Archive for Wednesday, January 21, 2004

Tonganoxie tax revenue increasing

January 21, 2004

It used to be that except for big-ticket items, such as cars and boats, consumers paid sales tax in the county where they purchased merchandise.

Now, with the streamlined sales tax act, which includes destination-based sourcing, that has changed.

And it's been beneficial to the city of Tonganoxie.

Kathy Bard, assistant city administrator, said that before the destination-based taxing law took effect in July, she had budgeted the city would receive $18,000 in compensating use tax in 2003.

But by Dec. 31, the city had taken in a record $31,293 in sales tax. Of that amount, $19,003 arrived in the final three months of the year.

Bard attributed part of this increase to the fact that merchandise shipped from businesses in the state is now taxed where it is sent.

"If you go to Nebraska Furniture Mart and buy a couch and have it delivered here, you pay the tax rate in Tonganoxie," Bard said.

In this instance, with a sales tax of 7.3 percent in both locations, the consumer wouldn't see a difference. But the city of Tonganoxie would receive a 1 percent sales tax that otherwise would have gone to Kansas City, Kan.

Locally, the 7.3 percent sales tax is broken down with 5.3 percent going to the state, 1 percent to the Leavenworth County and 1 percent to the city of Tonganoxie.

If the product were shipped to an address in rural Leavenworth County, the buyer would be taxed at the combined state and county sales tax rate of 6.3 percent.

Also, Bard said, some Internet companies are voluntarily collecting the use tax from consumers and distributing it to the appropriate counties. The counties then distribute it to cities.

"It looked like a significant portion of the use tax increase was from Internet sales because a lot of our retailers have not yet come up with the technology to determine destination base," Bard said.

Bard said the city's list of Internet companies that have voluntarily collected the use tax included Abercrombie, Best Buy, America Online, Netflix and Coldwater Creek, among others.

Bard said she expects Tonganoxie's sales tax proceeds to be much higher in 2004, because of the change in state sales tax law.

"I budgeted for $18,900 for 2004," Bard said. "If it goes as well as it did the last three months, that's $76,000."

The money goes into the city's general fund, which funds police, fire, streets, swimming pool and animal control, Bard said.

Will taxes go down because of that?

"Not necessarily," Bard said. "But I think we'll be able to fund these more adequately."

And Bard said that according to the city ordinance, half of the sales tax collected must go to the street department.

"We do a lot of patching," Bard said. "Now maybe we'll be able to spend a little bit more on streets."

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