Rolla's City Council is considering enacting a local use tax that has a history of voters rejecting the measure in Phelps County; in both August 1996 and April 2016.
The city council held the first reading of an ordinance that calls for a special election in an off-year to ask voters whether the city should impose a local use tax at the same rate as the municipal sales tax of 2.25 percent. If a local sales tax is repealed, the use tax would increase or decrease to an amount equal to the sales tax rate.
Missouri statute authorizes the city to impose a local use tax at a rate equal to the city’s local sales tax, City Administrator John Butz said at the Aug. 5 city council meeting while introducing the city’s proposal, which Butz said entails “earmarking at least the 1 cent general fund portion of it towards public safety needs and then the balance on street capital improvements and parks dedicated to capital improvements.”
The use tax rate for Missouri is 4.225 percent unless a city or county enacts a local use tax, which increases the use tax rate. The amount of use tax due on a transaction if the city were to adopt a local use tax would be 6.475 percent.
Unlike sales tax, which requires a sale at retail in Missouri, use tax is imposed directly upon the person that stores, uses or consumes tangible personal property in Missouri, the Department of Revenue states. If passed, the use tax applies to purchases made from out-of-state vendors that ship to customers in Rolla.
Numerous cities and counties in Missouri have gone to their voters successfully with the passage of a use tax, Butz said, and voters’ approval of a local use tax will help the city recover its losses.
Rolla has seen revenue derived from the city’s sales tax decline with the steady rise in people shopping online and subsequent decline in residents shopping in the city’s brick-and-mortar stores. Butz estimates that 10-to-12 percent of purchases done at local retailers in Rolla are now done online and with out-of-state vendors.
Butz said the decline in purchases traditionally done in the community has brought about changes to how local businesses operate and how the city operates, since the city uses general sales tax revenue to provide for roads and buildings as well as public safety services.
“I wouldn’t say it’s exclusively public safety because a lot of our operations are dependent on tax revenues, but we are having a bit of difficulty competing in salaries today on public safety because a number of counties around us and throughout Missouri have enacted a specific law enforcement sales tax in their county to allow them to raise rates,” Butz said.
In March the city council and city staff held a workshop to consider the next ten years of the city’s general fund for essential city services where it became apparent that operating costs were exceeding economic growth in Rolla.
“Currently the city of Rolla and Phelps County do not receive any sales tax on such purchases that were often previously made in local brick-and-mortar stores. The current situation places Rolla and Phelps County businesses at a competitive disadvantage of at least 3 percent. The often unintended result is that public safety services, streets and parks are impacted currently by a loss of revenues of $600,000,” Butz said.
The matter has become “urgent and critical for us,” Butz said with Nov. 5 the soonest election the city could place a use tax initiative on the ballot, requiring the adoption of an ordinance the Phelps County Clerk must certify by Aug. 27. Otherwise, the city would have to wait until the April election, Butz said.
“We have lots of expenses coming in, as we are looking at the budget over the next several years it becomes a crisis compounded going forward,” Butz said. “We’ve had conversations with the chamber; we’ve had conversations with Phelps County and the city of St. James. All of them are deliberating doing the same action; they are waiting to see the kind of reaction they hear from Rolla City Council.”
The council will continue the discussion on a local use tax at their Aug. 19 meeting with plans to host a community forum.
“The use tax is an important step in leveling the playing field for our local businesses who are forced to compete with an ever-growing Internet world. The convenience of online shopping is wonderful – but asking out-of-state retailers to collect and remit a use tax allows Rolla businesses to remain competitive and to ensure quality municipal services,” Rolla Mayor Louis Magdits said.