Labeling Stores in Special Tax Districts
- Sales and Use Tax
- August 26, 2011 | Erin Wiggins
Lawrence, Kansas Special Tax Districts
City commissioners in Lawrence, KS are pushing to pass an ordinance requiring stores within Community Improvement Districts (CIDs) and Transportation Development Districts (TDDs) to clearly label their businesses with signs indicating their higher sales tax rates. These districts typically have a rate that ranges from a half to two percent – on top of the city, county and state rates – and tend to be located in shopping areas with higher volumes of daily traffic. There are under fifty of these special tax districts in all of Kansas, but Missouri has hundreds – not including Fire and Ambulance districts that cover much larger territories – and Illinois has over fifty Business Districts (BDs).
There is a fine line between supporting transparency for consumers and harming the merchants in these higher-rate areas, especially because business owners who rent their space do not have the authority to object to the formation of these districts. Also up for debate is whether or not the state should create the relevant legislation instead of local city governments. Will Lawrence businesses that post signs informing of the higher rate lose customers to neighboring cities that are not required to make their increased rates obvious? And how obvious should the signs be? Currently, businesses in Wichita’s two active CIDs are the only ones in the state required to post signs that read “This project made possible by Community Improvement District Financing. For more information go to www.wichita.gov/cid.” Each of these CIDs has a 2% sales tax rate; should signs include this figure, the composite rate that consumers will be charged, or both? Or, as some lawmakers propose, should special taxing districts be eliminated in place of a more simple and universal tax?
If these types of ordinances gain popularity and cause participating shopkeepers to lose a significant amount of business, the viability of collecting from and creating new special tax districts may be severely reduced, which will force cash-starved states and cities to turn to other forms of revenue generation. The world of sales tax is ever evolving, so stay tuned here at our blog for updates!