Staet eyes cap on sales tax

Jul. 24, 2014 @ 05:25 PM

A bill working its way through the General Assembly could place a cap on sales tax in the state and give counties more options with sales tax revenue. 

Assistant County Manager Matthew Delk said that the way he understands the bill as of Thursday is that they proposed a new article to the sales tax. The legislature has authorized several changes to articles in the tax code in the past. 

The bill would place a statewide cap of 7.25 percent on sales tax. The sales tax rate in Union County is 6.75 percent, with 4.75 percent going to the state and 2 percent going to Union County. 

The taxes impact the county, along with municipalities and fire districts. The taxes are collected by the state and distributed to the counties, who distribute it to municipalities and fire districts. The new bill would give the county authority to use the proceeds for education, public transportation and other uses. 

"(The county) could use it to pay off some of our debt and our school debt...we also can use it for school capital," Delk said. "We can use it for the community college...and teaching funding." 

If the sales tax went to the 7.25 percent cap, the could potentially collect about $7.8 million more in revenue. 

In the 2015 proposed budget, local option sales taxes make up 19.1 percent of the budget and generate about $30.1 million in revenues.

Delk noted that those parts of revenue can be fluid, so it is sometimes dangerous to rely heavily on sales tax in a budget.  

The bill would require a referendum on any proposed sales tax increases. So an increase would have to be approved by the voters and the county commissioners. 

The current proposal would collect taxes at the point of sale and distribute them to by an ad valorem computation, a formula that consider's the county's property tax rate along with municipal tax rates. 

However, the way the bill is currently written, Delk said he is not sure if the municipalities will get a division, though that will most likely be clarified. 

"The way it's currently written, it would provide another resource the county could use to help fund education or other county resources" apart from property taxes, Delk said. As a rule, I think we're appreciative that the state legislature is considering" adding another tool to our toolbox, he added.

The bill also includes sections about economic development, Sen. Fletcher Hartsell attempted unsuccessdully to separate the tax provisions and the economic development provisions. 

As of Thuesday, the bill has left the Senate and ben sent to the House for disccusion. It needs to be approved by both bodies and signed by the Governor.