Category Archives: Sales Tax
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.
August’s local 1% tax distribution came out last Wednesday. Sit down. We had the first decline in 20 months. The August distribution, which comprises June large monthly taxpayers (3/4ths) and 2nd quarter smaller quarterly filers (1/4th) came in at $46.29 million, 2.5% below last August’s $47.47 million. Still, when you think about it, we knew the Sequestration was going to ding us about 1% to 2% for the entire year, so the decline isn’t really that shocking.
We need to remember last August was up 8% over 2011 and August 2011 was up 9.9% over August 2010. Compared to August 2009 the statewide $46.29 million is up 28%. In fact, our seasonally adjusted series over the past two months, adjusting for monthly seasonal effects, is up about 5%, after it fell 6% in June (Chart 1, below).
Also, negatively affecting taxable sales is the slowdown at Rio Tinto Copper mine. This is probably hitting business investment taxable purchases.
How about jobs? After two months of a major slowdown began, July employment shifted back from 1.7% growth to 3.5%.(http://jobs.utah.gov/wi/press/2001press/ratecurrent.pdf ). This implies that the slowdown may be limited to just the 2nd quarter. This remains to be seen, however. We hear that some of the slowdown in job growth may be just due to number crunchers’ back east adjustments.
Note that the August distribution is the last month of fiscal year 2012-13. So the fiscal year-to-date number in the 4th column is the latest fiscal year growth rate. Most cities dropped 1% in the fiscal year growth due just to July’s distribution decline since last month.
I have included the new population numbers for 2013. Remember 1/2 of your growth is due to 1/2 of the % change in the last column (unless you are a hold-harmless city).
Due to the 50/50 formula 1/2 of say Lehi’s 8% distribution was down 2.5% (-1.25%), so the other half must have been up more than 16% to get to an 8% overall growth. If your decline was below -2.5% your point-of-sale decline must have been below 1.25% to combine for your overall growth rate.
July’s Distribution is out about a week earlier than last year, but the distribution was still up 5.9% at $37.92 million, compared to $35.82 million last year. July’s distribution of the 1% local sales tax represents sales largely from May monthly taxpayers. Across the nation car and truck sales were strong as was new home construction.
Several large cities did not fare as well as some medium size cities in the July distribution. For example, Salt Lake City (0.4%), Sandy (0.7%) and Ogden (2.1%) did not perform as well as Draper (11.8%), South Jordan(18%). We initially thought this might be due to the use of the 2013 population numbers in the 50% population/ 50% point-of-sale distribution formula, which were inserted into last month’s distribution. But this does not explain all the variation, so most of the difference must be due to May’s point-of-sale performance.
I added a table with population so you can check out the new 2013 population differences. Just subtract how much your population percent change is from the statewide percent change and divide by 2 to estimate your monthly impact.
For example, Lehi’s growth of 5.04% less the statewide average of 1.35% divided by 2 equals a monthly increase of 1.85% in FY2014 for Lehi. See the second chart below.
Hope this helps. 5.9% is close to our forecast.
The 1% local sales tax rose only 0.4% in June to $34.9 million for April sales, lower than our expectations. However, for the 19 cities we track, 16 of them did better than the average statewide growth.
Salt Lake City, the largest city in the state, made a 2.9% gain in the June distribution. South Jordan, Draper and Sandy saw their sales increase in double-digits (32.5%, 14.6%, and 10.7%, respectively). West Valley’s sales rose only 1.8%. Curiously, Murray’s distribution dropped 31.2%.
Two factors in the process may have impacted this month’s distribution for an individual city. First, the distribution came out last Friday (June 21), perhaps a bit early. Second, the hold-harmless provisions impacted this month’s distribution by adding approximately $2.5 million to South Salt Lake’s distribution, $485,000 to Riverdale, $57,000 to Alta and $36,000 to Brian Head. These credits had to come from other cities. The adjustments are made in June for the entire fiscal year to minimize the impact for the other months. The sum of these credits, $3.1 million, is about 9% of June’s distribution, but is less than 1% per month over the entire year.
On a county-by-county basis, Salt Lake County’s sales rose 0.5%, Davis County’s rose 1.8%, Utah County’s rose 2.7%, Weber’s 1.2% and Washington’s rose by 4.8%.