The sale price is used, for the start. Then increases are usually capped to x percent rise per year after for tax purposes.

This protects me as a homeowner from having a massive tax increase just because the housing market has lost its collective mind.

My 300k house now appraises as a million, but im nowhere near that after homestead exemption and the caps on per year increases in my state.

If i sold this place and bought a new place on the other side ofthe road for a million, i would be starting off with that much highersale and appraisal.

This makes it very common for folks to not be able to afford to sell and move up because they would get punched in the wallet by taxes.