Such a change may force these local governments to adjust their local tax structure to remain competitive and thereby reduce local revenues. Generally speaking, these local governments rely on rental agents to remit the taxes due on residential transactions and for assistance in administering their local licensing systems. Another commonality is their methods of enforcement. Most rely on homeowner interaction with local government to verify the presence or absence of a license if one is required. The nature of enforcement efforts in these localities is fundamentally different, however, from enforcement at the state level.
Local officials live in close proximity to, and interact with, individuals subject to local taxes.
In some cases, enforcement efforts may involve nothing more than an informal conversation between neighbors. Such an approach is much less likely to yield the same results if employed by state tax officials in a much broader geographic area. As a result, more intrusive efforts will likely be required by state officials to enforce the law. In addition, expansion of the state's tax base may complicate local enforcement efforts. The incentive for individuals to conduct their transactions in a manner that escapes local taxation is increased significantly with the application of the 8.0 percent state tax rate on top of local rates.