Opting out of sales tax break gains more favor

Columbia, Boone County expected
to reject the holiday.
Sunday, December 14, 2003 | 12:00 a.m. CST; updated 5:20 a.m. CDT, Friday, July 18, 2008

Both Columbia and Boone County will soon decide whether to opt out of the state-imposed sales tax holiday, scheduled for Aug. 13 to 15.

The tax holiday temporarily lifts the state sales tax on certain items, including school supplies, clothing and computer equipment. Supporters of the tax holiday wanted to give families a financial break on back-to-school purchases. Other advocates say governments stand to gain revenue because shoppers will buy the tax-free school supplies, then buy other taxable merchandise.

Many city and county governments, however, have chosen to opt out of the holiday for fear of lost revenue.

Boone County Southern District Commissioner Karen Miller introduced the topic at the commission meeting Tuesday. Each commissioner spoke in support of the proposal to opt out. The proposal faces a second reading and vote at the commission’s next meeting this Tuesday.

“It’s important that people realize the percentage of our budget that is based on sales tax,” Miller said.

About 61 percent of Boone County revenue in 2003 came from sales tax, according to budget reports.

A list from the Missouri Department of Revenue, compiled at the end of November, shows 53 cities and 13 counties already have opted out of the tax holiday.

Within Boone County, Ashland has opted out; neighboring Howard County has done so as well. While the deadline for opting out is not until July 9, many have chosen to do so already.

“I think many of them are going to wait until closer to July to see what their budgets look like,” Missouri Municipal League Director Gary Markenson said.

A study by the Missouri Chamber of Commerce released Dec. 3

shows the profit each county and city was estimated to gain from the tax holiday. Boone County was projected to gain an extra $9,254.

Markenson, however, said other states have lost revenue from the sales tax holiday.

“There’s a lot of misinformation going out,” Markenson said. “I know that some organizations are saying that this will not cause governments any loss of revenue, but in other states it’s been significant.” He cited Florida as one state that chose to repeal its tax holiday entirely because of lost revenue.

The Columbia City Council is expected to follow Boone County’s lead when it votes on the matter Monday night, city Finance Director Lori Fleming said.

Nobody knows for sure how much money the city would lose if it participated in the holiday, Assistant City Manager Bill Watkins said.

“Estimates are that we could lose thousands of dollars a day over the three days,” Watkins said.

According to the city budget, Columbia officials estimate sales tax will comprise about 14 percent of city revenue for fiscal 2004 and about 35 percent for general government revenue.

Sales tax accounts for 28 percent of the city’s general fund, Fleming said.

Boone County Presiding Commissioner Keith Schnarre said the sales tax holiday could have a divisive effect. “This pits business people against local governments,” he said.

Northern District Commissioner Skip Elkin considers the holiday a risk for the county. “Because we’re so heavily dependent on sales tax, it would be a hardship,” he said.

The Missouri Municipal League provides a form on its Web site that cities and counties can download and fill out to opt out of the law.

“We opposed the legislation throughout, and we think it’s a terrible precedent to set,” Markenson said. “But we have no position on whether cities should opt out. That’s up to the individual cities.”

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