Belton is one of five cities in the Kansas City area where voters will be asked April 3 to approve a local use tax. Blue Springs, Independence, Liberty, and Odessa also have a local use tax on next month’s ballot.
A local use tax — also known as an equity tax, because it levels the playing field from a tax standpoint for local retailers — is a companion of the sales tax that is designed to compensate municipalities for tax revenue lost through out-of-state transactions, which are often made online.
Missouri cannot force out-of-state companies without a physical presence in the state to collect and remit sales tax. Thus, a use tax puts the burden on the consumer to pay taxes on retail items as if they were bought locally unless a retailer voluntarily collects it.
The “use tax is imposed directly upon the person that stores, uses, or consumes tangible personal property in Missouri,” according to the Missouri Department of Revenue’s website.
Purchases, even those made online, from Missouri retailers that already are required collect and remit state and local sales taxes are not subject to a use tax.
“If residents already pay a local sales tax, you will not pay a use tax,” Belton City Manager Alexa Barton said in a release. “The tax collected from online sales would be the same as the local 2.75 percent sales tax rate already in place. You pay one or the other, but never both.”
Lasr year, Amazon accounted for 44 percent of all U.S. online retail sales and 4 percent of the country’s total retail sales, according to a recent study. The e-commerce giant started collecting sales tax in Missouri in February 2017, but without a local use tax the city of Belton’s portion of the sales tax isn’t collected on purchases by residents.
The use tax will not impact the sales tax levied on retail purchase at local businesses, which will remain 2.75 percent. If the local sales tax is raised or lowered by voters in the future, the use tax will be adjusted by the same amount.
The city faces a state-imposed deadline of November 2018 to pass a use tax or lose that revenue, according to the city of Belton’s website.
Belton tried and failed to pass a similar measure in 2013, when more than 60 percent of voters rejected the local use tax, but a local use tax isn’t uncommon. The state of Missouri already collects a use tax (4.225 percent) on out-of-state retail purchases along with the cities of Kansas City, Grandview and St. Joseph.
“This is money that the city needs to rightfully claim, and the local use tax is the legal mechanism to ensure taxes paid by Belton residents are returned to local government to maintain ongoing city services,” Belton Mayor Jeff Davis said in a statement.
According to the city, the money will be used for capital items, including equipment for the police and fire departments, as well as improvements to public facilities and infrastructure.
“We urge residents to educate themselves on this important issue,” Davis said. “A vote for the use tax on April 3 is a vote for capital purchases and quality city services and facilities.”
If approved, Belton expects the local use tax to generate $200,000 to $300,000 in revenue annually beginning in the third quarter of 2018.
That’s actually a drop in the bucket compared with local sales tax revenue, which has nearly doubled since 2004.
According to the city’s Comprehensive Annual Financial Reports, Belton collected $6.07 million in sales tax revenue during the fiscal year that ended March 31, 2004.
The city’s sales tax revenue topped $8 million for the first time in 2013, a 32-percent increase in nine years, but that revenue surged to $11.88 million during the fiscal year that ended March 31, 2017.
The bulk of that increase was the result of a voter-approved 1/2 -cent sales tax for transportation and other infrastructure/capital improvement projects, which began to be collected in 2008 and is scheduled to sunset in 2028.
Belton also opened a new fire station in 2009, which increased the department’s budget requirements by 38 percent during the last nine years. The police department budget also has risen 14 percent during that time.
The local use tax will help fill in the budget gap created by inflation and the rising costs of doing business. It will pay for “police cars, fire trucks, ambulances, and safety apparatus, as well as ongoing maintenance of aging city buildings,” the city said in response to questions from The Democrat.
If passed, the Missouri Department of Revenue will collect the tax, but Belton officials said individuals will not be audited for local use tax compliance.