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Lawmakers take up local vehicle sales tax

JEFFERSON CITY, Mo. (AP) -- A state Supreme Court decision and a veto by Gov. Jay Nixon have cost Missouri cities and counties at least $43 million in lost tax revenues that they otherwise could have collected from the sale of cars, trucks and boats, according to figures compiled by a state senator.

The estimate of lost tax revenues is being used by Sen. Mike Kehoe as one of his main arguments why lawmakers should enact a measure reinstating local taxes on vehicles bought from other states or sold in private deals between Missouri residents. The bill, which already has won initial Senate approval, is expected to receive a second vote this week that would send it to the House.

The legislation was prompted by a Missouri Supreme Court decision last year that said local sales taxes cannot be levied when vehicle purchases are made in another state. The ruling also applied to cars sold by one person to another, because sales taxes only can be collected from retail businesses. The court said a local "use tax" could be charged on such vehicles, but only if approved by local voters.

Almost all counties and municipalities had been collecting the tax on out-of-state vehicle sales before the Supreme Court's decision, but less than half had a voter-approved "use tax" and so have been unable to keep collecting the revenue.

State lawmakers reacted to the Supreme Court decision by passing a bill last May that would have allowed local governments to collect the tax. But Nixon vetoed the measure and said voters should have a say in whether the tax should be imposed. Some lawmakers launched an effort to override Nixon's veto over concerns that Missouri car dealers were at a competitive disadvantage, because customers were going out of state to avoid paying local vehicle taxes. The veto-override attempt ultimately failed.

Now lawmakers are trying again to re-instate the local taxes. "Who in their right mind would think it is right for the state of Missouri that we would tax our own local businesses, but not those out-of-state," said Sen. Jay Wasson, R-Nixa.

This year's Senate bill would try to alleviate the governor's concerns. Republican Sen. Mike Kehoe, a former Jefferson City car dealership owner, said it's a "new version for the same conversation."

The bill would allow local governments to start collecting the sales tax immediately after Nixon's signature. But it would also require local governments to put a "repeal" vote on the ballot sometime between November 2014 and November 2016 in which voters would be asked whether they want to keep the local tax.

Kehoe said he thought his bill would be a "bit more palatable" to Nixon than the version he vetoed, because it lets voters decide whether to keep the tax.

One Senator said she was "a little nervous" about how the bill would allow taxes to be collected immediately without voter approval. But Minority Leader Jolie Justus, D-Kansas City, said she still wants the bill's end result.

Since the issue has been unresolved, counties and municipalities lost $43 million in revenue between April and December 2012, according to figures compiled by Kehoe's office. During that period, $1.4 billion in motor vehicle sales were not subject to local sales taxes. Missouri dealers sold $5.1 billion worth of vehicles, which were subject to local taxes.

At the time of Nixon's veto, just 43 of Missouri's 114 counties and more than 90 of the roughly 950 municipalities had the ability to continue to collect a sales tax on cars not bought at Missouri dealers. Under the Senate bill, these local governments would not have to hold a "repeal" vote and currently can collect taxes on motor vehicles not purchased from Missouri car dealers. With Kehoe's bill still in the legislative process, some counties are looking to fix the problem on their own. At least 18 counties or municipalities have placed "use taxes" on the April ballot that would apply to vehicles sold in other states or between individuals, according to Americans for Prosperity, a group that advocates for lower taxes and limited government.

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