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LOST Tax "Divvy" Law Ruled Unconstitutional
Thursday, 10 October 2013

October 10--  The Atlanta Business Chronicle reports on a ruling by the Georgia Supreme Court regarding a Georgia law which prescribes the process counties and their muncipalities must use to decide how proceeds of Local Option Sales Tax (LOST) will be divided.

The process was employed in Toombs County last year when the county and the cities of Vidalia, Lyons and Santa Claus could not meet an amicable agreement and ended up in court to decide the issue.

"The Georgia Supreme Court has issued a ruling that could affect the ability of cities and counties to collect local option sales tax (LOST) revenue.

In a unanimous opinion issued Monday, the justices declared unconstitutional an amendment to the 1975 Local Option Sales Tax Act approved by the General Assembly in 2010 allowing cities and counties that can’t agree on how to split the revenue to appeal to the courts.

The Supreme Court declared that having a judge decide how to allocate tax revenue puts what should be a legislative decision into the hands of the judicial branch of government.

“The authority to levy a tax is a legislative function of the state or local governments created by the state,” Justice Robert Benham wrote in the decision. “To the extent the 2010 amendment to the LOST Act permits judicial resolution of the issue … the amendment violates the separation of powers doctrine.”

Amy Henderson, spokeswoman for the Georgia Municipal Association, said the ruling has created uncertainty among local government officials on how to collect sales taxes moving forward.

“This leaves a lot of questions,” she said. “What does it mean for the cities and counties that have reached an agreement [on dividing sales tax revenue] through the courts and for those that don’t have an agreement?”

One potential response would be for the General Assembly to short-circuit the high court by passing a constitutional amendment and putting it on the statewide ballot, an approach lawmakers have taken in recent years following other rulings.

Local governments have used LOST revenue to help hold a lid on property taxes in their communities. Unlike the Special Purpose Local Option Sales Tax (SPLOST), which is limited to capital spending, LOST revenue can be used for operating costs."


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