Text of Proposed State Statute Requiring Allocation of County Sales Tax - Purpose: to Reduce Local Competition for New Superstores

First Published 3/16/02; Last Revision: 3/16/02 13:01

Bookstore-Chain Owner Wallace Kuralt came up with the idea of requiring county sales taxes to be allocated according to the counties (or Zip Codes) which produced the sales in a specific superstore. Wallace Kuralt's Proposal

I suggested that perhaps the allocation could also take into account the Zip Code areas in which the superstore's employees reside and the salaries paid to such employees.

With these and possibly other factors in mind, it is suggested that state legislatures (or a consortium of adjoining county governments) consider adopting a statute such as the following for the allocation of sales taxes collected by each superstore location in a county.

The Proposed Statute

It is hereby enacted that all sales taxes collected by any retail store in the state having in excess of $3,000,000 in annual sales shall report and pay its collection of the state's sales tax with an additional report which states (i) the total dollar amount of sales revenues obtained from each of the ZIP Codes falling in whole or in part within 30 miles from the location of the store, and (ii) the total payroll paid to superstore employees residing in any place having a ZIP Code area which falls in whole or in part within 30 miles from the location of the store.

All reported state (and local) sales tax revenues for the store for such period allocable to the county or counties shall be paid to the counties in proportion to their respective percentages of (i) dollar amount of such reported customer purchases and (ii) dollar amount of employee salaries, with a weight of 75% as to customer purchases and 25% as to employee salaries.

The following stores are exempted from this allocation statute:

  1. Any retail store located (i) in the main business area of a town, village or city or (ii) in a shopping mall having fewer than 200,000 square feet --

    except any retail store which has annual sales in excess of $3,000,000 and is part of a chain of stores with its headquarters out of state; and

  2. Any retail store located within any shopping mall within the state if the retail store has annual sales amounting to less than $1,200,000.

This statute is to be construed to accomplish the following purposes:

  1. Reimburse counties located next to or near the county in which the reporting store is located for welfare and other social service costs relating to service-sector employees who generally are paid at or slightly above minimum wages and are more apt to be receiving welfare payments and other relief from the county in which they reside;
  2. Reimburse counties located next to or near the county in which the reporting store is located for the loss of sales tax revenue occurring when large retail stores draw business away from local businesses throughout a 30-mile radius from the store;
  3. Discourage towns and counties from competing for new superstores and related sales tax revenues on a "winner-take-all" basis by allocating the sales tax revenues fairly among the counties and communities which provide the customers and employees to the superstores and maintained the roads and other govermment services used by the customers and employees in travelling to and from the non-local superstore;
  4. Recognize that there is presently a misallocation of county sales tax revenue by reason of malls and superstores which attract customers and employees from multiple towns and villages in comparison to the Main Street of most towns and villages;
  5. Recognize that there are various ways in which a store can capture sales and Zip Code information such as by credit card transactions, inputting Zip Code information at the moment a cash transaction is taking place, and through monthly billing of charge accounts transactions;
  6. The total sales tax reported and paid by a store will exceed the amount received by the store from customers within the Zip-Code 30-mile radius, and the amount of sales tax to be distributed by the formula set forth above shall be the full amount of state- (or county-) collected sales tax allocable to the county, not just the amount collected from customers within the Zip-Code 30-mile area.

Copyright © 2002 by Carl E. Person