Local Option Sales Tax OverviewCounties and some cities can impose a tax on sales and service of up to 1%. The revenues can be used for any local lawful purpose. To impose the tax, a countywide vote must be held. The tax only applies in the areas (categorized as incorporated or unincorporated) of the county where a majority voted in favor of the tax. Thus, a local option sales tax (LOST) may or may not be in effect across an entire county.
Application of LOSTThe local sales tax is imposed on the same basis as the state sales tax, or in some cases on the basis of the state use tax. Specifically excluded from the tax are the sales of any property or service not taxed by the state as well as certain sales of motor fuel, natural gas, and electric energy. Delivery is the taxable event that determines where a sale occurs. If delivery does not occur within a county the tax is not due.
Placement on the BallotThere are two ways to put a LOST on the ballot:
- Present a petition requesting a LOST to the county board of supervisors with a number of signatures equal to 5% of the number of people in the county who voted in the latest state general election.
- A governing body of a city(s) or county, which represents more than 50% of the county population, may present a motion to the county board of supervisors.
ElectionWithin 30 days after a petition or motion is presented to the county board of supervisors, the county commissioner of elections should be directed to place the question of a LOST on the ballot. The election must be held at a time that fulfills the following criteria:
- No sooner than 60 days after publication of notice of the ballot proposition,
- No sooner than 84 days after the commissioner is notified, and
- The first of the following dates:
- the day of a regular city election
- the day of a special election to fill a vacancy in the county
- the first Tuesday in March, May, or August
Ballot requirementsThe ballot language must contain at least the following information:
- type of tax
- rate of tax
- date it will be imposed (must be on either January 1 or July 1 of any year, and at least 90 days after the election)
- approximate amount of the sales tax revenue that will be used for property tax relief, if any
- specific purpose(s) which the revenue will be spent
- date which the tax will automatically be repealed, if the county board chooses such a date
- Because the contents of the ballot must be very specific, the Secretary of State has developed sample form ballots to assist parties with this process.
Lifetime of TaxUnless the ballot proposition contains a “sunset” provision, the tax is imposed until repeal occurs. The tax cannot be repealed if the tax has been in effect less than 1 year or there are outstanding obligations. The tax may only be repealed on June 30 or December 31 of any year. The tax is repealed when:
- A majority votes in favor of repeal
- In an unincorporated area, the county board can repeal the tax upon its own motion
- In a city, the county board can repeal the tax if the governing body of the city presents a motion
Distribution of RevenueThe revenue is distributed according to a formula based 75% on population and 25% on property tax levies. The property tax data is based on the three years from July 1, 1982 through June 30, 1985.
Improper Use Of Tax FundsState code does not address a situation where supervisors try to spend the revenue as they wish, but case law suggests that in the event of improper usage the revenue would go into the general fund. It is important to include very specific language on the ballot.
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Disclaimer: This document is intended for general informational purposes only and is not meant to provide legal advice for your specific situation or to infer an attorney-client relationship. Please contact your legal representative with any questions regarding your rights and available options. This document was last updated January 30, 2014 and may not reflect the most recent changes in the law. For additional information, contact your county Farm Bureau office.