Councilman Terry Hollander's Blog

Dec 20

[ARCHIVED] The Impact of Sales Tax and Online Purchases

The original item was published from December 19, 2019 10:25 AM to December 20, 2019 2:30 PM

For the past few weeks, your County Council has reviewed and discussed a budget for 2020 that has been proposed to us by the County Executive and his staff. It is one of the tightest County Government has ever seen.

After a year of economic growth and low unemployment, why is this the case? It’s because local governments are unable to collect sales tax from all online purchases. This isn’t a situation unique to St. Charles County, but that doesn’t make it any easier for us. No one knew that technology would create a method for people to buy online and not pay state or local sales tax on their purchases. After the United States Supreme Court changed the rules for collection of internet sales tax by states, the majority began collecting it from online sellers. Missouri was not one of them.  

Of the 45 states that collect sales tax, only Missouri and Florida exempt e-commerce from taxation. With the growth of our population and increased cost of services, action needs to be taken by our state legislators to overcome this problem.

The following section of the Report to the Community, which you received in the mail earlier this year, provides an excellent explanation of how e-commerce and sales tax issues affect County Government:

Governments typically are funded by a mixture of sales and property taxes to ensure diversity of revenues so that as the economy changes, the ability to provide basic services is unaltered. St. Charles County residents currently pay no property taxes to the County to support general operations. Since 1994, the rate has been rolled back and a rate of zero has been in place since 2015.

Property taxes do support Emergency Communications and the County Highway Department. The County voluntarily rolled back these tax rates as well, foregoing $27 million since 1996.

Because the County collects no property tax for the General Fund, 60 percent of revenues supporting general operations come from sales taxes; the other portion comes from federal and state grants and fees collected for specific services.

While the County was able to roll back property tax rates during the years mentioned above because of the sizable rate of growth in sales tax, that growth has slowed tremendously in the last five years with the increase of e-commerce. Because state and local governments can collect sales tax only from sellers who have a physical presence in the state, the County receives no revenue from many online purchases. The lack of property tax revenue for the General Fund, along with limited growth in the rate of sales taxes collected, means St. Charles County Government will be challenged in the future to keep pace in providing necessary services as the county’s population continues to increase. If inflationary cost increases in essential services, such as public safety, outpace growth in sales tax, the County will not be able to sustain services on sales tax alone.

Why don’t our state legislators change the e-commerce laws to benefit local governments and the citizens they serve, and to level the playing field for local businesses? I believe most people who shop online do so for the convenience and bargains and not to avoid a few dollars on sales tax that helps benefit and better their community.

This is my second term on the County Council and I am very concerned about what lies ahead. Something has to give, or St. Charles County will need to seriously examine services and resources in the near future. Having worked for 34 years in various local governments before retiring from St. Charles County, and I can tell you our County Government runs efficiently and is a sound steward of sales tax dollars. St. Charles County is a wonderful great place to live and work, and County Government must be able to provide public safety and other necessary services to keep it that way. Please contact your state legislators and tell them to approve sales tax for all online purchases. It’s the right, and necessary, thing to do.