This article first appeared in the St. Louis Beacon: October 14, 2008 - When St. Louis County voters go to the polls on Nov. 4, they will vote on Proposition H, a measure to allow goods purchased online, by catalog or mail order from out-of-state vendors to be taxed. Currently St. Louis County residents and businesses don't always pay county sales tax on these purchases. With 93 percent of the votes counted, 55.79 percent had voted no and 44.21 percent voted yes. (updated 11:30, Nov. 4)
A use tax is the equivalent of a sales tax on purchases from out-of-state sellers by in-state buyers and on certain taxable business transactions. A use tax return shall not be required to be filed by persons whose purchases from out-of-state vendors do not in total exceed two thousand dollars in any calendar year.
To help voters understand Proposition H, why it's on the ballot and what the money would be used for, the Beacon asked Tim Fischesser, executive director of the St. Louis Municipal League, to explain the measure. A simple majority is required for passage. There is no organized opposition to the proposition.
What is Prop H?
Prop H will close a loophole in the tax law and would tax all mail-order purchases from another state at the same county sales tax rate paid for in-state purchases, Fischesser said.
It brings back a use tax on out-of-state purchases that was on the books in the early 1990s but was later thrown out by the courts, he said. St. Charles County and the city of St. Louis have already reinstated the tax, he added.
Why is Prop H necessary?
It's a way for St. Louis County and some municipalities to capture millions of dollars in taxes they lose because out-of-state purchases are not subject to county taxes, Fischesser said.
"It levels the playing field for local brick and mortar businesses by ending the tax advantage now enjoyed by out-of-state businesses," he added.
What would Prop H cost St. Louis County residents?
It would make mandatory the payment of a use tax that is sometimes avoided, Fischesser said. If it passes, businesses making out-of-state purchases and individuals buying more than $2,000 a year in goods from non-Missouri companies would pay a county use tax of 1.85 percent. That is in addition to the existing 4.225 percent state tax and the municipal use tax where applicable.
How would reinstating the use tax work?
Currently, individuals are largely on the honor system when it comes to paying Missouri sales tax because "the Missouri Department of Revenue does not know what individuals buy," Fischesser said. "They ask you to report anything over $2,000 (in purchases each year) but only 77 people in the whole state of Missouri did that last year." Out-of-state vendors may or may not charge Missouri taxes when the purchase is made, he said.
Essentially, that wouldn't change. Unless the vendor collects the tax at the point of sale, individuals would still be on the honor system to cough up after they spend $2,000 in a given year.
"The long arm of the Department of Revenue can't require vendors to collect the tax unless they have some connection to Missouri," Fischesser said.
Companies are more diligent than individuals about paying because they are audited every few years, Fischesser said. "Businesses report and pay it because they don't want to get hit with interest and penalties (if they are audited). They would just add the county tax to whatever they pay for the state tax and the municipal tax, if applicable, and send it in."
How much would it raise?
Prop H is expected to generate $30 million annually.
How would the money be used?
It would fund a new countywide police and fire and ambulance team radio system, Fischesser said. "Right now each (radio) tower takes care of just the radios that are assigned to it. But when police, firemen and other first responders leave the area, they can't communicate via radio so it has to be done with runners."
>If Prop H passes, half the money would go to the Municipal League and St. Louis County. They want to use $9 million to issue 13-year bonds to buy the new radio system and train the first responders who would use it. It also would pay for maintenance of the system.
They would also use $4 million to create jobs via small business incubators and "green collar" initiatives and $2 million to improve accessibility of public parks for older adults and people with disabilities.
Why is a new radio system needed?
The current radio system used in most communities, the county and fire protection districts has a limited range so officials in different communities cannot communicate with each other. It also cannot trace 911 calls made on cell phones, an increasing problem as many people give up their landlines for mobile phones, Fischesser said.
Officials first raised concern about the area's emergency radio communication in 1996 when a big tanker exploded in Brentwood, he said. "They initially thought they would have to evacuate dozens of homes, but fortunately, they were able to stop the fuel from entering the sewer system. The police and fire chiefs all met afterward and said, 'Once again communication was the main problem'."
Since then the terrorist attacks on 9-11 and Hurricane Katrina demonstrated "huge communication failures," Fischesser said.
"Everybody became more motivated the last couple years to find a way to fund a new system here," especially because the FCC is requiring cities and counties to upgrade their systems by 2012, Fischesser said.
"Doing it (upgrading the system) all at once is cheaper and covers everybody as opposed to a few going ahead on their own and wondering if the others will catch up," Fischesser said.
How did Proposition H get on the ballot?
The Municipal League asked the St. Louis County Council to put it on the ballot.
"We feel it's a loophole we can close because if a company buys a bunch of shelving from somebody in Missouri, they would pay all the tax," he said. "But if they happen to buy it from an out-of-state vendor, they can skip the use tax. We're trying to close that loophole and, in effect, broaden the base without raising the rates. We're not saying it's not a revenue increase -- obviously somebody's got to pay it -- but it's not a rate increase."
What happens if Prop H fails?
>"I'm afraid we're going to have a piecemeal, decentralized response to the communication system and we'll just bump along for years," Fischesser said. "The wealthier cities will go ahead and graduate to the new system and the others will get around to it when they get around to it."
Who has endorsed Prop H?
A variety of government and civic organizations including Cities for Growth, East-West Council of Governments, Focus St. Louis, Mayors of Small Cities, North County Inc., Northwest Chamber of Commerce, St. Louis County Municipal League.
Other issues on the ballot
PROPOSITION C -- Charter Commission: Shall there be a charter commission to revise and amend the charter?
What is Proposition C?
It is an opportunity for residents to decide whether the county charter should be reviewed and possibly amended. If voters pass the proposition, a commission would be formed to consider changes in the charter. No group or individual asked for Proposition C to be put on the ballot. The county charter requires residents to vote on the question every 10 years.
PROPOSITION I -- Special Bond Election: Shall St. Louis County, Missouri, issue general obligation bonds up to the amount of $120 million for the purposes of constructing various capital improvements to county buildings and facilities, and making improvements to county safety/security and communication facilities?
What is Proposition I?
Proposition I asks voters to approve issuance of $120 million in general obligation bonds.
Funds would be used to build a new family courts building and animal shelter, upgrade the existing county court building and the county's tornado warning system and expand the county crime lab, said Mike Jones, senior advisor to St. Louis County Executive Charlie Dooley. The property tax rate would not go up if the proposition passes. It would, however increase the time property owners would pay the tax to cover the cost of the projects plus interest on the bonds. Officials put the issue on the Nov. 4 ballot because it takes only 57 percent for passage in a general election. In a non-general election, 66 percent of the voters would need to approve it for passage.
With 93 percent of the vote counted, at 11:30 p.m. Nov. 4, the vote was 50.55 percent in favor and 49.45 percent against. This was not sufficient for passage.
Ballot Language
PROPOSITION H - Use Tax
For the purposes of enhancing county and municipal public safety, parks, and job creation and enhancing local government services, shall the county be authorized to collect a local use tax equal to the total of the existing county sales tax rate of one and eighty-five hundredths percent (1.85%), provided that if the county sales tax is repealed, reduced or raised by voter approval, the local use tax rate shall also be repealed, reduced or raised by the same voter action? Fifty percent of the revenue shall be used by the county throughout the county for improving and enhancing public safety, park improvements, and job creation, and fifty percent shall be used for enhancing local government services. The county shall be required to make available to the public an audited comprehensive financial report detailing the management and use of the countywide portion of the funds each year.
Kathie Sutin is a freelance writer in St. Louis.