What is a Use Tax? Frequently Asked Questions

One item that residents of Maryland Heights will be able to vote on in the upcoming April election is the proposition of a local use tax.

Ballot Language:
Shall the City of Maryland Heights impose a local use tax at the same rate as the local sales tax rate, 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?

The purpose of a local use tax is to assess the same tax rate on out-of-state purchases as local purchases. For example, if a person purchases a piece of furniture at a store located here in Maryland Heights, the vendor collects a state and local sales tax on that item. However, if the same person purchased the same piece of furniture online from a vendor located outside the state of Missouri, the vendor is not required to collect the same local sales tax. Approximately half of all Missouri cities with populations of 2,000 or more already have a use tax in place.

U Mascot

We've compiled answers to frequently asked questions on this topic:

What is a local Use Tax?
A Use Tax is a tax on the purchase of goods by Missouri residents from out-of-state vendors. Products exempt from the sales tax would also be exempt from the Use Tax. 

I already pay Sales Tax. Is this the same thing?
Nope! Sales Tax applies to purchases made at local retailers within Missouri, while a Use Tax applies to purchases made from out-of-state. Purchases cannot fall into both groups and you cannot be taxed twice. 

How does a Use Tax function?
The easiest way is to see firsthand through your current purchase history. In other words - check your receipts! Most items that you purchase online are from companies that have a Missouri address. If you make an online purchase from a local retailer, even if it is a chain company, they may be collecting a SALES TAX on your purchase. If you are already paying a SALES TAX on a purchase, you WILL NOT pay a Use Tax on the same purchase. Simply put, a local Use Tax ensures out-of-state purchases are taxed at the same rate as purchases from your local businesses.

What would be the rate of the Use Tax?
The local Use Tax rate would be the same rate as the local Sales Tax rate. If the local Sales Tax rate is reduced or raised by voter approval, the local Use Tax will also be reduced or raised by the same action. Currently, our Sales Tax rate is 8.24% and one of the lowest rates in the area compared to other cities. Of this 8.24%, only 0.5% actually goes to the City of Maryland Heights Parks/Stormwater fund. 

Sales Tax Percentage
State of Missouri 4.225%
St. Louis County - General  1.000%
St. Louis County - Transportation 1.250%
St. Louis County - Public Safety 0.500%
Various Others 0.7625%
Maryland Heights - Parks 0.500%
Total Sales Tax 8.24%

Beginning January 1, 2023, all online purchases from out-of-state vendors will include a 4.225% Use Tax that will be collected by the State of Missouri. Since Maryland Heights and St. Louis County do not have a Use Tax in place, they would not receive any tax revenue from these purchases. 

If Prop U passes for Maryland Heights, the city would then collect 0.5% (the same amount collected as Sales Tax). 

How can a Use Tax benefit my community?
As online purchases increase, local revenues decrease. Funds generated from the Use Tax will be used to pay for vital municipal services that include: public safety, road and sidewalk repairs, parks and programming, emergency equipment and more. 

What if I do not shop online?
If you do not make any purchases online to an out-of-state vendor, the Use Tax will not affect you. You are already paying a Sales Tax when you purchase goods and services and cannot be taxed twice. 

What is the Wayfair Legislation?
Due to the Wayfair Legislation that was recently passed by the State of Missouri, on January 1, 2023 ALL out-of-state retailers who do not have a physical presence in the state of Missouri are now required to remit the state and local use tax. All Missouri residents will pay a Use Tax of 4.225% for online purchases. None of the funds collected will go to Maryland Heights.

How much revenue could Maryland Heights potentially receive if Prop U passes?
Since Prop U would affect both businesses and residents purchasing items from out-of-state vendors, Maryland Heights could receive anywhere between $750,000 - $2 million dollars in revenue. This revenue would be used to continue the same vital services and amenities such as infrastructure improvements, public safety, and trash/recycling/yard waste service, utility tax rebates, sidewalks and much more. 

If you have any questions about Use Tax, please contact us at MHLife@marylandheights.com or (314) 291-6550.