Cities plead for local-option sales tax on services

HELENA – Lawmakers heard more than two and a half hours of testimony today from city officials, residents and businesses on a bill that would let voters decide whether to enact local sales taxes in their cities and towns.

Senate Bill 506, sponsored by Sen. Jeff Essmann, R-Billings (pictured), would allow local voters to choose whether to apply a 4 percent sales tax on tourist-centered services, such as prepared food, alcohol served by the drink, lodging, rental cars or recreational machines, and recreational services like sightseeing tours and outfitted trips.

Essmann said the tax would help relieve the property-tax burden on Montanans, especially the elderly living on fixed incomes.

“Everybody likes to talk about (property) tax relief and nobody does anything about it,” Essmann said. “My senate district today looks like Montana will look 20 years from now. Over 65 percent of my district is over the age of 65.”

To ease property taxes, the bill requires that 20 percent of the income from such a sales tax must be shared with counties and that 35 percent must go to property-tax relief. Voters could determine if they wanted to enhance those percentages, and they would also decide what to do with the remaining money.

Supporters said it would greatly improve city finances and would make the estimated 12 million tourists who visit Montana annually help foot the bill for the services they use.

Ed Meece, Livingston’s city manager, said the city has run out of options for raising money to buy a needed police car and hire two firefighters.

“This bill offers us a way to do that and shift the burden of doing that to those folks that currently aren’t doing it,” Meece said.

Alec Hansen of the Montana League of Cities and Towns said nearly half of the income from the sales tax would come from tourists.

“We estimate that 48 percent of the money would come from nonresidents,” Hansen said. “Tourists and travelers, finally, coming to Montana will pay a fair share of the services they use.”

Supporters included mayors from Missoula, Bozeman and Glendive and city managers from Billings, Helena, Bozeman and Great Falls.

But opponents worried such a tax could hurt some businesses, especially in the current economic downturn.

Representatives from rental car companies said they worried the bill would unfairly favor rental business at locations outside a sales-tax city’s limits, such as airports.

“For some reason everyone thinks car rentals is only tourism,” said Robert Ward of Enterprise Rent-A-Car. “The vast majority of our business comes from Montanans.”

Mark Staples of the Montana Tavern Association said the tavern industry would be hit doubly hard because its members serve prepared meals and drinks. He said calling the bill a voter-approved tourism tax was dubious.

“If you oppose it you’re anti-democratic,” Staples said.

Nancy Schlepp of the Montana Farm Bureau Association opposed the bill, saying said it would penalize people living in rural communities who travel to cities to follow local sports teams.

“We are the people using these centers,” Schlepp said. “We go to these cities.”

Other opponents included State Farm Insurance, the Montana Restaurant Association, the Gaming Industry Association, the Montana Taxpayers Association, and the Montana Outfitters and Guides Association.

- by CNS correspondent Molly Priddy