New law still hurts cities depending on sales taxes; state gets moneyBy NIKKI ROWELL,
After a landmark 5-4 decision by the U.S. Supreme Court, states will have online retailers collect sales tax to be diverted back to the state’s general fund.
However, many cities are seeing the effects of the growing e-commerce industry and the lack of sales tax revenue being returned to the cities where the purchases were made.
Sales tax revenue impacts cities in Madison County greatly.
“That seven cents that you pay at a store, 18 percent of your sales tax is diverted back to the city,” Ridgeland Ward 2 alderman Chuck Gautier said.
That money allows local government to pay for police and fire protection, roads, sewer, garbage, libraries, jails and much more. Ridgeland Mayor Gene McGee said it also allows them to prevent rising property taxes.
“We’ve been able to grow as a city to the point that we have not had to raise our millage rates on homeowners in the 17 years that I’ve been serving,” Gautier said.
Because of the Supreme Court decision, sellers are required to collect tax on items purchased online, which will bring $100 to $200 million into the state due to online purchases.
However, state leaders are saying it could be too complicated to determine what cities those purchases came from within Mississippi.
“I know it’s going to be complicated for them to figure out how to divert that Internet sales tax back to cities, but it’s not that complicated. It can be done,” Gautier said.
“In my opinion, the City of Ridgeland should receive that sales tax as if it was bought in a local store,” McGee said. “(Sales tax) is important to our city, as it enables us to provide the quality of life that we provide for residents.”
Some of the things the money is used for includes the police department, fire department and roads, according to McGee.
“We are able to provide that for our cities, but if it keeps diminishing, it could deteriorate that,” he said.
“What we’re seeing now is a reduction because of internet sales,” he added. “We’re losing money and that could prevent our ability to provide everything.”
Alderman Chuck Gautier said that the Ridgeland Board of Aldermen has been frugal to accommodate that.
McGee said the city brings in around $13 million each year in sales tax, which makes up 60 percent of the city’s general fund budget.
He said this number has been quite steady for the past few years.
“That’s been the average for the past five or six years,” he said.
Before that, he said the city was seeing a bit of an increase over the years, but McGee said Internet sales have had an impact.
“The reason it has stayed that flat is because so much shopping is done over the Internet,” McGee said. “It hurts businesses, and it hurts residents.”
Gautier echoed McGee’s words. He said internet sales were changing what businesses are seeing the most success.
“It’s very hard for brick and mortar stores to compete with online sales,” he said. “They are evolving and changing every day.”
Gautier said that he has seen some stores closing due to their online sales being higher than their sales in store.
“For example, I see more interaction with online and experience-driven businesses,” Gautier said. “I see a struggle for growth in the restaurant business, with a bigger push toward delivery and service industries. Things like car washes and alterations, anything that you cannot order online seems to still be thriving.”