Finance Department
use tax header

What is a Use Tax?

A local use tax is a tax placed on goods purchased out of state for delivery to and use in Independence. A transaction will never be subject to both a use tax and a sales tax. To keep things simple, the State of Missouri mandates the local use tax be applied at the same rate as the City’s sales tax, currently 2.25%.

How is a use tax different from sales tax?

Local sales tax is collected by “brick and mortar” retail stores in the City of Independence. The local use tax is applied to purchases made from out of state vendors that ship goods to Independence customers. These out of state and online businesses do not currently collect local sales tax.

Local use tax can only be collected if the vendor has a physical presence in the State of Missouri. Online purchases from vendors who do not have a retail store or distribution center in the State of Missouri are not subject to local sales tax or local use tax.

Will I be double-taxed for purchases?

No. Consumers will never be charged both local sales tax and local use tax for any purchase.

Will I pay a use tax if I don't shop online?

No. Consumers will only pay a use tax for online purchases.

Isn’t the local use tax a new tax?

No. The local sales tax rate has been approved by voters of the City of Independence. The local use tax is not a new tax but it is a new way to collect tax revenue that has already been supported by voters.

Is there a sunset for the local use tax?

No. The local use tax will be collected in perpetuity, unless repealed by voters. The local use tax is not a new tax but a new way of collecting taxes that have already been approved by voters. The local use tax is assessed at the same rate as the local sales tax (2.250%). The City’s general sales tax and local sales taxes for streets, storm water, and parks were approved by voters with no sunset. The police and fire sales taxes sunset in 2028. The local use tax rate will always be the same rate as the local sales tax.

If approved, how will the local use tax be applied to online purchases?

Purchases made online that are delivered to Independence will be subject to local use tax only if they are not subject to local sales tax. If a purchase is made from a vendor that currently has a physical location in the State of Missouri local use tax rates apply. Online vendors who have annual sales of at least $2,000 with a physical location in Missouri will be required to assess local use tax in lieu of local sales tax.

How will the local use tax revenues be used?

The City Council approved an ordinance to place the local use tax on the August 6, 2019 ballot for the purpose of supporting operations of the Regional Animal Shelter and hiring more police officers. The local use tax rate is 2.250%. 50% of revenues will be used to support shelter services and 50% to hire additional police officers. Animal control services will continue to be funded through existing general fund revenues.

Once the level of funding for the Shelter and the Police Department are met, the remainder of the local use tax proceeds will flow into the City funds in the same manner as the City’s total local sales tax is allocated. This is includes :1% for the General Fund, 0.125% for the Capitol Improvement (Police), 0.125% for Fire Protection, 0.500 % for Streets, 0.250% for Stormwater, and 0.250% for Parks.

Why are Use Taxes being considered?

Local sales tax revenues have declined.

  • Approximately 50% of General Fund revenue is generated by local sales tax.
  • This year there was a less than 1% growth in local sales tax revenue

Local sales tax revenues cannot be collected for online or out of state purchases and can only be collected through a use tax.

  • In 2018 the State of Missouri reported $56 million of gross sales delivered to the City of Independence that were subject to local use tax. The City cannot collect anything on those sales without the use tax vote.
  • This trend toward online purchases is only expected to continue.

Local use tax revenues will be dedicated exclusively to critical community priorities.

  • If passed this funding would be used to address community priorities to provide operations of a no-kill animal shelter and increase public safety in neighborhoods by hiring additional police officers.

Do other cities in Missouri have a local use tax?

Yes. Approximately half of all Missouri cities already have a local use tax that was approved by voters. The list includes Kansas City, Liberty, Excelsior Springs, Gladstone, Grandview, St. Joseph, and Pleasant Valley.

On the Ballot August 6, 2019

Explanatory Statement

Local use tax is collected instead of local sales tax when an out-of-state vendor does not have a sufficient legal presence in Missouri to be subject to local sales tax. The State of Missouri and cities including Kansas City, St. Louis, Liberty, and St. Joseph already collect use tax. Currently the City of Independence receives no use tax revenue. Voter approval is necessary for the City of Independence to receive local use tax revenue on goods purchased for use in the City of Independence from out-of-state and online vendors. At no time can local use tax and local sales tax be collected on the same transaction.

The City of Independence submits the following question:

SAMPLE BALLOT FOR SPECIAL ELECTION IN THE CITY OF INDEPENDENCE, MISSOURI
ON TUESDAY, AUGUST 6TH, 2019

Proposition P:

For the purpose of operating a no-kill animal shelter and funding additional police officers for the Independence Police Department, shall the City of Independence, Missouri, impose a local use tax at the same rate as the total local City sales tax rate, currently two and one-quarter percent (2.25%), provided that 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? A use tax return shall not be required to be filed by persons whose purchases from out-of-state vendors do not in total exceed two thousand dollars in any calendar year.