The Impact of a Sales Tax Rate Hike: Exploring its Effects on the Economy and Public Finances
Napa County in California is looking at a quarter-cent sales tax hike to pay for a new jail and some children’s programs. The current tax rate is 8%. The Napa County government had their lawyer figure up what the tax would be on January 1st, 2017 if this new tax passes in June of 2016, and none of our readers will be surprised to learn that the official answer is that people in Napa County will be paying 8.25 cents on the dollar in January if they pass this tax.
It’s actually not that simple.
As of June 1, 2016, the tax rate is 8%. But a .25% state sales tax hike voters approved in 2012 will expire on December 31st. That means that the tax rate in Napa County could fall to 7.75% — and then immediately rise again to 8% if the voters pass the county tax hike in June.
Voters could, in that case, be voting on keeping the tax rate the same rather than lowering it, rather than raising it.
That’s not all. The current quarter-cent state sales tax add-on could be extended, in which case it would not expire on New Year’s Eve, and the sales tax rate would in that case be 8.25%.
For consumers, it probably doesn’t matter much. They’ll step out on New Year’s Day to exchange their holiday gifts and spend their gift cards and a quarter cent either way will not make that much difference.
For businesses, it could make a difference in the accurate calculation of sales tax and therefore for sales tax compliance. Sales tax professionals tend to plan ahead, and uncertainty about tax rates in one county could create uncertainty in the office.
Nearby Kings County is playing it safe by proposing a quarter-cent county-wide sales tax increase only if the state’s quarter-cent sales tax add-on is not extended. Accountants may be asking themselves, “Was it Kings County that made their sales tax hike an if-then, or Napa?” well into 2017.
Fortunately, SalesTaxDataLINK keeps sales tax complications to a minimum for your business, no matter how complicated they get in the legislature or the courtroom. Contact us today and find out how much easier we can make your life.