Missouri Gov. Jay Nixon on Friday vetoed legislation that sought to reimpose local sales taxes on vehicles bought from out-of-state dealers or through person-to-person sales.
Nixon’s veto marks the second time in two years he has rejected the General Assembly’s attempt to reverse the effects of a 2012 Supreme Court ruling that has put Missouri car dealers in border cities at a disadvantage and has zapped tax revenues from some cities and counties.
The governor said he shares the concerns of lawmakers seeking to rectify the financial strain but believes that their bill contains flaws that could result in inequitable taxation or an even greater loss of revenues to local governments.
Lawmakers could either try to override Nixon’s veto or work on a third attempt at the legislation before the session ends May 17.
At issue is a January 2012 Missouri Supreme Court ruling that Greene County could not charge a local sales tax on a man who bought a boat, motor and trailer from a dealer in Maryland. The court drew a distinction between sales taxes, which are collected from in-state retailers, and use taxes, which are levied on products used in Missouri but bought either from an out-of-state retailer or from an individual who does not run a business.
The high court ruled that Greene County could not tax the boat because it was not covered by the local sales tax and county voters had not approved a local use tax. The ruling has since been applied statewide, meaning numerous cities and counties without voter-approved use taxes are no longer able to collect taxes on any vehicles bought from any place besides a Missouri retailer.
The bill vetoed Friday by Nixon sought to get around the court ruling by applying sales taxes to the titling of the vehicle based on the residence of the purchaser. Had Nixon signed the bill, the local taxes would have been immediately reinstated and local voters would have had a chance to repeal them in referendums held between November 2014 and November 2016.
Nixon cited two flaws with the legislation. He said the referendums on repealing the local taxes applied only to vehicles bought out of state, not also to in-state sales between two individuals. He also said that a provision allowing a citizen-led initiative to repeal local sales taxes charged to vehicle titling could have the effect of repealing the tax both for out-of-state and in-state purchases, thus potentially costing local governments more money.