Columbia sees decline in sales tax revenue, city warns of less services

The growth of online shopping brings a decline of sales tax revenue for cities across mid-Missouri.

When residents shop online the sales tax collected does not go back to the city, creating a shortfall, according to some city managers.

Columbia sales tax revenue

Columbia’s Fiscal Year 2018 budget shows there is a decline in the sales tax revenue growth.

“Sales tax growth has been historically low for the last four years. These revenue challenges appear to be long-term problems,” the budget said. “As the retail economy suffers, our city will continue to be negatively impacted.”

The city said it prepared for the small growth year in 2017 and it did not have to dip into the reserves.

It shows a decline that started in 2014, where the sales tax revenue growth was 3.86 percent. In 2018, the growth was 1 percent.

Graph courtesy of the City of Columbia

City Manager Mike Matthes addressed the depleting sales tax revenue growth in his State of the City address.

He said Columbia’s sales tax is average for Missouri, “but is producing less funding because of the majority of taxable transactions now moving to the internet.”

Matthes said, “Those online retailers do not have to pay sales tax to cities.”

Lower tax revenue means the city has less resources to offer the community, including public safety officials.

“The departments that are supported by the general fund, public safety is included in that, those have a larger impact just by the way those are funded through general sales tax,” City of Columbia finance director Michele Nix said.

“Our residents should expect less service from the city government in future years, after all we as a community are not actually buying much of it,” Matthes said.

The Columbia Chamber of Commerce’s Government Affairs director, Jerry Dowell, said, “tax revenue affects everything.”

Local business owners are also feeling the hit of online retailers’ advantage.

Don Hart owns Best of the West, a store in downtown Columbia.

“I had this shop ten years ago and I was making five times as much money as I am making now,” Hart said. “Everybody is drawing away from mom and pop shops and they are going to the internet because things can be delivered to their doorstep.”

Boone County residents voted against the 1.75 percent use tax on November’s ballot. The use tax was expected to generate about $1.28 million for the county each year.

Commissioners at the time the tax was on the ballot said the money would have likely gone toward items such as law enforcement and road and bridge projects within the county.

The use tax was also voted down in Ashland and Harrisburg.

Jefferson City sales tax revenue

Jefferson City is also seeing a decline in its sales tax revenue.

Jefferson City’s 2017 proposed budget shows the city expected to see $19.9 million of revenue from sales tax. In 2017, that projection decreased by almost 6 percent, expecting to lose out on over $1.1 million.
Table courtesy of the City of Jefferson

However, Jefferson City’s director of finance and information technology services Margie Mueller said the city’s revenue was still growing.

ABC 17 News found documents that show the city’s revenue did grow from $11,002,277 in 2016 to $11,304,678 in 2017 – a growth of 2.6 percent – which is more than the city of Columbia.

Mueller said the city added a use tax vote to the August ballot.