Tax break on cars proposed

Monday, February 16, 2004 | 12:00 a.m. CST; updated 10:40 p.m. CDT, Thursday, July 17, 2008

JEFFERSON CITY — Missouri’s automobile industry supports exempting Missouri-made vehicles from state sales tax, but it could cost the state’s roads — while saving a new-car purchaser as much as $1,000.

The measure would exempt vehicles made in Missouri from state sales tax. Individual cities could decide to exempt Missouri-made vehicles from local sales tax as well. The bill’s supporters said this would likely increase sales of Missouri-made vehicles and encourage other manufacturers to open plants in the state.

Ford, Chrysler and General Motors manufacture various models of cars, vans and pickup trucks in Missouri.

The bill’s sponsor, Rep. Michael Spreng, D-St. Louis County, said he is pushing for bipartisan support similar to that which helped keep the Hazelwood Ford plant open last year. He said increased sales resulting from the tax exemption could also encourage Ford to bring back the second shift at the plant, which is in his district.

The bill could take a chunk out of the Missouri Transportation Department’s budget.

Currently, half of the 4.225 percent state sales tax on vehicles goes to the Missouri Transportation Department. In the last fiscal year, the department received $171 million in sales and use tax from the purchase of all vehicles sold in the state.

This includes used vehicles and those manufactured outside the state. The bill would only affect new vehicles made in Missouri. Cities and counties received $44 million in state sales and use tax from vehicles sold over the same year.

Official numbers on the loss of state revenue from the proposal are unknown because exact numbers of vehicles made and sold in Missouri are unknown, Spreng said.

He said he expects the overall impact on the state to be minimal because the money consumers save on their car purchases will be spent on other items.

Ben Reeser, finance coordinator with the Department of Transportation, said the money the department receives from sales and use tax is mostly used to fund road and bridge projects. Less money likely means fewer projects, he said.

Last year, 360,000 vehicles were sold in Missouri, including those made out of state. Sam Barbee, legislative affairs director for the Missouri Automobile Dealers Association, said the average selling price for a new vehicle is about $25,000, but vehicle trade-ins can lower the purchase price.

Rep. Chuck Graham, D-Columbia, has signed on as a co-sponsor for the bill. Graham said the measure would affect Columbians beyond the cost of a vehicle.

“We have people who make different auto parts — dashboards, things like that — in the Columbia area that feed into the auto manufacturers that are American,” he said.

Graham has not talked to Columbia officials about whether they would vote to exclude local sales tax as well, but he noted the city and Boone County decided not to take part in the optional sales exemption on clothing at the start of the school year.

The Missouri Automobile Dealers Association supports the bill but recognizes it might have some negative effects, Barbee said. The association represents some dealers who don’t sell any Missouri-made vehicles and may question whether it would hurt their businesses.

Barbee said other manufacturers would competitively price their products if this became a problem. However, sales tax is one of the last things consumers think about when buying a car, he said. Missourians may not even realize state sales tax is excluded from Missouri vehicles unless dealers advertise it, he said.

Dealers selling Missouri-made vehicles may be cautious, too.

“It could tend to put a dealer in a funny situation because of the special order side of things,” Barbee said.

For example, customers special-ordering the Eddie Bauer version of a Ford Explorer may be upset when they find out they are not built in Missouri. Thus, state sales tax would have to be paid on that vehicle but not on a regular Ford Explorer from Missouri that is sitting on the lot.

Rep. Harold Selby, D-Cedar Hill, has filed a similar bill that would also give a sales tax exemption to watercrafts made in Missouri. Selby said he plans to support Spreng’s bill if it makes it to the House floor, but he would propose an amendment to include watercrafts.

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