Accompanying the new sales tax exemption is a one-time reporting requirement that will apply to cities with populations of at least 500 and all counties.
(Published Jun 10, 2013)
The 2013 omnibus tax bill included a sales tax exemption for city and county purchases beginning on Jan. 1, 2014 (see article in this edition of the Cities Bulletin). The sales tax exemption is estimated to save cities and counties nearly $130 million in the first full year of implementation.
Accompanying the sales tax exemption is a new, one-time reporting requirement that will apply to cities with populations of at least 500 and all counties. When cities certify their proposed property tax levy by Sept. 15, they will also have to provide the county with the amount of sales and use tax actually paid to the state on purchases made by the city, or provide an estimate of the amount of sales and use tax paid in 2012.
Note that cities should not include with this report information on the sales tax collected by the city from residents on taxable sales. For example, if a city sells candy at a concession stand at a recreation center, the sales tax paid by residents would not be included in the report.
The county will then compile the sales tax information provided by each city and the county into a statement and when the parcel-specific proposed property tax statements are mailed in November, the county will include the statement in the mailing.
At the required public hearing on the proposed levy, the city must discuss the estimated savings realized to their budgets that resulted from the sales tax exemption and how those savings will be used for property tax levy reductions, fee reductions, and other purposes as deemed appropriate by the city council.
The new law allows the county to apportion reasonable costs of preparing the required notice with one-half of the cost allocated to the county and one-half allocated among the cities. The amount allocated to cities must be further apportioned among all the cities in the proportion that the number of parcels in the city bears to the number of parcels in all the cities that have populations over 500.
Cities will receive more information from the Department of Revenue and their county prior to the Sept. 15 proposed levy certification.
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