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Tax cap to have minimal effect in Sikeston

Sunday, May 1, 2005

SIKESTON - A bill which would cap local phone service franchise fees while making cell phones subject to these taxes has some cities in an uproar but would have little effect, if any, on Sikeston.

House Bill 209, introduced Jan. 12 by State Rep. Shannon Cooper of Clinton and approved by the House with a 97-55 vote, would cap local taxes on phone companies at 5 percent of their gross receipts beginning July 1, 2006. On Jan. 1, 2008, the cap would drop to 3 percent.

Sikeston presently has a 5-percent franchise tax on phone service, according to City Clerk Carroll Couch.

"Right now we're getting about $170,000 a year off the franchise tax," he said. The money from this tax goes to the general revenue fund. "We'll see what happens in the legislation, but right now it looks like it won't significantly affect Sikeston."

Couch said dropping the tax by 2 percent would drop the city's revenues by about $3,400 for franchise fees on land lines.

As city officials don't know how many cellular phones are in use, it is impossible to predict what kind of gain the city would experience from taxing cell phones. Those in favor of the bill say land line use is steadily declining as cell phone use goes up so cities will end up with more revenue in the long run.

A city like Independence, on the other hand, stands to lose a substantial amount of revenue as they impose a 9.08 percent gross receipt tax.

"They'd lose two-thirds of their revenue," Couch said.

Another source of opposition to the bill is from the handful of cities that use a flat tax instead of a percentage.

Phone company lobbyists reportedly have offered to work on adding an exemption for flat-tax cities providing the flat-tax receipts fall below what the capped percentage would generate.

Additionally, there are about 50 cities including Cape Girardeau and Jackson that are suing cell phone companies for back taxes claiming phone service is phone service and cellular companies were never exempt.

The bill would invalidate those lawsuits.