With the annual
“veto session” coming up this week there is much speculation about bills that
have been passed by the legislature but vetoed by the Governor. One of those bills that will certainly
warrant a lengthy discussion is one that would reinstate local vehicle taxes on
out-of-state purchases. It is a bill we
passed with bipartisan support during the regular session but also one that has
caused a great deal of debate and controversy.
The root of the
issue is a Missouri Supreme Court ruling handed down earlier this year that
denied municipalities the ability to collect local sales taxes on out-of-state
vehicle purchases. The court ruling made
an important distinction between sales taxes that are collected on
in-state-purchases and what are known as “use taxes” that can be collected on
products used in Missouri but purchased in other states. The court also applied the ruling to
person-to-person sales that occur when individuals choose to sell a vehicle on
their own. In effect, the court said
that cities and counties can collect vehicle sales taxes only on purchases made
at Missouri dealerships, and that their only option to collect taxes on other
purchases is through a use tax.
Because the
majority of municipalities in our state have no existing use taxes in place,
the ruling effectively cut off a major revenue source for cities and counties
in all parts of Missouri. The change had
the additional impact of making out-of-state vehicle purchases more desirable
because of their tax-free nature, which put in-state auto dealers in a
competitive disadvantage with their competitors across the border.
In an attempt to
help solve the problem, the legislature passed a bill that would allow local
governments to once again collect sales taxes on all vehicle purchases. With the change, auto dealers in Missouri
would once again be on equal footing with their out-of-state competitors. More importantly, cities and counties would
once again be able to collect tax revenue that provides funding for so many
vital services that they have provided for years.
When Governor
Nixon chose to veto the bill, he claimed the legislature’s fix circumvented the
will of the voters and would prefer that each municipality give the people the
opportunity to vote on whether to put a use tax in place. He also claimed that if the bill went into
law it would allow cities and counties to retroactively collect taxes on all
purchases made in the months since the Supreme Court’s decision. It is important to note that there is some
dispute about whether the tax should be applied retroactively and the original
sponsor of the bill has vowed to take steps to ensure it is not.
With all of
these factors in mind we must give this issue careful consideration. On one hand we have a large number of cities
and counties that saw the elimination of a revenue source they had collected
and relied on for years. We also see our
auto dealers losing business to those across the state lines. On the other hand, we have the many Missouri
citizens who have enjoyed the reduced tax burden on their vehicle
purchases.
Personally, I am
one that is very reluctant to vote for any kind of tax increase, however, this
may be more of an adjustment back to status quo. I do not want to see local businesses fail
and I do not want to see local communities stifled because of reduced revenue
sources. This is one of many issues that
will be considered in Jefferson City this week.
If you have questions, you may reach me at my
Capitol number 573-751-9465, at the local district number, 660-582-4014, by
email at mike.thomson@house.mo.gov or by mail at Room 401B State Capitol
Building, Jefferson City, MO 65101.
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