What would a new 1% sales tax mean for Hilton Head, SC

A new proposed 1% local sales tax on taxable purchases in Beaufort County will be on the ballot this year.

The issue will go to voters on November 2, which means the county will hold a referendum outside of the election on whether to implement the tax.

Supporters have argued that the local option sales tax, or LOST, would shift some of the county’s tax burden from property owners to tourists. Millions of dollars in fundraising would be used for local property tax relief.

But how will LOST, if approved, affect Hilton Head Island?

The island’s city council was briefed on the referendum during a meeting on Monday. John Troyer, the city’s chief financial officer, presented estimates on how the tax works county-wide.

The LOST, Troyer said, would be a 1% tax on gross sales proceeds in the county. Unlike the penny sales tax that voters approved in 2018, LOST would not have a fixed end date.

The SC Revenue Department, which would collect the tax on behalf of Beaufort County, estimated annual LOST collections in the county would total about $ 48.5 million, Troyer said.

Of that $ 48.5 million, the state would take 5%, or about $ 2.4 million, under a “Robin Hood” provision, allocating that money to jurisdictions elsewhere in South Carolina, a. declared Troyer.

So each year, about $ 46.1 million in LOST collections would be distributed among the governments of Beaufort County, Troyer said.

State law would require that 71% of that $ 46.1 million, or roughly $ 32.7 million, be used for property tax relief.

This would help offset county and city property taxes each year on Hilton Head, Troyer said.

Based on a state formula and representing the estimated $ 19.6 billion in Hilton Head property values, the island would receive estimated annual relief of $ 9 million in county property taxes.

On top of that, Hilton Head would get about $ 5.4 million in annual property tax relief from the city, said Troyer, who cited state estimates.

What would this mean for individual Hilton Head owners?

Take the example of a resident who owns a principal residence valued at $ 350,000. This resident, Troyer said, currently pays a total of $ 1,292.20 in county and city property taxes.

If the LOST is approved, Troyer said the resident would get an estimated total tax credit of $ 533.27, meaning the landlord would only pay $ 758.93 in county and city property taxes.

An owner of a principal home valued at $ 471,000, meanwhile, would get a total tax credit estimated at $ 717.63. This resident’s city and county annual property taxes would drop from $ 1,738.93 to $ 1,021.30, Troyer said.

The majority of counties in the state have already implemented a LOST, added Troyer.

The SC Revenue Department classifies a LOST as “a general sales and use tax on all retail sales (with some exceptions) taxable under state sales and use tax.”

Critics of the Beaufort County LOST project have argued that it is a regressive tax that favors high-income landlords and landlords over low-income tenants and residents, according to earlier reports from The Island Packet and Beaufort Gazette.

The tax, if approved, would go into effect on July 1, 2022, according to records.

What about the other money?

State law would dictate that 71% of the estimated $ 46.1 million of annual LOST collections available go to local property tax relief in Beaufort County.

But what about the remaining 29% of collections?

Municipalities could use that money as a source of revenue to fund operations or various projects, Troyer said.

Hilton Head would receive around $ 3.6 million through LOST that would not have to be used for property tax relief on an annual basis, he said.

The island’s city council would decide what to do with this money.

City staff members have proposed that if the tax is approved by voters, the city should use 100% of its LOST revenue for property tax relief in the first four years after the passage of the tax.

Council members, however, expressed doubts about the idea on Monday.

David Ames, the Ward 3 representative, said he did not support the four-year “sweetener” proposal.

“It doesn’t feel right to me,” Ames said.

And Glenn Stanford, of Ward 6, said he was “still looking for alternative sources of income for the city.”

“A basic need for us now, obviously, is ‘What are we going to do about the housing of the workforce?’ Stanford said. “It seems to me that we shouldn’t tie the remaining 29% to property tax relief. “

The city council finally decided on Monday to reconsider the matter at a meeting on October 5.

Elected officials said they wanted to know more about the residents before taking an official position on the referendum.

How does Hilton Head compare to other cities?

About $ 18 million, or about 38% of the county’s estimated annual LOST collections, would come from Hilton Head, Troyer said. This is the highest percentage of collections among municipalities in the county.

Landowners whose homes are valued at $ 350,000 in Hilton Head, however, would enjoy a lower total tax credit through LOST than their counterparts in all other local jurisdictions except Beaufort County. unincorporated, Troyer said.

This is because the estimated $ 19.6 billion in Hilton Head property values ​​(which is factored into the tax credit calculations) are higher than the estimated property values ​​in the unincorporated Beaufort County. society and other municipalities.