Local Option Taxes
Local option taxes are gross receipts taxes that counties and municipalities impose for their own revenues.
The state does not impose them. As a convenience, the state collects tax for the local governments and then redistributes the income to the county or municipality imposing the tax.
The state collects local option taxes at the same time and in the same manner as state gross receipts tax. Generally speaking, the state rate of 5.125% is the base. The county’s portion, if any, is added to it, making a second layer of tax. When a municipality imposes a tax, it is added to the total of state and county gross receipts taxes, and a new local tax rate with three layers takes effect for the municipality. All this is paid by the vendor, who usually bills the customer for the tax at time of sale and reports and pays it over to the state on the CRS-1 Form.
All local option taxes are done by ordinances; others also require an election. In some cases, local voters may petition for an election if the tax to be imposed does not require an election.
Everything you want to know about county gross receipts tax local options, including model ordinances, is contained in our publication FYI-C120: County Gross Receipts Tax Local Options.
Cities will find what they need in FYI-M121: Municipal Gross Receipts Tax Local Options.
County and Municipal Ordinances
Your local government must first enact an ordinance to be able to impose the local option tax. NOTE: It is important to remember that your government’s redistributed tax dollars will not reach your county or municipality in a timely way if you are unable to submit the ordinance by the deadline the state sets for it. Time is needed to program state computers, print tax tables and alert the businesses in your area of any tax changes. All county and municipal model ordinances are listed below.