Use Tax On April 6 Ballot
At its January 19, 2021 meeting, the Warson Woods Board of Aldermen decided to allow residents to vote on a “Use Tax” at the April 6 election.
What is a use tax?
A use tax is a type of a sales tax placed on items purchased outside of Missouri or online but for use in Missouri. This is not an additional sales tax but is more of an extension of the existing sales tax to these out-of-state or internet purchases from out-of-state sellers with no stores in Missouri. In other words, because the City’s local sales tax is 1.25%, any use tax collected would be in that same amount.
What’s the difference between a sales tax and a use tax?
The city use tax applies to the same goods, supplies or materials that the sales tax does except that they are purchased out-of-state by a business operating in Warson Woods or a resident of Warson Woods. Most online sales already include local and state taxes, so this would not be an additional tax on those purchases. Sales tax is for retail purchases within the state of Missouri or from vendors obligated to impose Missouri taxes because of a business presence in Missouri, while the use tax is for purchases from out-of-state vendors that do not pay sales tax. The use tax does not apply if the purchase is from a Missouri retailer and already subject to Missouri sales tax. It’s one or the other but never both. Many large online retailers already collect our state and local sales tax, so this would have no impact on those purchases. But those out-of-state and online sellers not collecting our local sales tax would collect and pay the use tax. There is already a state use tax in effect that is collected by the Missouri Department of Revenue.
Who pays the use tax?
Although much of the revenue from a use tax is generated from businesses doing work in Warson Woods and items purchased from out of state, the balance will be on some internet purchases by residents. As stated, many online sales already include local and state sales taxes, and the use tax would not apply to these.
How much money will a use tax generate for Warson Woods?
Passing of the use tax could result in revenues $50,000 or more per year for Warson Woods; but because there no way to know exactly how much is currently spent outside Missouri, this is just a guess. Webster Groves, who is also placing the tax on their April ballot, estimates that a local use tax will bring in about $250,000 each year. Keep in mind, Webster’s population is about 11.5 times Warson Woods’ population.
How will Warson Woods use the money generated by the Use Tax?
The Board can use the revenues for any municipal purpose, but it will likely be used to help with existing areas of need such as street repair, park enhancements and upkeep, storm water issues, sidewalk and other pedestrian improvements, as well as city services.
If the ballot language seems confusing… State law requires that the ballot language the City uses mimic the statute. The City had to use the state’s language on the ballot. Just understand, that a yes vote means you are in favor of the use tax and a no vote means you don’t want the tax on out-of-state sales.
How long will the use tax be in place?
If the city’s sales tax rate is repealed, reduced or increased, by voter approval, then the city’s use tax rate is similarly repealed, reduced or increased.
Do other area cities collect the use tax?
Besides the State’s use tax, according to the Missouri Municipal League, the use tax is collected by many cities and counties throughout Missouri including our neighbors in: Crestwood, Des Peres, Kirkwood, Frontenac, Glendale, Maplewood, Richmond Heights, Olivette and University City.