Sales Tax Extension and Use Tax Likely on April Ballot

The April 5, 2016 ballot could include two tax issues, if approved by the Cape Girardeau City Council on Jan. 4, 2016. The Council approved the first reading of the issues below at their Dec. 21, 2015 meeting.

  • Sales Tax on Titling of Out-of-State Vehicles, Boats, Outboard Motors
    • An extension of a current tax set to expire if not renewed by November 2016
    • This tax would apply to out-of-state vehicle purchases titled in Cape Girardeau. (See details below)
    • The rate will match the local sales rate which is currently 2.75%
    • Typical annual revenue: $200,000
    • Supports the annual operating budget (employees, supplies, etc.) of city services such as police, parks, maintenance, etc.
  • Use Tax
    • Use Tax and Sales Tax are NEVER charged on the same purchase.
    • Use Tax would apply to things purchased from a different state and “used” in Missouri. (See details below)
    • Those not paying the County and State Use Tax now, won’t likely pay the local Use Tax.
    • The rate will match the local sales rate which is currently 2.75%
    • Anticipated annual revenue: City officials have anticipated at least $1,250,000 annually.

Use of Revenue

  • $200,000 – Current revenue from the Vehicle Sales Tax already supporting public services.
  • $150,000 – Keep three grant-funded police on-duty right now.
  • $330,000 – New Police Station contribution, in place of proceeds from the Restaurant Tax.
    • The Amended Settlement Agreement with Midamerica Hotels outlines how Restaurant Tax money can be spent. Pursuant to this Agreement, some Restaurant Tax revenue will be used for a new police station unless a Use Tax passes, then the Restaurant Tax revenue will be made available for approved Parks & Recreation Department projects.
  • Add additional police officers and provide for their equipment and vehicles.
  • Any other revenue from the Use Tax would be subject to City Council approval. The Council will prioritize from many critical needs and announce their intent in advance of the April election.

Ballot Language

  • Vehicle Tax     Shall the City of Cape Girardeau, Missouri, continue applying and collecting the local sales tax on the titling of motor vehicles, trailers, boats, and outboard motors that were purchased from a source other than a licensed Missouri dealer? Rejection of this measure will result in a reduction of local revenue to provide for vital services for the City of Cape Girardeau, Missouri, and it will place Missouri dealers of motor vehicles, outboard motors, boats, and trailers at a competitive disadvantage to non-Missouri dealers of motor vehicles, outboard motors, boats, and trailers.
  • Use Tax            In an attempt to eliminate the current sales tax advantage that Non-Missouri vendors have over Missouri vendors, shall the City of Cape Girardeau, Missouri, impose a local use tax at the same rate as the total local sales tax rate, currently 2.75%, provided that if the local sales tax rate is reduced or raised by voter approval, the local use tax rate shall also be reduced or raised by the same action?  A use tax return shall not be required to be filed by persons whose purchases from Out-of-State vendors do not in total exceed two thousand dollars in any calendar year.

Additional Detail from Staff Reports to Council

  • Vehicle Tax             In January 2012, the Missouri Supreme Court ruled that cities could not collect local sales taxes on purchases from out-of-state vendors.  One of the primary effects of that decision was that unless a city had a local use tax, it could not tax out-of-state motor vehicle sales. Because of the huge loss in revenue that would result to local jurisdictions, the 2013 Missouri Legislature passed Senate Bill 182.  That legislation re-imposed the local sales tax on out-of-state motor vehicle sales as a sales tax on the titling of the vehicle.  However, the legislation also required cities that did not have a use tax in place prior to August 28, 2013, to obtain voter approval to continue this sales tax on titling by November 2016.  If a city does not obtain voter approval to continue this sales tax on titling by November 2016, the sales tax will expire on March 1, 2017, and the city will not have a subsequent opportunity to renew that tax.  Further, the statute states that a use tax adopted after August 28, 2013, will not apply to out-of-state purchases of motor vehicles. For these reasons, this ordinance has been prepared calling an election for April 5, 2016, to give the voters the opportunity to continue the collection of this existing tax.  Without this tax, out-of-state motor vehicle vendors will have an advantage over local business.
  • Use Tax              A use tax is a tax imposed on the storage, use or consumption of tangible personal property purchased from a vendor outside of the state. The use tax rate is equivalent to the sales tax rate in the taxing jurisdiction, and it is designed to eliminate the advantage that out-of-state suppliers which are not subject to those sales taxes would have over our local businesses. The State of Missouri has a use tax at the rate of 4.225%, and Cape Girardeau County has a use tax at the rate of 1.00%.  The amount of use tax due on a transaction depends on the combined (local and state) use tax rates in effect at the Missouri location where the tangible personal property is stored, used or consumed. Local use taxes are collected by the State Department of Revenue and are distributed in the same manner as sales taxes. Only those types of individuals or businesses currently paying a use tax would be affected by the addition of a use tax for the City of Cape Girardeau.