In Missouri, the use tax is a sales tax charged on the purchase of items that are purchased from an out-of-state vendor and delivered to a Missouri address. The use tax is applied to the same types of purchases currently subject to the traditional sales tax.
The City of Platte City currently does not have a use tax, but the city is proposing to change that. Voters will decide whether or not to authorize the city to start collecting a 2.375% use tax on purchases made from out-of-state vendors.
A decision to proceed with sending the question to voters at the April 7 election was approved at a meeting of the Platte City Board of Aldermen on Tuesday night. Aldermen approved putting it on the ballot with a 5-1 vote.
Alderman Tony Paolillo, who is currently running for mayor, voted against. Paolillo said he generally is against more taxes and also has concerns that the city is not going to be able to educate citizens that they’ll be responsible for submitting the use tax payments voluntarily because many online out of state companies are not imposing the use tax upon consumers in Missouri at the time of the purchase.
“Most online companies are not doing it now. A few are but most are not,” Paolillo said after Tuesday night’s meeting.
If approved, the tax would generate about $60,000 to $80,000 annually in general fund revenue, about $30,000 to $40,000 in park and capital improvement tax revenues and roughly $20,000 to $30,000 in transportation fund revenue, city officials said.
The current lack of voter- approved authority to collect a tax on out-of-state purchases prevents the city from receiving revenue to fund local services, city officials point out.
“Changes in retail purchasing have a direct impact on the city’s ability to provide basic services,” says DJ Gehrt, city administrator. “Sales tax is the single largest source of general fund revenue. The city’s general fund revenue in the fiscal year that ended in October is less than the revenue for the fiscal year of four years ago.”
City officials point to a need for increased tax revenue by saying that while steps have been taken to provide more effective basic services and to reduce general fund expenses, “it will be increasingly difficult to maintain current service levels without additional general fund revenue in 2021 and 2022.”
In a report to aldermen, Gehrt said the least painful option to increase general fund and parks fund revenue is to adopt a city use tax. The city’s use tax would be similar to the existing state and Platte County use taxes already paid by Platte City residents, he said.
The difference between a sales tax and a use tax is based on where the items are purchased and shipped. Items bought at Missouri retail locations are charged the sales tax applicable to the store location. Items purchased from an out of state vendor and shipped to Missouri are charged the use tax.
Regardless of where items are purchased, the sale is only charged one tax, either a sales tax (if purchased from a Missouri retail location) or the use tax if shipped to Missouri from an out of state vendor.
The State of Missouri currently charges a 4.225% use tax, which is identical to the state sales tax; Platte County charges a 1.375% use tax that’s identical to the county sales tax.
Gehrt said the city’s general fund revenue has been flat to slightly lower over the past five years.
Sales tax income, which is the single largest general fund source for revenue, has been virtually flat over the past five years with revenues steady at about one million dollars annually.
Gehrt explained the city’s general fund is used to operate (in order of highest to lowest) the police department, public works/street maintenance, general government needs, economic development, planning and zoning/codes enforcement/building inspection.
About 80 percent of the general fund expenses are for the police department and public works/street maintenance, Gehrt said.
Over the past five years, the policy of the city’s board of aldermen has been to direct staff to develop budgets that focus on reductions in expenses and to seek opportunities to provide services “in a more productive and cost effective method,” Gehrt explained.
The city administrator noted some of the cost reductions and productivity changes have included consolidating the municipal court into the associate circuit court at the county, consolidating administrative support staff; consolidating/eliminating management positions, holding vacant positions open; conducting competitive selection of employee benefits, ending the community improvement matching grant program and improving inventory control of tools, vehicles and materials.