Out of State Car Purchases No Longer Get Tax Break

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COLUMBIA - Some Missouri drivers previously saved thousands in sales taxes by buying cars out of state, but changes in legislation mean future buyers will not be able to avoid Missouri taxes.

Governor Jay Nixon recently signed legislation immediately reinstating local vehicle taxes, which had been declared unlawful in a Missouri Supreme Court ruling made in January 2012.

The owner of one local dealership said the change is a good one.

"It's a big, big turnaround for the state and economy-wise, I would think it'd be a real positive thing," said Steve Reynolds, of Head Motor Company.

In the Supreme Court ruling, a Greene County man argued he could not be taxed by the state of Missouri on a boat he bought in Maryland. The Court made a distinction between local sales taxes and use taxes. Sales taxes are applicable to purchases made in the state, and use taxes apply to products used in the state, but purchased elsewhere or from private individual.

The Supreme Court decided in favor of the man because Greene County voters had not yet approved county use taxes.

Due to this ruling, more than half of Missouri counties could not charge taxes on out-of-state vehicle purchases or purchases made from individuals.

"I never understood why they wanted to penalize the state of Missouri the way it was doing," said Reynolds.

The new law ends any discrepancies over the location or manner of purchase, instead focusing on the act of titling the vehicle. The law enacts a title sales tax, and requires local governments that did not previously have the use tax to give residents a chance to vote on the titling tax.

By making these changes, Missouri lawmakers said they hope to keep Missouri tax dollars in Missouri.