Legislation that seeks to change how Mississippi distributes sales tax money to cities could serve as a windfall for municipalities in need of funds for infrastructure repair.
Mississippi lawmakers are considering two House bills — HB 1149, which would funnel about $7 million to $8 million through taxes on Internet sales to cities, and HB 1110, which would raise the sales tax diversion to cities by 1 percent or about $20 million statewide.
The state’s sales tax rate would remain at 7 percent.
“This is not a sales tax increase. This is not an Internet sales tax,” said Rep. Sam Mims V, R-McComb, adding that the bills have already passed the House and face more work in that chamber before heading to the Senate. “This is just a diversion of taxes already being collected from corporations.”
Mims said the state makes approximately $50 million from online retailers who voluntarily pay use taxes. HB 1149 will only change the formula determining how that money is distributed.
“If someone buys something online, it will not cause anymore increase at all,” he said.
The bill passed the House last week but is being held on a motion to reconsider. Representatives have until the end of week to make adjustments and move the legislation to Senate, Mims said.
“I think it would give them a small amount of money to help with running the city. It would be the responsibility of the boards, mayors and administrative teams on how they use these funds,” he said. “We have to study it and see how it affects all our budgets and state appropriations.”
Rep. David Myers D-McComb, said cities are missing out on about $31 million in annual revenues because sales tax payments to the state are only voluntary for Internet businesses. He said HB 1149 seeks to correct that.
“The issue now is basing it on who would get what,” Myers said.
He said the state would distribute the money based on the size of a city, with larger cities getting more money.
“Any amount that we get back would be of help because right now we’re not getting anything,” he said.
Some lawmakers are expressing concerns that the legislation will reduce state money for education and other services.
Myers said the measures will remove millions from the state’s General Fund, but at this point the state can afford to take that hit.
He said increasing sales tax diversion is not going to affect state expenses such as education funding, but it will help municipalities.
“One good thing, if the governor signs it and if years down the road we see it’s not working, we can always change the law back,” he said.
Both of the bills have easily sailed through House committees, unlike similar efforts to raise sales taxes for municipal spending in years past, Myers said.
“I think what that means is there’s support in the House this year,” he said. “Both bills are bills that would do a great deal (for) municipalities.”
Magnolia Mayor Anthony Witherspoon said he is encouraged by any effort to increase the sales tax distribution to cities.
“If we were allotted that increase, the list of needs are long. That’s not just unique to Magnolia, but with all municipalities,” he said.
Magnolia averages about $35,000 per month in sales tax revenues.
“That 11⁄2 percent increase could generate anywhere from $6,000 to$7,000 annually,” he said. “It’s not a lot but every bit helps.”
Witherspoon said he would spend the extra money in newly annexed areas of the city where wastewater services are needed, and street and park upgrades all over town.
Magnolia is negotiating with McComb to use its wastewater treatment facility now that environmental permits for the town’s sewage lagoons are expiring. And while the extra money would be welcome, it still would be “a drop in the bucket in terms of what it would take for wastewater systems,” he said.
Witherspoon said the increase would cover more of the park projects.
“I’m just excited it’s made it this far,” he said.
Witherspoon said he would also like to use some funds to help increase hourly wages for city employees.
Summit Mayor Percy Robinson said the city gets an average of $31,000 a month in sales tax revenue.
“Any increase is going to always help,” he said.
Like Witherspoon, Robinson said if Summit gets an increase in funds, he wants to focus on pay raises for city employees.
“The other thing is ... setting aside money in a separate account for streets,” he said.
Robinson said he has discussed the issue with officials from the Mississippi Municipal League, which has been lobbying for the legislation.
“I think it will pass, I really do,” Robinson said.“We could always use the extra revenue. When you get down to municipalities like Summit, streets haven’t had any improvement in years. Any extra income will be used for streets.”
McComb Mayor Whitney Rawlings said cities have long been trying to convince lawmakers to allow them to have a local option sales tax dedicated for infrastructure repairs, and none of those efforts have had a warm reception from legislators.
“We consider this progress if the Legislature will raise it 19.5 percent,” Rawlings said, referring to the proposed amount of sales taxes that would go to cities under the plan. “We’re in favor of that, I’m in favor of that. We would use those monies for infrastructure, sewer problems, street repair.
“It would be very helpful. There are two ways to get money into the general fund — millage rate or through sales tax raises.”
McComb could see an aded annual $300,00 in sales tax revenues if the measures passed, Rawlings said.
“It would benefit every city across the state,” he said. “If you allow us to have the revenue to make the city better, it makes the state better as well.”
