Missouri Supreme Court Rules DOR Cannot Collect Local Sales Tax On Out-of-State Vehicle Purchases

Missouri Supreme Court Rules DOR Cannot Collect Local Sales
Tax On Out-of-State Vehicle Purchases

By Mike Scott

Missourians purchasing vehicles from out-of-state dealers or
other individuals in are no longer paying local sales tax on those purchases,
thanks to a recent Missouri Supreme Court ruling. Collection of the state’s sales tax rate of 4.225 percent is not
affected by this decision.

In Street vs. Director of Revenue, the court ruled that
the Department of Revenue cannot collect those local sales taxes, because, in
short, the sales tax law wording allowing the collection of local sales
indicates that the local sales tax is collected for the privilege of doing
business in the state of Missouri, not on out-of-state sales. The case came from Greene County, after
Craig A. Street challenged the $149.94 he had to pay for sales tax on an
out-of-state purchase of a boat, motor and trailer. The court ultimately said Street was entitled to a refund.

Ted Farnen, Director of Communication for the Department of
Revenue said, ”The Missouri Department of Revenue interprets the case to change
how local sales and use taxes apply for some motor vehicle purchases. Local sales taxes will no longer be
collected on out-of-state motor vehicle purchases, or sales made between
individuals in Missouri. In such
situations, local use taxes will apply in jurisdictions that have approved
local use taxes.”

The change went into effect on Tuesday, March 20.

Currently, only 176 communities and counties in Missouri
have “local use tax” laws in place, and in those areas, the use tax will be
continue to be collected. Cities and
counties currently without a local use tax will either lose that sales tax
revenue, or will have to put a local use tax question on the ballot for voter
approval.

The change will apply to purchases of motor vehicles, ATV’s,
boats, motors, and trailers.

Farnen had no estimate of the local tax revenue which will
be lost, however, it could be substantial.

Clark County imposes four separate one-half cent sales
taxes, and Kahoka has it’s own one-half cent sales tax.

Because of this decision, a Kahoka resident buying a car
from an individual or out of state dealer for a purchase price of $10,000 would
save $250 in taxes. However, Clark County would lose $200 in sales tax, and
Kahoka would lose $50 in tax revenue on the sale. When multiplied by the number of individual-to-individual or
out-of-state purchases, the lost tax revenue in Clark County and Kahoka will
easily impact the county and city finances.

To read the court’s decision, visit http://www.courts.mo.gov/file.jsp?id=52257

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