HB560: HB560 Joint county and municipal sales and use tax (LOST); negotiations for distribution of tax proceeds; revise provisions

This bill amends Georgia's sales and use tax code (O.C.G.A. Chapter 8 of Title 48) in several distinct parts. First, it exempts construction materials used in school capital projects from local sales and use taxes, but only for school systems that already have a base year value homestead exemption in place; school systems can apply for a refund of taxes paid, and this exemption ends automatically on December 31, 2033. Second, it revises the existing 2% cap on combined local sales taxes, adjusting which taxes count toward that limit and how taxes that already exceed it can continue. It also changes the rules for a special district sales tax used for property tax relief, including new conditions tied to homestead exemptions and how 'absent' municipalities that don't sign on are treated. Third, it changes how counties and cities negotiate and certify how proceeds from the joint county and municipal sales tax (LOST) are divided among themselves, including new rules for counties or cities that don't participate ('absent' jurisdictions). These LOST changes apply only to distribution certificates entered into on or after January 1, 2028.

• Exempts construction materials used in school capital outlay projects from local sales and use taxes, but only for school systems with a base year value homestead exemption already in effect.
• Creates a refund process letting local school systems recover local sales taxes already paid on qualifying construction materials, with the exemption expiring December 31, 2033.
• Revises the statewide 2% cap on combined local sales and use taxes, clarifying which taxes (education, transportation, other specific taxes) are excluded from that cap.
• Changes conditions for imposing a special district sales tax for property tax relief, tying it to homestead exemptions being in effect and adjusting rules for municipalities that don't join the agreement.
• Rewrites how counties and cities negotiate and certify the split of joint county and municipal sales tax (LOST) proceeds, including new treatment of 'absent' counties or cities that don't sign a distribution agreement.
• Limits the new LOST distribution rules so they apply only to distribution certificates entered into on or after January 1, 2028.

Local school systems and school boards seeking capital project funding, construction contractors and suppliers, county and municipal governments that levy local sales taxes, and residents whose local sales tax rates or homestead exemptions are tied to these tax-sharing agreements.

Local governments and school districts rely heavily on sales tax revenue for construction and services. Changing how that money is exempted, capped, and divided between counties and cities could shift how much revenue individual jurisdictions receive and change conditions under which some taxes can even be imposed.

• Section 1-1 adds a new exemption to O.C.G.A. § 48-8-3 for construction materials in school capital outlay projects, limited to systems with certain homestead exemptions, with a refund process and a repeal date of December 31, 2033.
• Section 2-1 revises O.C.G.A. § 48-8-6's 2 percent cap on local sales and use taxes, specifying which existing and future taxes count toward or are excluded from that limit.
• Section 2-2 revises O.C.G.A. § 48-8-109.31 to require that counties and municipalities have a homestead exemption in effect before the special district property tax relief sales tax can be imposed, and updates rules for absent municipalities.
• Section 2-4 revises O.C.G.A. § 48-8-109.33 on timing for imposing and reimposing the special district sales tax, including how intergovernmental agreements are transmitted to the state revenue commissioner.
• Section 3-1 rewrites O.C.G.A. § 48-8-89 governing how LOST proceeds are distributed among counties and cities, including rules for handling absent municipalities or counties in distribution certificates.
• Section 3-2 revises O.C.G.A. § 48-8-89.1 on certifying new qualified municipalities and distribution certificates for the LOST.
• Section 3-3 adds a provision to O.C.G.A. § 48-8-91 exempting a county from certain millage rate adjustment requirements while it is treated as an absent county.
• Part IV limits the new LOST distribution rules to certificates entered into on or after January 1, 2028, and repeals conflicting laws.

1. 2026-03-03House Committee Favorably Reported (House)
2. 2025-04-04House Withdrawn, Recommitted (House)
3. 2025-02-26House Committee Favorably Reported By Substitute (House)
4. 2025-02-21House Second Readers (House)
5. 2025-02-20House First Readers (House)
6. 2025-02-20House Hopper (House)

• Charles Martin (R, HD-049)Primary sponsor
• Shaw Blackmon (R, HD-146)
• Yasmin Neal (D, HD-079)

• sales tax
• property taxes
• school funding
• local government finance
• LOST distribution