Memo to the General Assembly No. 1

Elections are over, hearts are broken, and you all have plenty of work to do.

Today, however, I want to focus on one little thing. Local Option Sales Tax (“LOST”); not to be confused with Special Local Option Sales Tax. Codified at O.C.G.A. § 48-8-89, LOST is a one-percent sales tax that, in theory, helps reduce property taxes in counties and cities that have passed a LOST referendum.

What’s so bad about that? Nothing. The problem lies in distribution of LOST proceeds. LOST has seen a number of changes since being passed in the seventies, the law itself was once ruled unconstitutional. But the problem with distribution is not due to strange legal quirks, rather the problem arises out of the legislature’s attempt to create a law that is “one-size fits all” and, at the same time, a “fitted” law. The lion’s share of communities decide LOST distribution by population size. The communities getting the short end of that stick do not like that. Thus, the legislature created nine criteria to determine how to distribute LOST proceeds. The first eight center around, primarily, who delivers what service to the community-at-large, population, where the tax revenue comes from, and other criteria that seem redundant.

Number nine, however, is anything goes. Literally. Before listing the other eight criteria, O.C.G.A. § 48-8-89(b) states that the list isn’t all inclusive. Meaning, ostensibly, that communities can consider anything they want. End result: lots of litigation.

In 2009, the General Assembly added in an “arbitration” process to decide LOST distribution. While the end result remains to be seen, as communities have until December 31, 2012, to figure out their distribution scheme and submit the same to the Department of Revenue; I believe that, again, most communities will distribute the LOST proceeds along population percentages.

I’m not advocating for removing the arbitration process or wholesale changes to the LOST law. Indeed, having aided a client in their LOST negotiation process I have a vested interest in LOST remaining a dispute for decades to come. But the General Assembly should revisit the criteria set forth in O.C.G.A. § 48-8-89 and attempt to clear out some of the redundancy and confusion.

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