Category Archives: Sales Tax
Utah’s 1% local sales tax of $36.92 million in January 2014 (representing November 2013 sales) was 0.5% lower than the $37.11 million distributed a year earlier. For the the first five months of fiscal year 2015, local sales tax distributions are up 4.8%. But during the last three months the growth rate has slipped to 2.8%.
Utah’s economy may have slowed a bit more due to layoffs by the federal government due to the impending shutdown. Utah’s employment growth rate slipped from 3% in the summer months to 2.2% in November. Total construction values in 17 Wasatch Front & Back counties fell 3.5% between September and November compared to a year earlier. In Salt Lake County, residential construction rose almost 7%, while commercial construction fell 64%, driving a 24% total decline in new construction.
Salt Lake City’s distribution fell 0.7% in January. Sandy’s distribution fell 6.2%, suggesting an almost 12% decline in sales for November. On the plus side, Draper’s distribution rose 6.2% and Murray and Midvale’s rose 4.5%.
In Utah and Weber County, city distributions rose between 1% and 2% in January. Utah County’s distribution for its .25% tax inexplicably fell 7.4%.
In Davis County, distributions for Bountiful, Clearfield and Layton rose 5.8 to 5.9%. Farmington’s distribution rose almost 30%, implying a direct sales increase of 60.3%.
St. George’s distribution rose 3.4%, implying a 7.3% increase in November sales.
December’s distribution at $36.87 million, representing sales from October, was up 4.3% from a year earlier.
Salt Lake City’s sales were up 3.4%, below the statewide average. Other cities in Salt Lake County that did better than the statewide average were: Sandy (6.5%), Murray (5.2%), Midvale (8.8%), and Draper (10.1%).
This month we also calculated the “imputed” direct sales for the month, a number we computed going backwards with the 50% population / 50 % point-of-sale formula.
Based on this calculation direct sales growth were:
We thought October sales would have been soft given that consumer confidence in the U.S. slipped to 73.2 from 77.5 in September 2013. There was a foreboding edge in the air due to the government shutdown. Nevertheless, U.S. consumers increased their purchases of new automobiles and light trucks by 10.6% in October.
Since Washington DC came to terms with their budget in December, we are feeling quite a bit better about the February distribution for December sales.
The November distribution, which came out last week and represents taxable sales for September 2013, was up 4.5% compared to a year earlier. Statewide distribution totals were $44.31 million, up from $42.40 million in November 2012. For the first three months of fiscal year 2014, the statewide 1% local sales tax is up 6.1%, fairly close to our forecast of 6.5% (which assume no more major fiscal problems due to the federal debt ceiling and budget). The 6-month growth rate is almost 3% lower at 3.8%, suggesting that a realistic forecast still ranges between the low 2.4% pessimistic and 6.5% baseline scenarios.
Distributions among Utah’s major cities range between -3.6% (Tooele) and +15.3% (Farmington) in November. In Salt Lake County, South Jordan’s distribution was up 7.6%, in contrast with its 3-month growth rate of 1.4%. Draper’s distribution was up 5.1% in November and 12.4% for the first three months of fiscal year 2014. Salt Lake City’s distribution rose 4.6% and it’s year-to-date growth is up 6.1% from last year.
In Utah County, Orem led with a 6.6% gain, followed by Lehi at 4.8%. Fiscal year totals ranged from 7.0% to 7.9% for Provo, Orem and Lehi.
In Davis County, the two largest cities, Layton and Bountiful, saw respective increases of 5.8% and 5.4%.
St. George distribution was up 7.5%, partially due to its housing recovery.
The Tax Commission released its first quarter report last week for state revenues which indicated that revenue growth subsided a bit from the last few years. Evidence points to the federal sequestration and the landslide at Rio Tinto as the two key factors that have halved growth in the state’s general and education funds.
State sales taxes rose only 1.5% on their summary report, but in reality sales taxes for the state’s 4.7% general sales taxes rose 3.2% if you include the more than $115 million in earmarks to Transportation and Water projects. Earmarks rose 10%. In its detailed report, the Local Option 1% sales tax rose 3.9% for the first quarter of FY2014. Similarly for counties, the 1/4% County Option tax rose 3.9% in the first quarter. This confirms our analysis that state sales taxes rose at least 3.2% in the first quarter.
Individual Income taxes also rose 3.2% in the first quarter. This was exactly the increase as state sales taxes (including earmarks). The 3.2% overall gain was made up of a lackluster 1.3% increase in withholding from payroll taxes and an continued, surprising 25% gain in final payments. This puts into question the idea that FY2014 income taxes would be negative because of the falloff of one-time final payments due to large taxpayers pushing capital gains into 2012. These first quarter payments probably reflect payments from extensions, though, at least partially related to the capital gains play.
Motor fuel taxes drop almost 12% in the first quarter. At this time we are not sure if this is a real decline or some accounting problem. Indicating this might be a real decline, special fuel taxes on diesel and propane were also off 12% in the first quarter. If the decline is real, however, it should give pause to policy makers who want to “hitch their wagons” to the gas tax as a new source of revenue. The flat to declining outlook for gasoline consumption is due to increasing miles per gallon performance by the state’s automobile fleet. In addition, motor fuel taxes do not increase as the price of fuel increases.
Following last month’s huge 17.2% gain, the October (August sales) local sales 1% tax distribution rose 0.5% to $40.77 million, compared to $40.56 million last year (Table 1). This jagged-edge trend we have been watching (Chart 1) is perhaps due to the Tax Commission’s Revenue Accounting Group’s decision to turnout the distribution 2-3 days earlier. We included again a “Last 3 Months % Change” column at the end to give you a better short-term trend picture.
Over the last 3 months, the statewide 1% local sale tax is up 3.9%, about 1.5% below where it was trending in June. Several drags on the Utah economy were the continuing federal sequester and the possible debt default. In addition, the Rio Tinto landslide and slowdown of oil prices are dampening business equipment purchases. These drags will tend to impact the Utah consumer at least through October (December distribution).
On the positive side of the ledger, Salt Lake metro employment is rising at a 3% clip, ahead of gains in Los Angeles and Phoenix metro areas (Chart 2). During the second quarter several large sub sectors in the Salt Lake metro area increased employment at rapid clips:
1) Finance & insurance, up 5.5%,
2) Professional/Scientific/Technical Services, up 9.9%,
3) Educational Services,
4) Accommodations and Food Services (code for hotels and restaurants), up 5.6%.
Although consumer sentiment across the U.S. has been falling lately (Chart 3), the October reading is only down about 10 points from earlier 2013 recovery levels. In August 2011, during the default debates it dropped almost 20 points to 57.
So, we hope distributions will improve somewhat, now that Washington increased the debt ceiling and sent its employees back to work.
Economic Policy Analyst
Well, this month’s distribution, at $38.64 million, is up 17.2%, compared to last month’s 2.5% decline (for the last 2 months we were up 5.6% statewide).
This confirms that Tax Commission accountants probably closed early last month or a major taxpayer’s return was in the “suspense” account when they closed. Either way, it’s great we recovered and aren’t going down the rat-hole again.
Because the September growth rates are skewed too high, we included a “Last 3 Months Percent Change” in the final column, which should serve as a better gauge on your short-term growth.