A Missouri Supreme Court decision relating to vehicle purchases last week could take money out of local and county coffers, though officials said Monday they're not sure yet how much the ruling might take out of the tax pool.

Until last Wednesday in Missouri, no matter where a person bought a car, sales taxes were paid on it at registration according to the local rate associated with the buyer's home address.

But since last Wednesday, car buyers will be able to pay fewer taxes if they buy outside the state.

A Missouri Supreme Court ruling handed down earlier this year took effect last week and says that "local sales taxes cannot be levied on out-of-state purchases of motor vehicles, trailers, boats and motors," according to a memo circulated by the Missouri Association of Counties. Local use taxes can be imposed in areas where voters have approved them at the ballot.

The issue arose when a Greene County lawyer, Craig A. Street, objected to paying local sales tax on a boat, outboard motor and trailer purchased in Maryland and brought back to Missouri. He argued that statutes governing sales tax only allow local sales taxes to be imposed "to the extent and in the manner" as state sales taxes, as cited in the case summary available on the Missouri Supreme Court website. In a unanimous decision, the court agreed that, because state sales taxes apply only to purchases made in the state, Greene County similarly could not impose a local sales tax because Street's purchase was not made locally.

However, the state can levy a use tax equivalent to the state sales tax rate on out-of-state purchases.

In an example of what this means for local consumers, the tax rate is 7.975 percent in Cape Girardeau, which includes a 2.75 percent city tax and 1 percent county tax. Now, only the state use tax of 4.225 percent will be levied on cars bought out of state and registered in Cape Girardeau. Were a buyer to purchase locally, the tax at registration would be 7.975 percent. On a $20,000 purchase, $750 could be saved by buying across the state line.

How that will affect local motor vehicle dealers and county tax revenue is not yet known. Ted Farnen, director of communications for the Missouri Department of Revenue, said the state has not specifically gathered information on revenue from vehicles bought out-of-state, so he could not provide estimated amounts of potential losses.

"While the point of purchase of a vehicle is noted in the information of individual motor vehicle registrations, the Department of Revenue does not statistically separate out-of-state purchases versus in-state purchases," Farnen said.

John Mehner, president of the Cape Girardeau Area Chamber of Commerce, said it is "too early to tell" how the decision would affect local dealers. Mehner said the chamber has always advocated for consumers to "buy local" to support area businesses.

Cape Girardeau County Treasurer Roger Hudson said that loss of local tax income has been a long-standing problem stemming from buyers who seek out better deals on the Internet or cross state lines to make large purchases such as construction supplies. Since the ruling, vehicle purchases fall into that same category. Hudson said online and out-of-state discounts put local businesses at a disadvantage.

"That's been a problem, in terms of fairness," Hudson said.

One way to equalize the issue would be to create a county use tax that would apply only to out-of-state purchases. Cape Girardeau narrowly voted down a county 0.5 percent use tax proposal in 1996 by 3,348 votes to 3,127. At that time, Presiding Commissioner Gerald Jones said he felt the issue may not have been well-understood at the polls, as the tax would not have affected the "general populace."

Of the 114 counties and one independent city in Missouri, 39 counties and St. Louis city have local use taxes. In Street's case before the Missouri Supreme Court, he was awarded a refund of the local taxes he paid on his boat, motor and trailer, since Greene County does not have a use tax.

salderman@semissourian.com

388-3648

Pertinent address:

Springfield, MO