Spring 2022 Edition
What is it, what are the relevant facts and history surrounding the upcoming ballot issue? The term “use tax” is just another way of saying sales tax, however, the sale does not take place at a physical location. Therefore, purchasers are charged a “use tax” based on where they use or receive the item purchased from an out-of-state retailer.
The reason this is coming about is that a loophole was created in the tax laws first in 1967, and then re-affirmed in 1992, when the Supreme Court ruled in Quill Corp. versus North Dakota that sales tax could not be collected/imposed on purchases made from out-of-state vendors. For a sales tax to apply, the retailer had to have a significant physical presence in that particular state. This originally created an advantage for catalog purchases, and subsequently for online sales. This probably was not tremendously impactful in 1992 when there was relatively little online shopping. With the tremendous increase in e-commerce (even more so with COVID), the disadvantage it creates for local brick and mortar stores has become very significant. This consequence extends to local governments that depend heavily on sales tax revenue to pay for police, parks, public works, etc. Unlike many cities, Chesterfield receives no property tax, and is heavily dependent on sales tax revenues.
In its 2018 decision of the South Dakota versus Wayfair case, the Supreme Court overturned the 1992 Quill decision, which closed the loophole and again allowed states and local governments to impose what is called a “use tax” on out of state purchases. This Supreme Court decision cleared the way for state governments to provide enabling legislation applicable to their respective states. Missouri was the very last state in the union to pass what was called “Wayfair” (Senate Bill 153) legislation. This legislation was sponsored by State Senator Andrew Koenig, who coincidentally happens to be one of the senators representing a portion of Chesterfield. Senator Koenig is a well-respected public servant and is thought to be among the most conservative members of our legislature.
Local Voter Approval Needed
In order for a “use tax” to be imposed on out-of-state purchases, a ballot measure must be passed locally for the municipal taxes and a separate ballot for the county-wide taxes. The Chesterfield ballot will be labeled Proposition U (associated with existing Parks ½ cent and Capital Improvement ½ cent taxes) and I understand that the St. Louis County ballot measure will be labeled Proposition C. The county ballot would be applicable to the existing county-wide taxes, from which Chesterfield would receive a proportionate share based on population. If the ballot measures obtain voter approval, the earliest effective date would be January, 2023. Regardless of the passage of either ballot, the state portion (4.225%) has been and will continue to be in effect. The sales tax rates will remain the same, but out of state purchases would become subject to existing rates of local sales taxes. Consumers would pay the same sales tax, whether it be from a local store or an out of state vendor.
State law prohibits government from expending resources to advocate for or against ballot measures, but I am allowed to inform and educate voters in order that you may make your own decision as to if or how you will vote on the upcoming ballot measures.
The Missouri Chamber of Commerce, Missouri Retailer’s Association, and Chesterfield Regional Chamber of Commerce, have voiced their support in favor of the use tax ballots, and as you can see, I have devoted the entirety of my Mayor’s message to the subject. Thank you for your consideration!
I hope to see you out and about as we approach the new year!
Mayor Bob Nation