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Mitchum Jewelers owner Randy Mitchum says the Ozark use tax would level the playing field for local businesses competing against online retailers.
SBJ photo by Eric Olson
Mitchum Jewelers owner Randy Mitchum says the Ozark use tax would level the playing field for local businesses competing against online retailers.

Ozark takes 2nd swing at online tax

The issue reappears on ballot two years after defeated by voters

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The city of Ozark has returned a use tax for online and out-of-state purchases to the election ballot, two years after voters defeated the issue.

If approved, the use tax sets a 2.375% rate for Ozark residents, the same as the city’s local sales tax. It’s set for a vote June 2, after the state postponed the April 7 election amid the coronavirus pandemic.

“It’s exactly identical to the regular sales tax you would pay if you were to walk into a brick-and-mortar store anywhere in Ozark and make a physical purchase,” Ozark Chamber of Commerce Executive Director Anna Evans said during a May 14 chamber-hosted livestream discussion.

The Ozark chamber, as well as economic development organization Show Me Christian County and the community-organized Love Ozark Committee, endorse the tax proposal. The city seeks to use the revenue for city services and updated facilities, such as a new animal control building.

Ozark City Administrator Steve Childers said how much the tax would annually generate is uncertain, as the Missouri Department of Revenue doesn’t track online sales for cities unless a use tax is in place. However, looking to Christian County neighbor Nixa, which passed the tax in 2018, he expected it would generate well over $100,000.

Ozark leaders hope to be successful where the Missouri General Assembly wasn’t this year. Legislators ended session this month without passing a so-called Wayfair tax, which would allow the state to impose sales taxes on online businesses with in-state gross sales exceeding $100,000. Lawmakers identified the issue as a priority early in the session, prior to the coronavirus pandemic slowing much bill activity, according to past Springfield Business Journal reporting.

“It’s the new way of shopping and it’s what everyone is going to do. We know that,” Ozark’s Childers said, noting the city isn’t encouraging people to shop online. “We will always support our local community, our local businesses. We encourage people to shop local first.”

Keep it local
The total sales tax rate in in Ozark 8.375%.

In Nixa, it’s 7.475%, and Childers said Nixa’s use tax, currently at 1.5%, brought in nearly $500,000 in its first 15 months.

Ozark generates over 55% of its general fund revenue from the local 2.375% retail sales tax, he said, noting the 2020 budget projected $7 million.

Evans at the chamber said online shopping likely has spiked in recent weeks during the local stay-at-home orders.

“Unfortunately, many or all of those purchases that have been made by, more than likely, all of us over the past six weeks have not gone back to fund our local municipality,” she said.

Nationwide, e-commerce sales showed first quarter growth of 2.4% to $160.3 billion, according to the U.S. Census Bureau. That comes after a big year for e-commerce in 2019, when sales were estimated at $602 billion, up nearly 15% from the year prior.

Childers said it’s undeniable online shopping is here to stay, which posed a challenge for small businesses even before the pandemic.

“If it wasn’t hard enough for retail to make it before COVID-19, it’s proven that it’s going to be even more challenging for them to make it in situations like this,” he said.

For Randy Mitchum, owner of Mitchum Jewelers, the tax issue comes down to holding Amazon.com Inc. (Nasdaq: AMZN) and other e-commerce companies to the same standard as local businesses that charge sales tax.

“It would help level the playing fields for internet-based purchases and encourage people to actually walk in and shop in a local brick-and-mortar,” he said. “There’s a lot of value for that.”

In his industry, consumers often first research jewelry online. However, for those who don’t shop local in Ozark and want to buy online, Mitchum said it’s a harder sell for his business if the consumer isn’t assessed a 2.375% use tax. The cost difference without the use tax can amount to hundreds of dollars on jewelry purchases.

Online jewelry and watch sales is on the rise, with revenue increasing at an annualized 4.9% rate over the past five years to $8 billion in 2019, according to data research firm IBISWorld.

“Big entities like Amazon should be held accountable for collecting a tax and repurposing it back to the city,” Mitchum said. “What the city does with it will only enhance our community, honestly.”

Under the proposal, the majority of the Ozark use tax revenue, 40%, would go toward public safety, such as police services, with the remaining 60% split between city facilities and parks, trails and playgrounds, said Parks and Recreation Director Samantha Payne. Aside from a new animal control building, the city would apply tax funds toward a new playground outside the Ozark Community Center and renovations to the Neal and Betty Grubaugh Park.

“Those are the highest things people are asking for: public safety, parks and trails. We’re just trying to take what they’re asking for and say this is an action plan to get you what you want,” Payne said. “It creates a transparency and, hopefully, some trust between the citizens and the city.”

Time matters
Not all city leaders are on board with the tax issue.

Alderman Jason Shaffer said he plans to vote against the tax, as he did two years ago. He also cast the lone dissenting six-member Ozark Board of Aldermen vote in January to add the issue to the ballot.

“I give a lot of credit to voters and respect their vote,” Shaffer said, regarding the issue’s 611-516 defeat at the polls in April 2018. “So should the city.”

While he understands retailers want an even playing field with online sales outside Ozark, Shaffer, who works as a health care attorney in Springfield, said shopping on the internet has always been about convenience.

“People like to shop from home and have the convenience of having it be delivered,” he said. “This use tax doesn’t change that. Those [local business] sales are still going to be lost.”

More than 200 other Missouri communities, including Springfield and Willard, have passed the tax issue, according to the Missouri Municipal League. Evans said Ozark needs to join those cities to address future goals of its growing population.

“Speaking frankly, Ozark is behind,” she said. “This is something that should have been in place before this point.”

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