Economic nexus is now pretty much the law of the land for all states with a statewide sales tax. But what has been the impact on states?
States – and their cities and towns that receive portions of their sales tax revenue – have scored big. In fact some would say they are seeing green! Revenues and now their localized payouts are reported to be way up, from New York’s Long Island and California’s Pacific coast to towns like Bentonville, AR, Calhoun, GA, and Kingsport, TN revenues from sales tax collection are higher than ever.
Midland County, Texas bettered its first-quarter sales tax haul by two-thirds year over year. The sales tax take for Lead, SD has more than doubled in five years.
The February sales tax revenue for Bartlesville, OK, is the highest on record.
“I’ve looked at the data going back to 2015 and every month we’ve had this fiscal year has outpaced every month during that time,” Bartlesville City Clerk Jason Muninger told news outlets. “[Sales tax] really does make a difference...”
Numbers are up
Sales tax is also making a difference in bigger tax jurisdictions where, according to the Tax Foundation, sales tax constitutes about a third of all revenue.
Texas Comptroller Glenn Hegar said his state’s sales tax revenue totaled $3.23 billion in February, 28.6% more than in February 2021. Arkansas had an almost 20% gain in December, pushing state tax revenue 1.5% beyond budget estimates; Georgia’s sales and use tax collections totaled $1.37 billion, an increase of $243.4 million, or 21.6%, over last year’s total.
Pennsylvania hauled in $1.2 billion in sales taxes for December, $101.9 million ahead of estimates. West Virginia saw consumer sales tax receipts $20.1 million above the monthly estimate and 18.1% ahead of the prior year.
States newest to economic nexus also got a quick lesson in filling coffers. In Missouri, sales and use tax collections jumped almost 20% for 2021 and they’ve yet to even start collecting from remote sellers according to their new economic nexus laws that go into effect in 2023. Florida reported that general-revenue tax collections in December were $610.9 million, or 19.3%, over earlier projections – and nearly 87% of the gains reportedly came from sales taxes, fueled in part by inflation and consumers’ stimulus cash.
New trends, but for how long?
Kansas – sales tax revenue of $224 million in December, $4 million over predictions – is one of the states where banner hauls have ignited call for eliminating sales tax on essentials like groceries.
Revenue surpluses also seem to be turning sales tax into a political tool: “I urge the Legislature to work together to send me a clean bill eliminating the state’s tax on food immediately so that we can put this money back into the pockets of Kansas taxpayers,” said Kansas Gov. Laura Kelly, a Democrat seeking re-election.
Hegar cited double-digit growth in electronic shopping, among other segments turbocharged by pandemic spending patterns.
E-Commerce sales were $870 billion in the U.S. in 2021, a 14.2% increase over 2020 and a 50.5% increase over 2019. E-Commerce represented 13.2% of all retail sales in 2021 in the nation. (Furniture, building materials and electronics saw the fastest e-sales growth over the past two years. Food and beverage e-commerce grew almost as fast. Apparel e-sales actually slowed year over year.)
E-comm’s upward trend is only continuing, but will states’ sales tax cornucopia last as federal stimulus payments evaporate and consumer spending changes? “It would be nice to continue at this pace indefinitely,” Muninger told Oklahoma news outlets, “but we know that’s not possible.”
Still, states have truly seen the green of robust sales taxes, even if changes are made to alleviate the burden on remote sellers in the future, or fight current inflation rates, it’s doubtful you will see economic nexus going anywhere with it’s strong benefit to state’s revenues.
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