes Springfield, could not charge a local sales tax on a man who bought a boat, motor and trailer from a dealer in Maryland.
The court drew a distinction between sales taxes, which are collected from in-state retailers, and use taxes, which are levied on products used in Missouri but bought either from an out-of-state retailer or from an individual who does not run a business, according to the Associated Press.
Although the state use tax could be imposed on the boat and its accessories, the court ruled that Greene County could not tax them because they were not covered by the local sales tax and county voters had not approved a local use tax.
According to the ruling, the sale of a motor vehicle or any other titled vehicle or trailer occurs at the point of origin, meaning if a car is bought in Illinois and titled in Missouri, the buyer doesn’t pay county or municipal sales tax, unless a use tax is in effect in that location.
If the car is purchased in Missouri, however, local sales tax is still charged.
The ruling went into effect in March. A bill that would close the loophole in the legislation was approved by both the Missouri House and Senate, but vetoed by Gov. Jay Nixon.
Ted Farnen, director of communications at the Missouri Department of Revenue, said before the Missouri Supreme Court case, people licensing a vehicle paid a local sales tax before they could get plates.
“The only way (cities and counties) can get that money back is if a use tax is implemented,” Farnen said.
A state sales tax at a rate of 4.225 percent is still collected on all vehicles registered to Missouri residents.
A number of other cities and counties attempted to pass use tax measures in the aftermath of last year’s court decision.
But voters rejected the “use taxes” in two-thirds of the Missouri cities and counties that placed them on the November ballot, according to figures supplied by local government associations. Two losing proposals were in St. Joseph and Pleasant Hill, where 77 percent of voters said no.
Local use taxes were approved in Adair and Saline counties, as well as the cities of Huntsville, Kirksville, Moberly and New Cambria last November.
Officials offered a variety of reasons according to the Associated Press.
“It’s a difficult tax to understand. It’s a tough time to be talking about a tax to voters. There were a lot of things on the ballot,” said Dick Burke, executive director of the Missouri Association of Counties.
Before the Supreme Court decision, Buchanan County had collected about $250,000 annually and St. Joseph about $450,000 annually from taxes on out-of-state vehicle sales. But voters in both jurisdictions rejected local uses tax proposals by 59 percent of the vote. City officials had said the revenues would have gone to street repairs and public safety projects, such as facilities and equipment for police and fire departments.
Despite the recent losses, some officials expect better success in the future.
“I think the message is starting to resonate with people,” Burke said. “This is the new economy we’re living in now. Our current tax structure of sales taxes in this Internet day and age just isn’t sufficient.”