The Aug. 4 special election ballot will be a short one, with only two issues, but the election’s outcome could have a major impact on the City of Sedalia’s budget and economy.
Voters residing within city limits will vote on two separate tax issues: a local use tax and a sales tax extension on out-of-state vehicle purchases. Members of Yes Yes for Sedalia, a local committee tasked with spreading information about the two issues, have emphasized that neither of these are a property or double tax, and they won’t affect the average citizen. They will, however, have a substantial effect on the city.
Local use tax
A use tax is paid on property bought out-of-state but used in Missouri, only when a sales tax is not applied at the time of the purchase, “so it’s intended to fill the gap for when sales taxes are not applied, so the use tax comes in and levels the playing field,” Finance Director Kelvin Shaw said.
Pettis County and the State of Missouri both operate under a use tax. Almost half of Missouri cities with a population of more than 2,000 also already have a use tax in place. The use tax, if approved in Sedalia, will have the same rate as the city’s sales tax: 2.375 percent.
The tax would primarily affect out-of-state contractors who work on commercial projects in Sedalia. City Administrator Gary Edwards noted that the city has missed out on gaining additional revenue from out-of-state construction companies working on Hobby Lobby and Kohl’s over the last few months because a use tax is not in place, therefore any of the materials they bought elsewhere are not subject to a city use tax.
For it to affect an individual, one must have more than $2,000 in purchases where a sales tax was not applied. The system is reliant on self-reporting on an annual use tax return. Since the same requirements apply to state, county and city use taxes, Shaw pointed out that if a citizen isn’t filling out a use tax return now, chances are they won’t need to do so if the proposed city use tax is approved.
City of Sedalia voters have seen this ballot issue once before, in 1996 when it failed by a mere 31 votes. Pettis County passed its own use tax during that same election. Sedalia is now trying to get its own use tax, which is estimated to generate $685,000 for the city each year. That revenue would be used for fire and police departments, street repairs and city improvements.
When it comes to roads, $685,000 would pay for 4.25 miles of mill and overlay or 43 miles of chip and seal work. Shaw, however, said he thinks the money would be well-spent on city improvements, such as improving the intersection at West U.S. Highway 50 and Main Street or stormwater improvements.
“It’s just going to get more and more congested as far as traffic there (at 50 and Main),” he said. “The city has taken a proactive approach and started a traffic study to find out what our options could be as far as improvements there. MoDOT has already told us they will not have any funding to help us with that, so we’re actively looking for a funding source.”
Sales tax extension on out-of-state vehicle purchases
This is a local sales tax on vehicles bought out-of-state or from an individual (the law specifically states anyone who is not a licensed Missouri dealer). It is paid when the vehicle is originally licensed or you apply for a title.
The City of Sedalia has this tax in place already, so it is not a new tax, but due to a recent change in Missouri law, it will expire in 2016 if not renewed by voters in August.
“There was a court challenge that basically asked the question of whether this was a sales tax or a use tax, and so the Missouri legislature came back in and enacted legislation that said it was a sales tax and not a use tax, but as they did that, they said any city or county that did not have a use tax already in place would have to put it in front of the voters to see if they want to continue it as a sales tax,” Shaw explained.
This tax generates about $100,000 a year for city services. While not passing the use tax means not receiving additional funding, not passing the vehicle sales tax would mean losing $100,000 the city already receives.
Renewing the tax would also level the playing field for local dealers of motor vehicles, outboard motors, boats, and trailers. No out-of-state vehicle sales tax in Sedalia would possibly encourage potential vehicle-buyers to travel across state lines to save a few dollars, while taking money from the local community in the process.
“You as an individual will probably not pay either tax, but it will greatly benefit our community,” Shaw said. “In other words, we will be able to get more services for the tax dollars you do pay as an individual. It levels the playing field for our local merchants who supply jobs and support the local community.”
Educating the public
The Yes Yes for Sedalia Committee has been busy spreading the word about the upcoming election, speaking to local organizations and members of the media. The committee is comprised of several local business-people, including Karl Kramer of McCarthy Toyota.
“(Being a member of the committee) could be seen as selfish — automotive, you have a kinship to one of (the tax issues), but really both of them are related,” he said. “Both of them are related to businesses and the market, and we do a lot to support the market. We want to keep those dollars and keep consumers within the market, and both of these are preservative of that because if you go out of state to buy a car, all we’re talking about is retaining those tax dollars to be invested in city services, primarily.”
Since the taxes would be of benefit to the city, it may seem obvious why voters should mark “yes” on their Aug. 4 ballot, but both Edwards and Shaw agreed that many people may be opposed to the idea, simply because the word “tax” is involved, and because it is a complex issue.
“The word ‘tax’ is part of it, and because it’s already in place for the county and state, chances they’re probably not paying and filling out the form for the use tax,” Edwards said. “Chances are that will continue. It probably will not impact them, but, ‘tax’ is still there and getting past that word is difficult.”
The committee spoke at Thursday’s Sedalia Area Chamber of Commerce breakfast, and Kramer, who is also the Chamber board president, told those in attendance that the goal is to “keep residents here and not give them a reason to shop elsewhere.”
For more information, visit YesforSedalia.com.
Nicole Cooke can be reached at 660-826-1000 ext. 1482 or @NicoleRCooke.