Council discusses sales tax increase

The Petersburg City Council discussed raising the sales tax cap from $1,200 to $1,700 at a work session Thursday evening.

Citywide sales for the fiscal year 2012 were $95,570,231.29 and after exemptions the total sales were $2,752,594.84, which is an increase of over $200,000 from fiscal year 2011. Sales for the fiscal year 2011 were $90,427,154.48 with exemptions in the amount of $47,404,716.97

“Assuming sales generated are above the proposed $1,700 will generate an additional $353,000 in sales tax revenue,” City of Petersburg Finance Director Jody Tow said. “But this is just an estimate of what could possibly be brought in by this increase.”

Tow also explained that this increase would not affect anyone differently that doesn't buy in excess of $1,700. “It will be the big ticket items and large sales that will be affected by this change,” she said.

Sales of over $1,200 come in at $14,152,152.89 with a tax exemption total of $849,129. Currently, taxable purchases within the city in excess of $1,200, are charged a maximum of $72 in sales tax.

“With an increase to $1,700 the sales tax will be $102,” Tow stated. “That is an extra $30 per sale.”

This increase will be placed on the City Council agenda for Monday, Aug. 6. A proposed ordinance for this rate change will have to be passed Aug. 6 and then twice more by the meeting of Aug. 20 in order for this to be placed on the ballot to go before the voters.

“The tax cap needs to be raised to keep up with inflation,” Petersburg City Manager Stephen Giesbrecht stated. “But we don't want to raise it so much that it runs business to other sources.”

Some items that are now exempt from sales tax are salaries and wages received by an employer, casual and isolated sales that are not made in the regular course of business, that part of a sale of goods over $1,200 when all items purchased or delivered at the same time or within a 24 hour period, that part of a sale of services over $1,200 for a specific job or task, sales of insurance and bonds, fees for medical, psychological, dental, hospital and veterinary services, all drugs and medicines prescribed by a physician and dispersed by a registered pharmacist, city services such as electric, water, sewer and refuse collection, child day care, charter services by air and all sales of good outside the city.

“The exemptions for the out of town sales are a little tricky,” Giesbrecht stated. “Anyone living outside the city can call a store and have goods delivered and they are exempt from sales tax.”

Giesbrecht explained that Petersburg does not have a point of sale sales tax, whereas the goods or services are taxed at the point of sale.

“That is a change Petersburg could explore as well,” Giesbrecht said.

Other sales tax revenue lost for Petersburg could be attributed to the recent tax-free day. “Our total sales tax revenue lost for the tax free day totaled just over $13,000,” Tow stated.

The uses of these funds are important to any city. They enable the council to construct, operate and maintain school facilities, plan, design and construct any permanent public works, pay principal and interest on any general obligation bonds and provide for general government operations.