How Penny Sales Tax Responsibly Builds Strong Wyoming Communities
31 May 2022
What is a Specific Purpose Sales and Use Tax? First, it’s a sales tax in Wyoming that goes by several names: SPOT, special purpose tax, penny tax, temporary penny tax, sixth penny tax, 6% special purpose tax, and 1% special excise tax. All the names give indications of the nuts and bolts of the tax, but let’s discuss its benefits first.
How a Sixth Penny Tax Benefits Your Community
The sixth penny tax quite simply pays for capital projects residents want and need in a fiscally responsible manner. Unlike bonds, this tax does not put governing bodies in future debt by making improvements today. Instituting a penny tax always requires the approval of the county’s voters. During elections, residents vote on clearly specified and budgeted projects such as sewer line upgrades, fire truck purchases, multi-use event and recreation facility construction, library renovations, or road repair.
The penny tax is very specific and controlled. The revenue only goes to those projects approved by a majority of the voters, and it cannot be used for the operating expenses of local government. Once the necessary dollar amount designated on the ballot has been generated, the tax goes away or sunsets. Alternatively, the tax can be specified to span a specific time period, such as three months. Either way, once the approved endpoint is reached, the tax ceases to be collected.
While residents are in complete control of instituting the penny tax, they are not the only ones who pay it. Because it is levied on all taxable goods and services, anyone who makes purchases pays it, including tourists and industries.
You can find a real life example of sixth penny tax propositions here and the sample ballot here.
Wyoming Sales Tax Primer
The majority of the 23 counties in Wyoming collect 6% sales tax: 4% general state sales tax + fifth penny general purpose sales tax + sixth penny specific purpose sales tax. Only Sublette County remains at the base rate of 4%. Just four counties — Big Horn, Lincoln, Sweetwater, and Uinta — are at 5%.
General State Sales Tax
Sales tax is a tax paid to a governing body on the sale of certain goods and services. Wyoming first adopted a general state sales tax in 1935. The legislated rate now sits at 4%. It applies to each purchase made, except for some services, groceries, and prescription drugs. To look at it another way, for each dollar spent on purchasing goods or services in Wyoming, an additional 4 cents is collected for state sales tax.
Of the total amount of revenue generated by the 4% state sales tax across Wyoming, the state keeps 69% in its general fund to support the functions of the state government. The remaining 31% of the proceeds from the state sales tax go back to the counties where the transactions occurred. The county then divides its portion of the remaining 31% between the county and municipalities, based on a percentage of the total county population. This revenue provides a major source of funds. (Source: Wyoming Tax Facts)
Fifth Penny Sales Tax
The fifth penny tax is a general purpose sales tax; therefore, it can be used for capital projects or operating needs at the county and municipal governments’ discretion.
This optional county general purpose sales tax increases the rate to 5% and must also be voted into action by residents. Once enacted, it is in place for four years. After four years, it can be continued by resolution of the governing bodies within the county — usually, the county commissioners and the city or town councils — or the governing bodies can bring it back to the ballot for voter approval every four years.
Unlike the 4% state sales tax, 99% of the fifth penny tax funds are distributed back to the counties. Once the 99% of the funds generated by the fifth penny tax are distributed back to the respective county, it follows the same state sales tax population-based formula to distribute the funds to the county and municipal governments.
Sixth Penny Sales Tax
As discussed above, this optional specific or special county sales tax increases the rate to 6% and is only enacted with voter approval on designated capital projects. The extra penny drops off once the specified dollar amount is reached or the expiration date passes.
Pennies Build Communities
Most of the counties in Wyoming have funded major infrastructure projects using the sixth penny tax. Find recent propositions passed in Laramie County here and those passed in Platte County here. Remember, in addition to residents paying the tax, so do tourists and industries buying goods and services. Up to 17% (or more) of Wyoming’s sales tax revenue is paid by visitors.
Projects for inclusion on the ballots for the sixth penny sales tax are carefully researched and considered. If the propositions do not pass, they cannot be voted on again for 11 months after the election. Keep in mind, special elections are costly, so propositions will likely wait until the next scheduled election. Without sixth penny sales tax funding, projects often get postponed unless other funding sources are found. The State Legislature has decreased funding to cities, towns, and counties by more than 50% in past years, so it is very likely projects not approved by voters for sixth penny tax funding will be postponed indefinitely.
Evanston, Wyoming, is “The Next Frontier.” Contact the Evanston Economic Development office to learn about opportunities and initiatives: (307) 783-6300 or email@example.com.