Arnold voters will be asked again this April if they want to allow the city to collect sales taxes on internet sales.
City Council members voted unanimously Dec. 16 to place the measure on the April 5 ballot, which, if approved, would allow the city to collect its current 1.25-percent sales tax on internet purchases, like it does on purchases at retail businesses in the city.
The measure requires a simple majority to pass.
“The city is heavily reliant on sales tax to fund all of our services from street repair to police protection,” City Administrator Bryan Richison said. “As more people shop online, we are going to see a decrease in sales tax revenue. We are hoping the voters will approve this use tax to help us capture some of those online sales that are currently not taxed to help us continue to provide the quality services they have come to expect.”
Missouri residents already are obligated to pay state sales taxes – called “use taxes” – on internet sales, but not all vendors collect it. Missouri residents who buy more than $2,000 in untaxed goods and services are supposed to report that on their state income tax returns.
A state law that goes into effect in January 2023 further requires businesses not based in Missouri to pay Missouri’s sales taxes if they had more than $100,000 in business in the previous calendar year.
The internet sales taxes are commonly called “Wayfair” taxes, referring to a 2018 U.S. Supreme Court case, South Dakota vs. Wayfair Inc., that overturned a rule preventing states from taxing the sales of vendors who don’t have a physical presence in that state.
However, the new law applies only to state sales tax. Counties, cities and other entities that collect sales taxes must ask their voters to approve a “use tax” on internet purchases and other out-of-state sales that is equal to their sales tax rates.
According to city documents, the measure residents will be asked to vote on in April will read, “Shall the City of Arnold impose a local use tax at the same rate as the total local sales tax rate, provided that if the local sales tax rate is reduced or raised by voter approval, the local use tax rate shall also be reduced or raised by the same action?”
Richison said the measure does not reference “online” or “internet” sales because the use tax also would apply to businesses that make purchases at wholesale prices with no sales tax charged.
“It would be nice (for the ballot language to mention internet sales) because that would help clear up some confusion,” Richison said.
He said he does not know how much additional sales tax revenue the city would receive if it’s allowed to collect its 1.25-percent sales tax on internet purchases.
“I have seen aggregate data for nationwide online sales, but as far as how much people in Arnold are spending online, I have never seen that number,” Richison said. “I don’t know if that number exists anywhere.”
He said 1 percent of the city’s sales tax revenue goes to fund general operations and 0.25 percent is used to fund the Arnold Recreation Center, and any additional sales tax revenue from internet purchases would be divided the same way.
Arnold joins Byrnes Mill, Festus and Herculaneum in putting the use tax measure on the April ballot.
In addition, the Pevely Board of Aldermen and the Crystal City Council were expected to vote Monday on whether to place the measure on the April ballot.
De Soto City Manager Todd Melkus said the City Council likely will vote Jan. 17 on the matter.
County Executive Dennis Gannon had talked about asking the County Council to place the same request on the April ballot, but later backed away from the idea because of a lack of support among council members.
Arnold had put the same issue before voters in August 2018, and it failed, with 66.3 percent voting no and 33.7 percent voting yes.
Jefferson County and eight other cities also asked voters to approve the measure, but only Kimmswick voters approved it.
Richison said he hopes voters’ opinions on the use tax have changed since 2018.
“I think what has changed since then is taxation of internet sales is becoming more of a reality,” he said. “Amazon, for example, is now collecting state of Missouri sales tax. You also have the Wayfair ruling from the U.S. Supreme Court, which affirmed sales tax can apply to internet purchases. In the past, the feeling was it couldn’t. Those are all major shifts.
“I assume the trend will continue and more shopping will go online. At some point, if we don’t have a way to get tax revenue from those transactions, we will see a decrease in our revenue and will have to make cuts. We would like to continue to provide the services we do well into the future, and this is the way to ensure that.”