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October 28, 2010

 

DiNapoli: Sales Tax Collections Continue Modest Rebound

Growth Remains Uneven; Cities Could Face Significant Losses Due to Population Shifts


Local and county sales tax collections increased 10.5 percent across New York during the first three quarters of 2010, compared to a 9 percent decline in the same period the year before, according to a report released today by New York State Comptroller Thomas P. DiNapoli. However, more than a third of this growth is due to sales tax rate increases and the extension of sales tax on additional items in New York City and Nassau County. Excluding these changes, growth in collections to date was approximately 6 percent.

“An increase in sales tax collections is a good sign for the economy,” DiNapoli said. “New Yorkers are getting out and spending money. But that growth has been uneven around the state, and even though there are some positive signs, recent economic news points to slower growth.The sales tax growth is reason for cautious optimism, but no one should be popping any champagne corks. There’s still too much unemployment and uncertainty.”

A major issue on the horizon is the impact of sales tax redistribution between local governments. Twenty-nine counties currently distribute a portion of sales tax revenues to local governments within their borders, and many sales tax sharing agreements are based at least in part on population. The results of the 2010 Census could result in significant shifts in sales tax distributions to other units of local government. Sixteen cities, many of which have been losing population, are particularly at risk, including: Buffalo, Niagara Falls, Albany, Watervliet, North Tonawanda, Lockport, Cohoes, Jamestown, Elmira, Geneva, Tonawanda, Canandaigua, Dunkirk, Lackawanna, Hudson and Rye.

DiNapoli’s report notes signs that sales tax revenues are on the rebound:

  • Local sales tax collections, including New York City, increased 10.5 percent during the first three quarters of 2010, compared to a 9 percent decline in the same period the year before; Roughly half this growth was due to tax rate and base changes;
  • New York City sales tax collections increased by 20.6 percent during the first three quarters of 2010, compared to an 11.4 percent decline during the same period a year ago. Again, roughly half of this growth was due to changes to the sales tax rate and base; and
  • County sales tax collections outside of New York City grew by 3.7 percent in the first three quarters of 2010, compared to a 7.2 percent decline during the same period in 2009.

Although local and county sales taxes grew across New York, growth has been quite uneven around the state. The report indicated the following:
  • Collections in Western New York were anemic, growing at only 0.7 percent;
  • Outside of New York City the highest growth was 5.6 percent in Long Island, in part due to increased Nassau County sales tax collections from a residential energy tax that was in effect from January through June 1, 2010;
  • Sales tax collections declined in seventeen counties. Particularly steep declines in Tioga and Schuyler counties were due, in large part, to technical adjustments by the State Department of Taxation and Finance;
  • Chemung County’s strong 10.4 percent growth was due to one large vendor filing, while Jefferson County’s apparent strong growth was due to technical adjustments; and
  • Ontario County had a 0.375 percent sales tax rate increase that took effect in September 2009.

For a copy of the report, click here.



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