City Beat: Springfield opts out of tax-free shopping days

by Eric Olson

SBJ Reporter

eolson@sbj.net

To some Springfield retailers, City Council is playing the part of Scrooge this holiday season. But city officials say council members were acting cautiously when they voted Dec. 8 to opt out of a state-imposed sales tax holiday slated for three days during the back-to-school shopping season next year.

"I find it quite disappointing," said Darin Lake, general manager of the Springfield computer retailer Gateway, realizing a chance for additional sales at his store may have vanished with the vote.

Senate Bill 11, signed by Gov. Bob Holden in July, eliminates sales taxes Aug. 13-15, 2004, on back-to-school purchases such as clothing, school supplies and computers. Legislators say the aim is to inspire greater spending and create savings for Missouri families. The bill gives local taxing authorities the option of not participating.

The bill's co-sponsor, Sen. Delbert Scott (R-Lowry City), and its proponents say the tax-free days would increase sales throughout the state by providing an incentive for shoppers to spend more and by drawing shoppers from across state lines.

But in Springfield, benefits of the sales tax holiday are unproven, said City Manager Tom Finnie.

"We've set our budget based on anticipated revenue. There's been no hard evidence there'd be anything except a loss of revenue," Finnie said, directly disputing a Missouri Chamber of Commerce study sent to city offices.

According to the chamber study released Dec. 3, increased sales of nonexempt items during the sales tax holiday would outweigh the losses incurred from tax-free purchases, creating a net gain of $793,358 in local tax revenue and $335,494 in state tax revenue. Of that, Springfield is estimated to see a net gain of $19,138, while Greene County would benefit by $16,412. Researchers with the chamber projected losses of state and local sales tax revenues, reviewed experiences from other states to calculate projected sales increases in nonexempt items for Missouri and combined loss and gain data to show the net effect.

By the counts of Springfield and Greene County officials, the city and county combined could lose up to $500,000 in sales tax revenue, not including sales of nonexempt items. It's a risk Greene County officials aren't willing to take; Presiding Commissioner Dave Coonrod expects the county to opt out as well.

"We're not sure the generation of the additional revenue will cover the loss," said Jeff Reinold, Greene County budget officer.

Therein lies the point of contention. Statewide proponents argue that reduced tax rates would lure shoppers and their shopping dollars across state lines.

"That argument doesn't hold much water here in Springfield," Finnie said, though he does see an advantage for Kansas City, St. Louis or Cape Girardeau. "I don't think people are going to drive from Kansas or Arkansas to save 2 percent."

Finnie is not the only municipal official with that belief. According to the Department of Revenue, 45 cities and 13 counties had opted out of the sales tax holiday as of the end of November.

The state can add Nixa to the list, too, said Brian Bingle, Nixa city administrator. Bingle doesn't expect the city to ever participate in such a program.

"We rely on those amounts of monies to balance the budget at the end of the year," he said.

The numbers of municipalities opting out is disappointing to Scott.

"I think it's obvious folks coming to town and spending money are going to spend money other than on those limited items which are exempted for that weekend," Scott said. "To choose (that the sales tax holiday) is only going to be a losing proposition is pretty short sighted."

As it stands, only state sales tax of 4.225 percent will be withheld. Springfield's sales tax is 1.375 percent and Greene County's is 1 percent. The bill expires July 1, 2005.