Columbia City Council to consider use tax for November ballot

Sales tax revenue in Columbia is projected to only climb about 1 percent in 2018. The last time the city saw such low growth was in 2008, during the Great Recession. According to the city, the highest annual growth in sales tax revenue happened in 2011, when the growth was almost 6 percent.

City Manager Mike Matthes said Friday he expects sales tax revenue to continue its decline due to rising internet sales across the country. Online shoppers don’t have to pay local sales tax and city leaders said that in the past 10 years, it has been estimated that the city has lost out on nearly $11 million because of it.

“Every time we buy something online, we defund most of the city government,” he said.

Matthes said he will be putting a request to the city council to place a use tax on the November ballot. A use tax is imposed on anything bought out of state that has a direct connection, or nexus, back to Missouri. Boone County voters approved an auto, boat and trailer use tax last year.

“Use tax very briefly fills the gap where we as humans and business owners make our self-interested decision to avoid tax where we can,” he said.

The U.S. Supreme Court ruled in 1992 that states can’t collect sales tax on things a customer purchases out of state unless the retailer has a physical brick-and-mortar location in that state.

One way around this is a broad use tax but until state and federal legislation is enacted, it will most likely not have a significant financial impact on the city or county in the short term. Ward 2 councilman Mike Trapp said it could bring in about $80,000 a year if passed.

Ward 5 councilman Matt Pitzer said that even though the financial impact would be minimal, it would set up the city to benefit in the long term if the Main Street Fairness Act is passed at the federal level.

That legislation would allow state governments to require out-of-state retailers to collect and remit sales and use tax on purchases shipped to residents in that state. It was introduced in 2010 but died in committee three years later.

“All of our local businesses and our local economy would be able to be on a level playing field with those online retailers,” he said. “We see a lot of local businesses having trouble competing and if the use tax is in place, and if the Main Street Fairness Act is in place, then it will be an equal opportunity for everyone to compete.”

Sens. Roy Blunt and Claire McCaskill voted in favor at the time.

Jerry Dowell, Government Affairs coordinator with the Chamber of Commerce, said Missouri has one of the more complicated sales tax laws in the country because it has so many different taxing jurisdictions. He said state legislators can make a small impact while the federal level grapples with its legislation by making some of those jurisdictions more uniform.

The Streamlined Sales and Use Tax Agreement calls for Missouri to collect sales tax on online purchases but, despite being filed for years and making it out of committee, has never gotten a vote from both houses.

“I doubt it’ll be a priority this sesson,” said Dowell.

Boone County leaders have also expressed a desire to add a use tax to the November 2017 ballot. Matthes said it would be a good idea for both groups to work together.

The state’s tax rate is 4.225 percent, but cities and counties can impose their own in addition. Matthes said he did not know what the rate in Columbia would be.

ABC17 News reached out to council members this weekend and received responses from Ian Thomas, Mike Trapp, Matt Pitzer and Clyde Ruffin, who all said they would be inclined to support a use tax for the November ballot.

Betsy Peters, Karl Skala and Mayor Brian Treece did not respond to requests for comment.

Matthes’ use tax request will most likely be taken up by the council next month.