United States Department of Transportation
i
Value Capture: Sales Tax Districts
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2018-01-01
[PDF-730.42 KB]
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Abstract:Sales tax districts levy an incremental sales tax on goods sold within a designated area that derives benefit from a transportation improvement. The resulting revenue is used to support the development of the infrastructure improvement. Sales tax districts may be established at the municipal or county level, but they are more commonly implemented in smaller local areas. Statues establishing sales tax districts normally specify the rate of the incremental sales tax and the types of projects their proceeds may support. Unlike other special assessment districts, there is no formal process for establishing the rate of the incremental sales tax. The revenue raised by the tax, however, should reflect the value the area derives from the transportation improvements funded by the district. It is helpful to distinguish sales tax districts from local option sales taxes. Local option sales taxes are normally collected at the county or municipal level, whereas sales tax districts are more often—but not always—confined to smaller zones that benefit from a specified transportation improvement. Although municipal governments rely on property taxes for a majority of their tax income, local sales tax districts have the potential to generate significant revenues.
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