A use tax would ensure that purchases from online vendors located outside of the state are subject to the same local tax rates as those purchases made from Harrisonville vendors.
It would also help the City maintain its revenue while continuing to provide the services our residents expect.
If voters approve Prop U, it’s estimated that a use tax would bring at least $1 million back into our community each year, but many other Missouri cities have reported revenues as much as double the amounts initially projected.
OFFICIAL BALLOT LANGUAGE
WHAT IS A USE TAX?
A use tax is a local tax on goods purchased from out of state (most often online) for delivery to and use in the City of Harrisonville.
Currently, the City of Harrisonville collects a 2.375% local sales tax on all goods and services purchased from local businesses. However, that is not the case for purchases made online from out-of-state vendors.
For example, if a person purchases new pillows at a store located here in Harrisonville, the vendor collects a state and local sales tax on that item. However, if the same person purchased the same pillows online from a vendor located outside the state of Missouri, the vendor is not required to collect the same local sales tax.
If voters approve Prop U on November 7, 2023, a 2.375% local use tax would be collected on goods and services purchased from out-of-state vendors. The revenue generated from the use tax would be allocated to fund streets and sidewalk improvements, along with public safety initiatives like additional police officers and improvements to the Harrisonville Animal Shelter.
Residents would benefit from a use tax as it is estimated the City would be able to better meet the needs of residents and business partners by increasing the number of road and sidewalk improvements able to be completed each year. The City will also be equipped to make improvements to the Harrisonville animal shelter and its programs and provide additional resources for public safety.
The use tax rate would be the exact same as the resident’s local sales tax rate. Residents would NEVER have to pay both use and sales tax on the same purchase.
WHAT WOULD A USE TAX MEAN FOR HARRISONVILLE RESIDENTS AND BUSINESSES?
A use tax would eliminate the disparity in tax rates collected by local and out-of-state sellers by imposing the same rate on all sellers.
With no local use tax in place, consumers have an incentive to purchase goods and services from out-of-state vendors instead of buying locally.
If voters approve the Prop U ballot measure, online, out-of-state purchases would be taxed at the exact same rate as in-state purchases.
It’s estimated that the City would collect at least $1 million annually through the use tax, but many other Missouri cities have reported revenues as much as double the amounts initially projected. The funds collected by the use tax would be spent in the same manner as the local sales tax.
As mentioned above, the revenue generated from the use tax would be allocated to fund streets and sidewalk improvements, along with public safety initiatives like additional police officers and improvements to the Harrisonville Animal Shelter.
FUNDING SOURCES THAT BETTER REFLECT CONSUMER BEHAVIOR
Online shopping has become much more prominent in recent years, and the general trend is that in-store shopping is decreasing steadily.
Nationwide, online sales rose 30% during the pandemic and now represent more than 13% of total retail sales.
With the rise in e-commerce, the City is seeing a decline in sales tax growth. To keep pace with this trend, the City must modernize its revenue sources to continue to provide the essential services our residents expect.
The City relies heavily on revenues from local sales tax to fund basic services, such as road maintenance and public safety.
Because the City doesn’t have a use tax in place, Harrisonville has missed out on at least $5.5 million in tax revenue due to online shopping over the last five years.
Revenue of the e-commerce industry in the U.S. 2017-2027
E-Commerce as a percentage of total retail sales worldwide from 2015-2027
Graphs provided by Statista
FREQUENTLY ASKED QUESTIONS
I already pay sales tax, is this the same thing?
No. The sales tax applies to purchases made at retail within Missouri, while the use tax applies to purchases made from out-of-state vendors. Purchases cannot fall into both groups and therefore a purchase would not be taxed twice.
What is the use tax rate?
The use tax is imposed at the same rate as the total local sales tax rate, currently 2.375%. If the local sales tax rate is reduced or raised by voter approval, the local use tax rate shall also be reduced or raised by the same action.
How much will the City of Harrisonville receive from a local use tax?
It’s estimated that the City would collect at least $1 million annually through the use tax, but many other Missouri cities have reported revenues as much as double the amounts initially projected.
Why is this important to City of Harrisonville’s residents?
With no local use tax in place, consumers have an incentive to purchase items from out-of-state vendors instead of buying locally. This costs the city local jobs and tax revenue because millions of dollars are sent out of our state and local economy.
The City of Harrisonville needs to maintain this revenue stream for vital City services such as:
• Public safety (police and animal shelter)
Do other Missouri cities have a use tax?
Yes. Approximately half of all Missouri cities with populations of 2,000 or more already have a use tax in place. The City of Harrisonville does not. Large cities with a use tax are Columbia, Kansas City, St. Louis and Springfield. Cities in the western-Missouri area with a use tax are Claycomo, Clinton, Excelsior Springs, Garden City, Gladstone, Grandview, Kearney, Lee’s Summit, Liberty, Oak Grove, Peculiar and Raytown.
Full list of Missouri cities with a use tax (288)
Will the use tax apply to online purchases?
It depends on where the transaction occurs. If goods are purchased from a vendor located in Missouri, sales tax is applied at the rate applicable to the vendor’s location. If goods are purchased from a vendor outside of Missouri the use tax applies.
Important documents and resources
August 21, 2023 Board of Aldermen Agenda (Item F)
Prop U Brochure
Additional FAQs (Frequently Asked Questions)
Paid for by the City of Harrisonville, Missouri. Brad Ratliff, City Administrator | 300 E Pearl Street, P.O. Box 367, Harrisonville, MO 64701