Approval would close loophole and generate revenue for city

The City of Paris will likely place a measure on the April Municipal Election ballot seeking to impose the city’s 2.5 cents on the dollar sales tax on Internet purchases made by city residents.

The so-called use tax would close a loophole that allows e-commerce merchants to not charge sales taxes for purchases in states where they do not have a presence. Under the proposal that will go to voters, the city of Paris would collect a 2.5 percent “use tax” on Internet sales delivered to residents of the city.

Paris aldermen were expected to approve placing the measure on the April ballot during their regular monthly meeting on Tuesday, Dec. 5.

“The sales tax is based on the point of sale, while a use tax is based on the point of delivery,” said Lisa Hollingsworth, Paris city superintendent. “A use tax on Internet sales provides a level playing field for our retailers who must charge the sales tax.”

Hollingsworth said the Missouri Department of Revenue estimates that Paris is losing about $13,900 a year in tax revenue due to Internet sales.

The issue is part of a national debate. Internet sales are booming in popularity among consumers, while taking business from traditional Main Street brick-and-mortar businesses. Thousands of retailers have shut down locations as e-commerce has become a more dominant player for consumers.

And the growth of Internet sales has created an issue for state and local governments across the nation as many look for ways to soften the blow of lost local sales tax revenues to online retailers.

For the third quarter 2017, the United States Department of estimated that e-commerce represented nearly 9 percent of all retail sales in the United States, and is growing at an annual rate of nearly 15 percent, a figure most market watchers predict will get much higher. Meanwhile, traditional retails sales, while much higher, are flat, at best.

In Missouri, a study by the research and consulting company Civic Economics reported that in 2015, online sales from Amazon alone cost state and local governments about $75.4 million. The report found that 2015, Amazon sold $55.6 billion worth of retail goods nationwide, all while avoiding $704 million in sales taxes. The cost of lost sales taxes falls equally on state and local governments.

“These sales are the equivalent of 39,000 retail storefronts or 133 million square feet of commercial space, which might have paid $528 million in property taxes,” Civics Economics reported in the study. “A total of more than $1.2 billion in revenue is lost to state and local governments. Amazon also operated 75 million square feet of distribution space, employing roughly 111,000 workers. Even counting all the jobs in Amazon distribution centers, Amazon sales produced a net loss of 222,000 retail jobs nationwide.”

The Missouri Legislature has given local units of government until November 2018 to get voter approval to institute use taxes, Hollingsworth said.

Hollingsworth said that Paris will work to educate voters on the proposal in the coming months.

“We cannot advocate, and we won’t. We want to present facts to voters,” she said.