Revenue from county's local option sales tax will vary from year to year

The local option sales tax is akin to a bad relationship, filled with misunderstanding and unmet expectations.

In an appearance at Monday's meeting, Appalachian Council of Governments official Joe Newton told Cherokee County Council members confusion exists over the local sales tax because of the differing usages of the tax. Forty of the state's 46 counties have imposed either a one or two cent local sales tax, according to a handout distributed at the meeting. In addition to tax relief, the 1- cent tax can be earmarked for school construction, transportation needs or capital projects.

Newton noted that whatever the tax's specific use, the revenue generated from it will vary greatly from year to year depending on the local economic climate.

With that in mind, he said, "It's my recommendation not to spend it until you know how much," Newton said.

In November's general election, county voters approved the 1-cent local option sales tax by a 10,541-8,651 margin.

Based on 2007-'08 revenue projections, the SC Board of Economic Advisors projected the tax to generate about $5 million for the county. But the current economic crisis will likely lower the figure to $4 million or less, Newton said.

According to state law, 71 percent of the money generated by the sales tax will go to reduce local governments' portion of home owner property taxes. The county has designated the remaining 29 percent to be spent on capital items.

Of that total designated for property relief, state law requires that 67 percent go to rollback property taxes for county residents, with the remaining 33 percent earmarked for tax relief for City of Gaffney property owners.

Newton said local merchants will begin collecting the tax in May.

The state will disburse two checks to the city and county each month for property tax relief and for their general fund.

Unlike the state sales tax, groceries are not exempt from the local option sales tax.

But Newton said there is talk in the state legislature to exempt groceries, too, from the local option sales tax.

If that happens, Newton said the tax revenue would plummet.

Other points to remember:

Because of collection problems, first-year revenues will be less than later years;

Tax millage will not change as a result of this tax;

This is a tax shift, for some an increase.

Property tax revenue will be spread out over 12 months.