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Use Tax Approved

April 23, 1996
By: Dana Coleman and Joseph Morton
State Capital Bureau

JEFFERSON CITY - Missouri voters will get to choose whether to impose a local use tax under legislation given preliminary approval by the Missouri Senate Monday night (April 22).

Local use taxes are imposed on out-of-state purchases, which often involve mail-order catalogues or raw materials that cannot be found in Missouri. The tax is collected by the state Department of Revenue and redistributed to the local governments.

But the state's current use tax law was struck down by the courts. Rather than re-imposing the tax with legal language to meet court objections, the Senate voted to let local voters decide.

Under the version approved by the Senate, county or city voter approval would be required before a tax would be imposed on out-state purchases by the area's residents.

Business representatives say they often have been unfairly hurt by such use taxes.

"A local use tax will generally hit a business harder than a resident, because businesses generally have to order more out-state-goods, things that are not available in Missouri," said Dan Mehan, a lobbyist for the Chamber of Commerce. "Many businesses see this as a redistribution of a tax that they pay to their local government."

Mehan said the tax is collected from about 46 percent of the counties and cities in Missouri, and is then distributed to 98 percent. He said the Chamber of Commerce is not opposed to a use tax, as long as it is imposed by a vote of the people and redistributed fairly.

Missouri has collected about $50 million a year from this tax since it's enactment in 1992, said Jay Wunderlich, executive director of the Taxpayers Research Institute of Missouri.

"It's a discrimination tax on businesses," Wunderlich said.

After being amended Monday, the bill requires local governments wanting to continue the local use tax to put the issue up for voter approval during the second week of August.

"I think we should allow local governments to continue collecting the tax because they need the money," said Sen. Wayne Goode, D-St. Louis County.

Under the bill, local areas will be required to keep the use tax below the level of the local sales tax.

The legislation passed Monday night is a response to recent U.S. and Missouri Supreme Court rulings that eliminated the state's local use tax, which was enacted in 1992. In lawsuits filed by various business groups, the U.S. Supreme Court struck down the local use tax in areas of the state where it exceeded the local sales tax.

Members of the Missouri Supreme Court then decided the remaining use tax system could no longer be applied fairly to all counties and cities, so they declared it unconstitutional.

Backers of Goode's bill maintain it will satisfy the courts' concerns with uniformity and comparison to sales tax. But Sen. David Klarich, R-St. Louis County, thinks the courts will still have problems with the tax as it is structured in Goode's bill.

Klarich said Missouri must have a statewide vote on the use tax, the exact rate of which can then be determined by local voters.

"State voters haven't given the Department of Revenue the authority to collect this tax," Klarich said. "I think this bill may have problems standing up in court."

Klarich said he will attempt to have the bill brought back for reconsideration today and amend it.

But Sen. Franc Flotron, R-St. Louis County, said a statewide vote on the issue is unnecessary.

"It is unclear to me how this is could be state tax," Flotron said. "The department remits this money back to the local governments."