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Sales Tax Collection During COVID-19 By Justin Adams | The CITY JOURNALS

This June I wrote an article about how the first sales tax reports released by the state showed early signs that COVID-19 had actually boosted sales tax collection in the month of March, relative to the same month the previous year.

I received some valid feedback from readers who pointed out that sales tax numbers for March included all the panic-buying of food and toilet paper that was going on at the time. They theorized that sales tax numbers would go down in the following months as the bulk-buying relaxed and as the County’s order to disallow dine-in eating was put in place.

Others pointed out that an increase in sales tax from year to year should be expected, as populations grow and new businesses open. They suggested that I should compare 2020 sales tax numbers not just to 2019, but to previous years as well in order to provide more context for how COVID-19 is impacting our economy.

So with those two pieces of feedback, I downloaded additional sales tax reports from the Utah Tax Commission for the months of March through June between the years of 2017 and 2020. What I found is that COVID-19 has been a big boost for the coffers of most cities in the Salt Lake valley.

Many cities have seen a substantial increase in taxable sales between March and June compared to the same period previous years.

Other cities have seen more mixed results on a month-to-month basis but have still outpaced previous years in total.

And just three have seen less total sales tax collected during the period than in previous years: Sandy, Murray and Salt Lake City.

While Sandy and Murray have been able to rebound to four-year highs by June, Salt Lake City's sales tax collection continues to track almost perfectly with its 2017 numbers.

Seven of the fifteen cities have stayed ahead of previous years’ numbers for all four months. Many of them by quite a bit. Riverton’s sales tax collection is up 36% relative to its 2017-2019 average. West Jordan is up 26% and Holladay 22%. Five others are in the 10-20% range (West Valley City, Taylorsville, South Salt Lake, Millcreek and Cottonwood Heights).

The question is: why the big increase? Stocking up on toilet paper in March doesn’t explain it. And the growth is more than what one would expect from regular economic expansion. So why are Utah businesses as a whole collecting more sales tax during COVID-19?

One possible reason could be that Utahns who normally would be traveling out-of-state for vacation - spending their money at Disneyland or Las Vegas or in Europe - are staying home and spending that money here instead.

Fewer dollars spent by Utahns on travel could mean more dollars spent here.

There also may have been an influx of college students who normally would have been living on campus, in places like Provo or Logan or other university towns out of state, but who returned to their parents’ houses in Salt Lake County, bringing their valuable young adult spending habits with them.

Of course, all these numbers mean is that these city governments should be in pretty good shape. They’re not reflective of the state economy as a whole. According to UtahPolicy.com, sales tax collection is up statewide by 5.9% but the state’s revenue from income taxes is down 10.1%. So while most city governments seem to be in pretty good shape, many individuals and small businesses within those cities may not have been as fortunate.

Created By
Justin Adams
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Created with an image by Becca McHaffie - "Back in time"