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Enacting the Sales Tax
Tax Rate Increments
A Type A or B sales tax rate can be increased or decreased in increments of 0.125 percent. The tax may not be less than 0.125 percent and the total local sales tax cannot exceed 2 percent.
Initiating the Ordinance
If a city is already imposing an economic development sales tax, the city's governing body may adopt an ordinance calling for an election to increase, reduce or repeal the tax rate. The ordinance may be initiated in either of two ways:
- by a majority vote of the governing body; or
- by petition of registered voters.
Petition Requirements
In order to initiate a change in the rate of a Type A tax by petition, 10 percent or more of the registered voters must petition the city to call an election for that purpose. Procedures for tax rate changes are not addressed under Type B; however, general provisions of the Tax Code for calling an election may be used. Under these provisions, the city council must call an election if it is petitioned by registered city voters equal to at least 20 percent of the number of votes cast in the most recent regular municipal election.
Dissolution of a Type B corporation can be called for by petition of 10 percent of the registered voters in the city.
If the election to adopt or change the tax rate is by petition, the governing body must determine if the petition is sufficient within 30 days of receiving it. If the petition is sufficient, the city must adopt the ordinance calling for the election within 60 days after receiving it to be held on the next uniform election date.
Combined Ballot Proposition
If a city wants to conduct an election to reduce or abolish its Type A sales tax (or any other special purpose municipal sales tax) and adopt a Type B sales tax, the two issues can be addressed in a single ballot proposition.
Only sales tax elections that may be called by the governing body of a city are eligible for combined ballot propositions. If a combined sales tax proposition is defeated, there would be no effect on any existing sales taxes already imposed.
Determining the Tax Period
A tax approved without a limit on its duration is effective until repealed by an election. A tax imposed for a specified period expires at the end of that period. A city imposing a tax for a specified period may extend the period or repose the tax after its expiration date only with voter approval.
A tax for a specific project expires when all debts related to the project and obligations from the tax proceeds have been paid in full. A tax imposed for a specific project may also be reimposed by an election. A Type A or Type B sales tax is effective until the city notifies the Comptroller's office to stop collecting the tax. A city must continue assessing the tax until all obligations incurred by the corporation, including principal and interest on bonds, are satisfied.
Disclaimer
This information should not be construed as, and is not a substitute for, legal advice.
Cities are urged to consult the Attorney General's Economic Development Handbook and their own legal counsel for any questions or interpretations of economic development laws.