Use Tax v. Sales Tax

Commissioners in Franklin County, Missouri, have decided that revenue levels would be best maintained by extending the current sales tax on boats, motorcycles and vehicles purchased out-of-state, rather than replacing it with a use tax on such out-of-state purchases.

Under legislation enacted in 2013 by the Missouri Legislature, cities and counties must approve by November 2016 either a sales tax or a use tax on vehicles purchased by Missouri residents from individuals or in other states. If voters in Franklin County approve neither, the county will be unable to collect any tax on these transactions.

As the Commission sees it, there are three options:

1. Do nothing and let the current sales tax expire.
2. Place a measure to extend the current sales tax model on the April ballot.
3. Place a measure to replace the current sales tax with a use tax on the April ballot.

During their January 12 meeting, the commissioners decided to “put on the April 2016 ballot a proposal for a tax to offset the loss of revenue in out-of-state sales.” The proposal was presented at the January 19 meeting. It reads as follows:

Now on this day the County Commission of the County of Franklin does hereby elect to continue to impose its local sales taxes on the titling of motor vehicles, trailers, boats, and outboard motors that were purchased from a source other than a licensed Missouri dealer.… The intent is to collect the local sales tax or this special use tax, but not both, on the titling of motor vehicles, trailers, boats and outboard motors that were purchased from a source other than a licensed Missouri dealer. IT IS FURTHER ORDERED that the County Commission of the County of Franklin hereby calls for an election to be held on Tuesday the 5th of April, 2016 for the purpose of submitting to the voters the proposition contained in the following Notice of Election and Sample Ballot:

Shall Franklin County, Missouri continue applying and collecting the local sales tax on the titling of motor vehicles, trailers, boats, and outboard motors that were purchased from a source other than a licensed Missouri dealer? Rejection of this measure will result in a reduction of local revenue to provide vital services for the County of Franklin and it will place Missouri dealers of motor vehicles, trailers, boats, and outboard motors at a competitive disadvantage to non-Missouri dealers of motor vehicles, trailers, boats, and outboard motors.

YES         NO

IF YOU ARE IN FAVOR OF IMPOSING THE LOCAL SALES TAX VOTE YES

IF YOU ARE OPPOSED VOTE NO

What difference does it make?

It's fair to wonder what difference it would make to apply sales tax or use tax to these sales. In most states with sales tax, use tax rates and sales tax rates are the same. However, use tax rates throughout Missouri are generally less than sales tax rates — sometimes by as much as half.

The sales tax rate for Franklin County is currently 5.975% (4.225% state rate + 1.750% local rate), while the use tax rate for Franklin County is 4.225% (the state rate). Franklin County does not currently impose a local use tax.

One reason the Commission opted to pursue a continuation of the sales tax rather than replacing it with a use tax is because nearly 60% of voters rejected a use tax proposal a couple of years ago. Commissioner Tim Brinker said, “The public had its say, and they said, ‘We don’t want it.’”

Use tax is one of the most common areas of noncompliance. Read 5 tips for consumer use tax compliance to learn more.