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O’Fallon seeks approval to put use tax measure on April ballot

Bill No. 7159 sponsored by Mayor Bill Hennessy would ask city voters in the April 7, 2020, municipal election to consider approving a use tax at the same rate as the city’s local sales tax.

At the City Council meeting on Dec. 12, the bill was given a first reading. Second reading and vote for final passage likely will be at the council meeting on Jan. 9, in order to meet the Jan. 28 certification deadline for items to be on the April 7 ballot.

The use tax was previously presented to the voters in 2018 and was defeated.

City staff and council members believe the defeat was caused primarily due to voters not receiving enough information and education in advance to be able to understand how the use tax actually works; the state-mandated wording was confusing as well. Discussions earlier this year between city staff and the council made it clear that a comprehensive communication and education program will be needed for this initiative well prior to the April 7 election.

The ballot language for the proposition is prescribed by state statute. A simple majority vote would be required for the proposition to be passed.

Per a background memo from City Administrator Mike Snowden:

“Currently, 45 states and nearly half of all Missouri cities with populations over 2,000 (105+ cities) have a use tax in place. Locally, the State of Missouri, St. Charles County, Wentzville and Foristell are among those that already have a use tax in place, along with the City of St. Louis and at least twenty-three St. Louis County municipalities. Several other Missouri communities had use tax initiatives on their ballots in November 2017.

“For clarification, there are some differences between sales tax and use tax. Sales tax is based on the point of sale, while the use tax is based on the point of delivery. Out-of-state purchases would be subject to the use tax with a minimal impact on the average consumer, as the use tax does not apply until the online/out-of-state purchases exceed $2000. The local use tax would not cause a double taxation situation because it applies to purchases where no sales tax is currently being charged.”

Per Snowden’s memo, proponents believe that adding the local use tax would help level the playing field between local brick and mortar retailers and online, out-of-state retailers.

Snowden also clarified that the mechanism for collecting the local use tax is already in place, with the state having the responsibility to collect the tax and to remit it through the existing sales tax payment apparatus. If the local use tax is approved by the voters, any future modifications to the city’s sales tax rate would be automatically mirrored by the use tax rate.

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