Cody City Council members are backing efforts by the Wyoming Association of Municipalities to change how the state distributes its 4% sales tax revenue.
In a 7-0 vote, the council joined other WAM members in supporting legislation that would amend State Statute 39-15-111. The proposed legislation would return to Wyoming’s original practice that divided sales tax collections evenly between the state and counties.
Under that scenario, Cody could gain a couple of million more dollars for operations.
Wyoming statute determines how sales tax revenue is distributed. By law, the state government keeps 69% of sales tax revenue for its general fund plus another 1% for administrative costs.
The remaining 30% is allocated to Wyoming’s counties, cities and towns, which also depend on property tax collections, money lawmakers appropriate as direct distribution in the state’s biennium budget, and other miscellaneous funding sources.
“We’d like to return back to the 50-50 split created in 1935,” said Barry Cook, city administrator, in presenting the resolution recently.
Doing so would result in the state keeping 2% of sales tax collections. Consequently, Wyoming’s 23 counties along with the cities and towns within those counties would divvy up the other 2% based on population.
Using sales and use tax figures from a year ago, such a change would have provided $2.08 million more for the City of Cody’s general operating fund.
In the fiscal year that ended June 30, 2019, the State of Wyoming received $30.8 million in sales and use tax. Based on that number, Park County would have received 30%, or roughly $9.24 million. A change to 50% would up the countywide amount to $15.4 million, providing $6.16 million more in revenue for Park County and its three municipalities.
Cody, with 33.75% of the county population, would have reaped $2.08 million more in sales and use tax revenue with a 50-50 split of the statewide 4% tax.
By comparison, the one penny optional sales and use tax would provide about $2.3 million more because local governments keep the whole 99% while the state keeps 1% for administration costs, Cook said.
In November, Park County voters will decide whether to impose a 1% general purpose tax for the next four years.
In the meantime, the City of Cody’s resolution has been forwarded to WAM.
“We’ll see if legislators are interested in acquiescing their percentage,” Mayor Matt Hall said after the recent vote.
The WAM resolution says together, those revenue sources are not enough to meet increasing demands. Local governing boards need more revenue to provide essential services. In addition to the insufficient state assistance, the resolution says this deficiency is expected to grow in the coming years.
“The costs of providing essential services and capital expenditure requirements are expected to increase; and municipalities in Wyoming seek a more equitable distribution of the sales tax revenues collected by the state,” the resolution reads.
The original sales tax in 1935, called a temporary emergency tax, was intended to get the state through the Great Depression, which seriously hurt state revenues, according to the Wyoming Taxpayers Association website.
“The tax was chosen over an income tax and the rate was only 2%, including many exemptions,” the website says.
Originally, half the tax went to local governments to help with programs for the unemployed and to improve infrastructure, according to the Wyoming Sales, Use, and Lodging Tax Revenue Report.
The state sales tax was renewed in 1937 as a permanent tax at 2%.
Cook said in 1967 the state-imposed sales tax rate was increased to 3%.
At that time, the state reduced the percent going to local governments, he said.
On July 1, 1993, the state-imposed sales tax rate was raised to 4%, and the distribution formula was changed to allocate 72% for state government and the remaining 28% to the county of origin.
Extended several times afterward, the fourth cent was made permanent in 2000.
In addition, counties may impose, in increments of .5%, two optional penny taxes, either for general or specific purposes.
Each option tax is limited to a maximum of 2% total and must be approved by a majority of voters in that county. But general purpose and specific purpose taxes cannot add up to more than 3%.