Effective Oct. 1, the increase in sales tax to 9.5 percent for the city of Troy will affect Troy University main campus student expenses.
The current sales tax rate for the Troy campus is 9 percent divided into local, county and state taxes, with 3 percent for the city of Troy, 2 percent for Pike County and 4 percent for the state of Alabama.
Starting Oct. 1, 2017, this rate will change to 9.5 percent for the Troy campus, with an increase of 0.5 percent in Pike County sales taxes.
According to Troy Mayor Jason Reeves, the sales tax increase will fund a new $8.5 million jail facility in Pike County.
The project is expected to take two to three years to complete, and once paid off, the increased sales tax is expected to be discontinued.
Tara Donaldson, senior associate vice chancellor and controller, said certain University purchases are subject to sales taxes.
“Any time a student or individual purchases retail goods (to include textbooks), athletic event tickets at the gate or athletic ticket office, athletic event parking, meal plans or dining dollars on the Troy campus, the sale is subject to city, county and state sales tax,” Donaldson said. “Tuition, student parking decals and student housing are not subject to sales tax according to Alabama law.”
The Alabama Department of Revenue classifies a sales tax as “a privilege tax imposed on the retail sale of tangible personal property sold in Alabama by businesses located in Alabama.”
Sales taxes can be applied on both the state and the local level and provide an additional revenue for the governments.
According to an article published by the Tax Foundation in January, “the five states with the highest average combined state and local sales tax rates are Louisiana (9.98 percent), Tennessee (9.46 percent), Arkansas (9.30 percent), Alabama (9.01 percent), and Washington (8.92 percent).”
Alabama has the highest average local sales tax rate at approximately 5.01 percent.
Donaldson said that the rates are determined by the local and state governments.
“Troy serves only as the withholding agent for sales tax collected on the Troy campus and therefore remits the sales tax funds collected to the city of Troy, Pike County and the state of Alabama,” Donaldson said. “The individual rates are set by the Troy City Council, the Pike County Commission and the state of Alabama as applicable.”
Jennings Byrd, associate chair of the department of economics and finance and associate professor of economics for Troy University Montgomery, said a sales tax increase could inhibit students from purchasing certain items that they might normally buy.
“Typically, a college student is not going to have a high income, which means that an increase in taxes limits their ability to buy the things they want at their current rate,” Byrd said.
Byrd also said that the sales tax increase may cause students to travel to surrounding cities or counties that have a lower rate.
“Another issue to consider is the ability for people (students in particular who can travel home on the weekend at relatively low cost) to purchase items in an adjacent or further county at a lower tax rate,” Byrd said. “It isn’t uncommon for people to purchase a good in another county or state where the cost is lower because of a tax differential.”
Stephen Miller, an associate professor of economics and finance, said that the increased sales tax “raises the cost of living for those living in Troy.”