The city council had a brief discussion about online sales taxes last week. A scheduled presentation by Nick Edwards, assistant city manager, about use taxes will be continued next month. If the city wants to pursue putting a use tax measure on the April ballot, the council will need to take action by Jan. 15.
A local use tax would allow the city to collect sales tax for purchases made by residents from out-of-state vendors. This would include online and catalog sales from out-of-state businesses that also have a physical presence in the state – such as big-box stores who are based in another state but have locations locally.
Mayor Bill Baird began the conversation at the council’s Dec. 11 work session by admitting that he’s made a number of online purchases out of convenience – purchases that don’t contribute any sales tax to the city. He reviewed a number of receipts that showed the collection of some state taxes but none for Lee’s Summit. That’s lost revenue that would have supported infrastructure, public safety and other city services.
“We have to start this conversation somewhere,” Baird said, confessing he felt shame about the lost sales taxes for the city.
Councilmember Diane Forte said she’d felt red-faced listening to Baird, having also often shopped online for convenience. She said she hadn’t realized until joining the council how small the portion of the total sales tax collected goes to the city is. Forte suspects many constituents don’t realize how far those dollars have to go toward paying for city services. She said she thought the council is on the right track and that it’s a conversation that must be had.
Councilmember Phyllis Edson suggested that the council take some more time to discuss the issue in conjunction with debt capacity issues and the city’s broader strategic planning initiatives.
City Manager Steve Arbo agreed. He referred to lost tax revenues through online shopping as “tax leakage,” likening it to the days before Summit Woods Crossing when Lee’s Summit lost many sales to nearby cities with large shopping centers.
Baird agreed, asking the council not to rush to any decisions. The council plans to take up the conversation again in January.