As fears of the coronavirus increased in March, restaurant reservation bookings crashed even before most locations imposed stay-at-home orders that closed eateries and most other retailers.

But a handful of businesses – mainly grocery stores, but also hardware retailers – saw a surge in sales as people stocked up for prolonged isolation. The enduring image is shelves denuded of toilet paper.

But shoppers also snapped up canned goods, meats and frozen foods, leaving behind many aisles with little or nothing for those who came later.

That extra spending in grocery stores is a big reason local tax revenue in Columbia and Boone County showed the biggest increase in the May distribution in more than five years, increasing 17.2 percent for the city general fund and 16.3 percent for the county.

That increase in local revenues is almost certainly temporary, Boone County Treasurer Tom Darrough said.

"No decisions are being made off of this data because it is too preliminary," Darrough said.

The sales that generated the tax money received by cities and counties across the state occurred mainly in March and earlier, Anne Marie Moy, spokeswoman for the state Department of Revenue, wrote in an email.

The money is sent based on the completed sales tax returns filed by businesses on a monthly or quarterly basis, and the May distribution represents returns processed by April 30, she wrote.

“It is unlikely any sales made in April would have been included in the distribution issued in early May,” Moy wrote.

On Monday night, the Columbia City Council will devote its second consecutive work session to budget issues. On May 4, the council heard that the city can expect a 10 percent decline in sales taxes by the end of the fiscal year on Sept. 30. On Monday night, Finance Director Matt Lue is presenting a document intended to start discussion on how to make the budget more reliable on stable revenue like property taxes.

Lue declined a request for an interview about city finances prior to the meeting.

“We are looking at this currently,” Lue replied when asked why sales taxes surged.


A more current picture of how retail sales are faring in Missouri can be found in the daily reports of the Department of Revenue.

Large retailers make four payments each month to the state for sales from the previous week and reconcile those payments on their monthly return. And state sales taxes, through Thursday, remain up for the fiscal year despite an 8 percent decline nationally in retail sales in March and 16 percent in April.

Overall state revenues, which are much more dependent on income taxes than sales tax, are down almost 7 percent for the fiscal year. The budget approved by lawmakers and awaiting action from Gov. Mike Parson anticipates a $700 million decline in general revenue in the coming year, to about $9 billion.

Unlike local governments, the state does not tax food sales at grocery stores for general revenue. But it does have a source of sales tax revenue many local governments don’t have – major online retailers like Amazon pay what tax law calls a use tax.

A use tax is equal to the sales tax and applies to goods purchased outside the state for use by Missouri residents.

That means the state captured a portion of the surge in online purchases and other spending that was sustained by $4.3 billion in federal economic relief payments sent to 2.4 million tax filers and $800 million in federal pandemic aid distributed to unemployed Missourians.

"You can see how the fact that the state is capturing Amazon sales in particular is probably helping prop up that sales tax collection during the early parts of the coronavirus outbreak and the economic downturn,“ said state Rep. Kip Kendrick, D-Columbia and the ranking Democrat on the House Budget Committee.


In Missouri, the sales tax rate on any particular purchase, and which government benefits from that tax, can differ depending on the goods, the retailer and the residence of the purchaser.

Local governments tax grocery food purchases, but they are exempt from the 3 percent state general revenue tax. Amazon and many other major online retailers collect and pay the full state sales tax rate of 4.225 percent but only collect taxes on behalf of Missouri local governments that have voter-approved use taxes in place.

Counties, cities and smaller jurisdictions like community improvement districts can all impose sales taxes. The tax rate on purchases in unincorporated parts of Boone County is 5.975 percent. Inside Columbia, the rate is 7.975 percent in most locations and up to 8.975 percent within special districts.

Until 2018, only out-of-state retailers with physical business locations in a state could be required to collect sales tax on purchases from within that state. Missouri law tried to capture that revenue by the use tax, and residents who purchased more than $2,000 in goods outside the state were supposed to file a return and pay the appropriate tax.

In reality, little revenue came in from that source.

Columbia and Boone County voters rejected a local use tax in 2017.

State power to collect sales taxes from online retailers changed in 2018 when the U.S. Supreme Court ruled, in a case brought by South Dakota against Wayfair, that the rule it created in a time when catalog sales were the main form of out-of-state sales was no longer appropriate.

Instead, that rule was “a judicially created tax shelter for businesses that decide to limit their physical presence and still sell their goods and services to a State’s consumers — something that has become easier and more prevalent as technology has advanced,” Justice Anthony Kennedy wrote.

The Missouri Senate on Friday debated but did not pass a bill to make the changes needed to implement the Wayfair decision for state taxes. For city and county governments, it offered a change in the ballot language for use tax elections that made it clear the tax would be the same as at local retailers.

With the pandemic continuing to restrict sales at businesses that have reopened, and the prospect of the additional federal unemployment benefits stopping at the end of July, there is little doubt that any temporary increase in sales tax revenue will disappear, Kendrick said.

“I assume there will be a request from municipalities across the state to do a special session on this issue,” Kendrick said.

The difficulty on passage is a handful of conservative lawmakers who want to cut state income tax rates to offset the additional revenue, Kendrick said.

For the state, it is estimated that a Wayfair fix would bring in as much as $110 million annually. For local governments, the revenue could be as much as $60 million annually.

The House is ready to pass the bill, if the Senate can approve it without cutting other taxes, Kendrick said.

I feel confided the leadership could assure a clean Senate bill through the process without much problem,“ he said.

The small retailers who will find it most difficult to survive may not, as individual outlets, pay much in sales tax, but together they are a substantial portion of local revenues, Darrough said.

Closed businesses pay no sales taxes, he noted.

“That is so critical to this whole discussion, the long-term effect when businesses didn't remit and don't reopen,” Darrough said.

Those sales will be gone and so will the purchases made by the employees of those businesses, Darrough said.

“They are going to stop purchasing because they don't have money,” Darrough said. “The repercussions of this are going to take months and months and months and months to work through.”

Some purchases will continue, of course. Local governments tax home utilities and there was a noticeable increase in that sector in the details of the most recent state distribution, Jason Gibson, financial analyst in the county auditor’s office wrote in an email to Darrough.

“I can assume increased utilities in residential due to people staying home and many businesses would have to still maintain utilities due to being partially open,” Gibson wrote. “It will be interesting to see what next month’s remittance looks like.”