Beck: Tax-free Internet still taxes city services

Thursday, May 20, 2004 | 12:00 a.m. CDT; updated 6:28 p.m. CDT, Thursday, July 17, 2008

Columbia City Manager Ray Beck would like to tax Internet purchases that occur in Columbia, but he isn’t sure exactly how to do it.

During his annual State of the City address, Beck said the trend toward Internet buying is one reason for slower growth in revenue from the city’s sales tax. Recent economic downturns and the emergence of businesses in neighboring communities are also to blame, he said.

Internet purchases are not subject to city taxes.

“I feel it is important that states and cities, working with Congress, continue to find a fair and equitable method of taxing Internet sales,” Beck said Tuesday.

The sales tax is one of the city’s principle sources of revenue, accounting for about 30 percent of the city’s general fund for the past five years. The rate of increase over the previous year is now in its second year of decline. How much of this decline can be attributed to each of the causes listed by Beck is difficult to determine.

“It’s impossible to track how many local sales have been lost to purchases made over the Internet or to businesses in neighboring communities,” said Lori Fleming, the city’s finance director. “But common sense tells you it’s happening.”

Fleming said a national report determined that Internet sales during the last holiday season were up 21 percent over the previous year. “Given the national trend, it makes sense that something similar is occurring locally,” Fleming said.

Beck also indicated that Internet sales do more than simply displace purchases that would have otherwise been made locally.

“Deliveries of merchandise purchased over the Internet into our city have an impact on our streets and traffic systems and other city services we provide,” Beck said.

But just as the cause of the tax revenue’s declining rate of increase is hard to pin down, so is a solution.

A local use tax, for example, was enacted by the state in 1995, imposing a 1.5 percent tax on all sales by out-of-state vendors, including catalog and direct market sales. But the tax was found unconstitutional by the Missouri Supreme Court.

“It is important that our retail outlets continually update and diversify our product mix to retain and expand our regional shopping base,” Beck said.

He noted the addition of Famous-Barr to the community, as well as the coming arrival of Bass Pro and Best Buy.

“The city will need to continue working on making it worthwhile for people to do their shopping in Columbia,” Fleming said.

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