Local Option Sales Tax
Encyclopedia
In the United States
, a Local Option Sales Tax (often abbreviated LOST) is a special-purpose tax
implemented and levied at the city
or county level. A local option sales tax is often used as a means of raising funds for specific local or area projects, such as improving area streets and roads, or refurbishing a community's downtown
area.
LOSTs are always appended onto a state's base sales tax
rate, most commonly at a rate of 1%. For example, in Iowa
, the base sales tax rate is 5% statewide, or five cents per dollar. If a city or county in Iowa were to implement a local option sales tax, this would result in a 6% sales tax rate, or six cents per dollar. Since a LOST is implemented at city or county level, they apply only within the city or county in which it was implemented. Using the Iowa example, this means that any neighboring cities or counties would remain at 5% sales tax, unless they implement their own LOST.
A LOST most often (if not always) requires a passing vote by the general public before they can be implemented. Once implemented, a LOST is often levied for only temporary time periods, such as five years. As the expiration date approaches, another vote may be presented to the public, giving the options of either extending the LOST (for any other projects), or letting the LOST expire and discontinue.
Some states include multiple types of LOSTs depending on their intended purpose. For example, in Iowa, a standard LOST is used for city or county improvement purposes, whereas a SILO (School Infrastructure Local Option) tax is often used to build new schools, improve existing school buildings, or other educational purposes. Since a standard LOST and SILO are considered different types of taxes, regardless of them both being forms of local option sales taxes, it is possible for a city or county to implement both simultaneously (Using the Iowa example, this would yield a 7% sales tax within that city or county).
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, a Local Option Sales Tax (often abbreviated LOST) is a special-purpose tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
implemented and levied at the city
City
A city is a relatively large and permanent settlement. Although there is no agreement on how a city is distinguished from a town within general English language meanings, many cities have a particular administrative, legal, or historical status based on local law.For example, in the U.S...
or county level. A local option sales tax is often used as a means of raising funds for specific local or area projects, such as improving area streets and roads, or refurbishing a community's downtown
Downtown
Downtown is a term primarily used in North America by English speakers to refer to a city's core or central business district ....
area.
LOSTs are always appended onto a state's base sales tax
Sales tax
A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....
rate, most commonly at a rate of 1%. For example, in Iowa
Iowa
Iowa is a state located in the Midwestern United States, an area often referred to as the "American Heartland". It derives its name from the Ioway people, one of the many American Indian tribes that occupied the state at the time of European exploration. Iowa was a part of the French colony of New...
, the base sales tax rate is 5% statewide, or five cents per dollar. If a city or county in Iowa were to implement a local option sales tax, this would result in a 6% sales tax rate, or six cents per dollar. Since a LOST is implemented at city or county level, they apply only within the city or county in which it was implemented. Using the Iowa example, this means that any neighboring cities or counties would remain at 5% sales tax, unless they implement their own LOST.
A LOST most often (if not always) requires a passing vote by the general public before they can be implemented. Once implemented, a LOST is often levied for only temporary time periods, such as five years. As the expiration date approaches, another vote may be presented to the public, giving the options of either extending the LOST (for any other projects), or letting the LOST expire and discontinue.
Some states include multiple types of LOSTs depending on their intended purpose. For example, in Iowa, a standard LOST is used for city or county improvement purposes, whereas a SILO (School Infrastructure Local Option) tax is often used to build new schools, improve existing school buildings, or other educational purposes. Since a standard LOST and SILO are considered different types of taxes, regardless of them both being forms of local option sales taxes, it is possible for a city or county to implement both simultaneously (Using the Iowa example, this would yield a 7% sales tax within that city or county).