Based on a reader’s suggestion, this week’s edition is about Local Option Sales Tax (LOST), and a bit more specifically about how it works for us here at Carroll.
First implemented here by election in 2002, then re-approved by voters in 2018, the tax will continue without a sunset clause unless repealed. A 1% tax is charged on all qualifying sales and services throughout Carroll and Carroll County. For Carroll, LOST revenue is split as follows: 25% for property tax relief and the remaining 75% for capital improvement projects or any other lawful purpose determined by the city council, as set out in our Statement of income goal.
The tax applies to all qualifying sales and services if the delivery of the tangible good is to a sales tax jurisdiction.
This also includes most online sales, a relatively recent and welcome change to Iowa law. Prior to this change, online retailers had an unfair advantage over local merchants. Not only has this leveled the playing field for local retailers, tax jurisdictions are now reaping the benefits of no longer missing out on what they were missing before the change.
There is, however, a general misunderstanding about the exact amount that is collected and then received as tax revenue. Jurisdictions do not receive the actual amount of LOSSES collected by locality.
For example, every penny of every dollar sold to Carroll is not returned to Carroll.
It is collected throughout the county and then distributed according to a somewhat complicated formula based on population levies and property taxes.
I normally reserve my political opinion here, but the formula is probably as fair as it gets.
LOST revenue has remained flat historically over the years and the aforementioned shift in collection for online sales is a big part of why, and more importantly, our local merchants by remaining competitive and attractive not only to shoppers locals, but also for those of the surrounding communities. .
In fiscal year 19/20, the city received $1.7 million in revenue from LOST, and in fiscal year 20/21, $1.9 million. Collections have not been affected by COVID and have in fact increased. In fiscal year 21/22, revenue is paced at just over $2 million.
Although far from an exhaustive list, the city has requested funds for several notable projects with LOST. A few are the fire station, trade corridor, library/town hall, aquatic center, several street and traffic improvements, and much more. We also participate in Chamber and CDAC initiatives with LOST revenue. More recently Council approved much of the new leisure center project using LOST.
Going forward, while being aware of the effects on our local economy, the Council will strive to make the most of these funds over the next few years. It is, after all, your money.
