Council weighs replacing lapsed state grocery tax with 1% local levy as reporting limits complicate revenue estimates

Lebanon City Council members discussed whether to replace a lapsed state grocery tax with a local 1% levy and the difficulty of estimating revenue because the state does not provide itemized grocery‑tax receipts.

"The original ... literature that we received said that it was a $1.2 million is what the municipality was receiving. That was a miscommunication," Councilmember Jessica said, describing her recent meeting with state officials. She told the council the state aggregates sales tax remittances into a lump sum and does not provide municipalities with an itemized grocery figure.

Jessica said the city lost access to certain state reports in 2021 because required filings were not kept current; staff has initiated the re‑registration process and expects guidance from the state on steps to regain access. Even if the city regains access, she said municipal staff may be restricted from sharing some business‑level details for privacy reasons.

"So essentially, I would recommend that council moves forward with putting on the agenda and just deciding, are we going to replace the 1% tax that the state took away?" Jessica said, urging the council to consider whether to enact a local 1% grocery tax to recoup lost revenue.

Staff noted the local replacement would be a 1% surtax on total sales and said 64 municipalities had already adopted the 1% option, with more expected. Officials warned there would be limits to the granularity of any public revenue estimates because state reporting aggregates several tax types into a single payment.

Council did not vote; staff said they will pursue the administrative steps to recover access to state reports, provide an estimate of likely revenue ranges (subject to reporting limits) and return to council with a proposed ordinance and timetable.