While a recently formed campaign group hopes to educate enough Jefferson City voters about a proposed use tax to get it passed in August, not every resident is convinced.
Citizens for a Stronger Community kicked off its campaign a little over two weeks ago to encourage Jefferson City voters to vote "yes" on Proposition L during the Aug. 7 election, which would allow Jefferson City to implement a use tax.
If approved by a majority of Jefferson City voters, a 2 percent use tax would be placed on all out-of-state items to be used, stored or consumed in Jefferson City. It would match the city's 2 percent sales tax and be divided the same way — 1 percent for general revenue, 0.5 percent for capital improvements and 0.5 percent for park improvements.
Campaign organizers Gary Wilbers and Nathan Hays said the use tax would help local businesses compete with online stores that do not have a presence in the city. When someone purchases products online from an out-of-state vendor, he or she does not pay sales tax to Jefferson City; when those same items are purchased in the city, they pay sales tax.
"It's really about leveling the playing field with Proposition L," said Wilbers, who owns Ascend Business Strategies in Jefferson City. "The benefit would be making it the same regardless of whether you're buying something in Jefferson City, on the internet or out of state. Everyone should have to pay the same taxes, we believe."
If approved, residents would not pay both taxes for the same purchase — they would pay either a sales tax or a use tax.
While Wilbers and Hays said the use tax would help local businesses compete with online retailers, a handful of area residents have expressed opposition to the proposal in letters to the editor submitted to the News Tribune.
One of those residents, Ed Williams, said it is another way the city and the Jefferson City Area Chamber of Commerce are trying to filter money into the "feeble" Capital Mall.
"(The playing field) is still not going to be level. Nothing at this point is going to slow down internet sales," Williams said. "Places like the mall are simply out of date — they're too expensive; there's too much space that they have to maintain and heat and cool. It's not going to be level, and people aren't going to go out to the mall when they could stay at home and buy online, often for a cheaper price, even without the use tax."
Williams alleges a use tax would be another example of some local businesses receiving unfair advantage through tax incentives.
Capital Mall owner Farmer Holding Company has received local economic development incentives including tax increment financing and a community improvement district to redevelop the retail property.
The use tax would benefit not only Capital Mall businesses but all brick-and-mortar shops in Jefferson City, Chamber of Commerce President Randy Allen said.
Wilbers and Hays said the campaign is not trying to change people's online spending habits or discourage people from shopping online. They said they want to "fill a gap" that's forming with the growing online retail world.
Wilbers and Hays said they do not believe residents are trying to bypass sales tax by purchasing online.
A use tax would be just one additional tax Jefferson City residents would have to pay, Williams said, adding there is a "never-ending stream of taxes" proposed by local entities. He noted voters are still feeling the tax levy increase they approved in April 2017 to fund a $130 million bond issue to build the new Capital City High School and renovate the existing Jefferson City High School.
Another potential tax Williams thinks could be on the horizon is one to fund a potential Missouri River port in Jefferson City. If the use tax is approved and the Chamber of Commerce proposes a tax to fund the port, Williams said, that would be a large burden on residents.
"It probably doesn't make a difference to most people whether the use tax passes or not, but the thing is it's another tax on top of other taxes, and there will probably be other taxes in the near future," he said. "The federal government and the state government is trying to decrease taxes so people have more money to spend, and our local government is trying to increase taxes every year. We need to send a message to the City Council and all local government that enough is enough."
While residents don't pay a use tax for Jefferson City, they do pay a use tax for Missouri when purchasing items from out-of-state vendors. Missouri has a 4.225 percent use tax and requires buyers to self-report their purchases if they spend $2,000 or more on out-of-state goods in a year, according to the Missouri Department of Revenue.
Missouri's use tax does not apply if the purchase is from a retailer in the state or a business that already collects the state's sales tax. If an online company self-collects the use tax, the purchaser does not have to report the purchase.
This same philosophy would apply to Jefferson City, Wilbers said. The $2,000 threshold would be the same if voters approve the use tax in August, and voters would self-report their purchases only if the companies they buy from do not already collect a sales or use tax.
"If you buy from Walmart or Sam's Club, one of the retailers we have here (in Jefferson City), and you buy online with those type of retailers, you're already paying the sales tax, either online or in person," Wilbers said. "Really, the only time it affects people is if they truly are buying out of state from a vendor that is not in our city, and for most people, that's a really small amount."
Williams said he thinks "compliance would be pretty low" if Jefferson City voters approve the use tax because many would not self-report their purchases. He added many Missourians most likely are not aware of the state's use tax.
The U.S. Supreme Court ruled in June that states may collect sales taxes from businesses that do not have physical locations in those states.
Williams said he also worries the money from the use tax would not go toward public services.
Citizens for a Stronger Community is a "grass-roots campaign" founded by local business owners, Wilbers said, but Williams argued the committee is a "shell organization" created by the Chamber of Commerce "behind the scenes."
Citizens for a Strong Community received $15,000 from the Civic Progress organization, which is affiliated with the Chamber of Commerce, Allen said. The campaign received this payment July 2, according to its 48-hour report of contributions over $5,000 filed with the Missouri Ethics Commission. The $15,000 donation was the only contribution listed on the form.
The July 3 report is the most recent and only financial report filed for the campaign committee as of July 27.
The Chamber of Commerce board also endorsed Proposition L, Allen said.
"If we're going to have a sales tax, if we are going to tax products at the point of sale then we need to tax every sale the same so that there's not an unfairness with people who are selling through the World Wide Web versus walking in and buying something," he said. "I think we have determined that a sales tax for the city, county and state are appropriate, so then it is appropriate for those companies that are (selling items) over the internet."
Wilbers, Hays and Williams agree on one point: residents must be educated on the use tax. However, they have opposing views on how education will influence the Aug. 7 election.
Wilbers and Hays said they think they can educate enough residents to get the use tax passed, while Williams said he thinks more awareness would convince voters to vote "no" on Proposition L.
Citizens for a Stronger Community has been trying to educate residents about the use tax by speaking at different meetings and posting on social media. The group also plans to place signs around town regarding Proposition L.
They also have been looking at municipalities that have placed use taxes on past elections. More than 160 Missouri cities have use taxes, according to the Missouri Municipal League. Cole County and Callaway County have use taxes, as do municipalities such as Linn and Sunrise Beach.
Fulton and Wardsville voters rejected proposed use taxes in April. Boone County and Columbia voters rejected similar use taxes last year.
Many communities that failed to pass use tax proposals did not campaign, Hays said, which is why Jefferson City business owners formed Citizens for a Stronger Community.
"I'm sure there will be some people that when they go to the ballots, they'll see 'tax' and they'll say, 'Oh, no,'" Hays said. "I think that's what Gary and I have been trying to educate the public on — that this is nothing new and it's not going away. We're just asking people to pay their fair share and support local businesses and make it fair for them."
However, if voters believe the use tax will not benefit brick-and-mortar businesses but instead local government, Williams said, "the less likely they are to vote for it."
If a use tax is implemented, the city could receive about $1.5 million in additional revenue, Jefferson City Finance Director Margie Mueller has said previously.
City officials began discussing the use tax last year after the Missouri Supreme Court ruled in 2012 that cities could collect sales tax on out-of-state motor vehicle purchases only if those cities have local use taxes. This means Jefferson City must either receive voter approval to continue the sales tax on out-of-state motor vehicle purchases or pass a use tax.
If Jefferson City does neither, Mueller said previously, it could lose $240,000 each year from the out-of-state vehicle purchase tax.
City officials originally felt a time crunch to get a use tax on the ballot as municipalities had until Nov. 1 to implement the tax, but the General Assembly passed a bill this year that pushed that deadline to November 2022, City Counselor Ryan Moehlman said.