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Following a U.S. Supreme Court ruling last month, local leaders hope Jefferson City residents will pass a use tax on the August primary election ballot that could allow the city to collect revenue from internet purchases.

The Supreme Court in June overturned a long-standing precedent when it ruled states may collect sales taxes from businesses without physical locations in states. As local leaders kicked off the campaign for the use tax Friday, they said they hope it could level the playing field between internet retailers and brick-and-mortar stores.

If approved by voters, the 2 percent use tax would be placed on all out-of-state items to be used, stored or consumed in Jefferson City. Local group Citizens For a Stronger Community is leading the push for the use tax as the Aug. 7 election approaches.

Nathan Hays, an organizer with Citizens For a Stronger Community, said the group does not want people to view the use tax as a tax increase because residents will not pay the city's use tax and sales tax. Rather, the tax protects the city's budget as internet sales grow, Hays said.

Hays spoke Friday at a breakfast meeting held by the Jefferson City Area Chamber of Commerce.

"We just want to make sure they're paying this use tax," he said. "If the mall goes out of business or downtown (retailers) go out of business, the city's tax burden will be changed drastically."

The Supreme Court upheld a 2016 South Dakota law that required online merchants with more than $100,000 in annual sales or 200 transactions with state residents to collect sales taxes. The ruling overturned a pair of judgments from 1967 and 1992 in which the court found companies without a physical presence in a state could not be forced to collect sales taxes. Those rulings applied mostly to mail-order catalog companies.

Bill Plank, chairman of the Jefferson City Area Chamber of Commerce Board of Directors, said the ruling was exciting, but residents still need to create and approve a tax for the ruling to have an effect on the area.

"The citizens still have to select 'yes' on the ballot to be able accept the payments from this mechanism that's already built," Plank said.

Jefferson City's use tax would apply to purchases other than internet purchases, like cars bought from an out-of-state dealer without a presence in the state. Residents buying items online would bear most of the new tax burden, Hays and others said Friday.

More than 160 Missouri cities have use taxes, according to the Missouri Municipal League. Mid-Missouri municipalities like Cole County, Callaway County, Linn and Sunrise Beach already have use taxes.

Boone County and Columbia voters rejected proposed use taxes last November. Fulton and Wardsville voters rejected similar use taxes in April.

In 2012, the Missouri Supreme Court said cities can collect sales tax on out-of-state motor vehicle purchases only if the cities have local use taxes. So Jefferson City must either receive voter approval to continue the sales tax on out-of-state motor vehicle purchases or pass a use tax before Nov. 1.

If the city does neither, it could lose $240,000 each year from the out-of-state vehicle purchase tax.

The 2 percent use tax would match the city's sales tax, which allocates 1 percent for general revenue, 0.5 percent for capital improvements and 0.5 percent for park improvements. Jefferson City Finance Director Margie Mueller said previously the city could receive about $1.5 million in additional revenue if voters pass the use tax.

Use taxes typically require purchasers to pay the tax to the taxing body. But in the case of internet sales, retailers will collect the tax and distribute it to the city, Hays said.

Jefferson City's Proposition L needs 50.1 percent of voters to vote "yes" to pass. Hays estimated about 6,000 votes could be needed for the measure to pass.

Online sales made up 9.3 percent, or $123.7 billion, of the $1.3 trillion in U.S. retail sales conducted during the first quarter of 2018, according to the U.S. Census Bureau. Non-partisan think tank the Missouri Budget Project noted a recent analysis conducted by the U.S. Government Accountability Office found Missouri misses out on $180 million-$275 million annually in state and local taxes each year from internet sales.

The city use tax would not impose a state tax on internet sales.

Plank said the use tax would protect local retailers.

"We view it as critical to our small businesses," he said. "That is the type of stuff that solidifies the fabric of a community."

With the election just over three weeks away, Hays said he's optimistic voters will approve the measure. Citizens for a Stronger Community plans to make a grassroots push through content on social media, meeting with local groups and retirees, using print media advertising and placing signs around town.

Darren Heckman, another organizer with the group, said they think voter turnout during the primary will be high because of other issues on the ballot, like a measure that could decide the fate of Missouri's right-to-work law.

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