Sales tax collections show signs of rebounding in Lawrence; online tax still soaring

photo by: Nick Krug

A cashier hands a receipt back to a customer after a purchase at Lawrence's Sunflower Outdoor and Bike Shop in this file photo from July 6, 2017.

Lawrence is on a winning streak. The city has posted back-to-back months of positive sales tax growth, and that hasn’t happened since January and February. (Yes, as the HR person explained, that is probably a lame excuse to blow a vuvuzela noisemaker in the office, but when you are a Royals fan you don’t waste a winning streak.)

Lawrence City Hall recently received its July sales tax check from the state, which mainly represents sales made in May because of lag times. Sales tax collections were up 2.6% compared to the same period a year ago. That’s the best monthly showing since a 4.9% increase in January, which represented sales made in late 2018.

So, maybe there is some evidence that Lawrence buyers are starting to come out of their shells a bit in 2019. But there is not evidence that they are stepping away from their computer screens. As we’ve been reporting for most of 2019, another type of tax the city collects has been soaring. The city also receives a use tax. One of the most common ways people pay a use tax is when they buy something online and the site charges the purchaser a sales tax. While it says it is a sales tax, it really is considered a use tax by the state.

Previous coverage

June sales tax report

May sales tax report

Those numbers have been posting double-digit increases all year long, but the July totals went to a new level. Use tax collections rose by 42% compared to July 2018. That is such a large increase that it makes you wonder whether there is something else besides an uptick in online shopping that is fueling this. After all, unless Amazon was running a special on “Honk for Hemp” bumper stickers, there is really no reason online spending would have soared that much in Lawrence during the time period.

Other examples of use taxes are when you buy something at a brick-and-mortar store outside of Lawrence but have it delivered to your home, or if you buy a car in a jurisdiction that has a lower sales tax than Lawrence’s. When you get your tags, you pay the difference in sales tax, and that is booked as a use tax. Plus, the tax applies to corporations too. If an industrial user bought a big piece of equipment out of state, for example, a use tax would apply.

It would be interesting to know more about what is fueling the increase, which is not happening in every community across the state. But then again, you know what they say about looking a gift horse in the mouth. (Don’t do it, because gift horses rarely brush their teeth.)

Regardless, there is this report from the state about use taxes by industry. It is only through February, but it shows the area that is the big mover statewide is a category in the wholesale trade sector called Electronic Markets, Brokers and Agents. That may not exactly be, but it sounds like it certainly has something to do with e-commerce. The category is up 251% statewide — or about $22 million in the first eight months of the state’s last fiscal year.

But unless you find NAICS codes good poolside reading, just take the good news. The July sales tax numbers almost pushed Lawrence into positive territory for the year. With seven of the 12 monthly payments in the books, Lawrence’s sales tax collections are down 0.7% compared to the same period a year ago. That is a shortfall of just less than $100,000. The surge in use tax collections, though, has made up that shortfall and then some. Use tax collections for the year are up 21%, or about $340,000.

As for how Lawrence’s sales tax collections are faring compared to other major retail centers in the state, we’re a bit better than middling. More communities are seeing a slowdown than an uptick in sales tax collections this year. Here’s a look at year-to-date numbers for some of the largest:

• Manhattan: up 1.0%

• Shawnee: up 0.7%

• Sedgwick County (Wichita): up 0.7%

• Lawrence: down 0.7%

• Olathe: down 0.7%

• Kansas City: down 0.8%

• Salina: down 2.2%

• Topeka: down 3.8%

• Overland Park: down 5.1%

• Lenexa: down 14.9%

The situation in Johnson County — particularly Overland Park, which has been a retail haven for decades — is catching the attention of leaders there. They aren’t sure what is fueling the decline in sales taxes, given that the national economy still is pretty good. The Kansas City Star recently reported on some of the angst.

Unlike Lawrence, the news wasn’t good for Overland Park in July. Its monthly sales tax collections were down 6.3% compared to a year ago. Also unlike Lawrence, Overland Park’s use tax numbers aren’t soaring. They are up only 4.8% for the year, which is not nearly enough to make up for the sales tax losses.

We’ll see if Lawrence and Johnson County continue to go in opposite directions. How the year closes out will be interesting to watch.


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