Sales tax numbers surprisingly good statewide and locally; Lawrence economy still trails many, though
photo by: Jackson Barton/Journal-World File Photo
There are many things I can’t do with a mask covering my mouth. I can’t show off my toothy smile that causes orthodontists to dream of tropical vacations and other expensive purchases. I can’t blow nearly as big a bubble with my chewing gum, and sunflower seeds are messier than normal. But I can still utter that magical three-word phrase: I’ll buy it.
Evidently lots of other folks can, too. The state has released its latest sales tax report, and it shows retail sales tax collections in Lawrence actually were higher than they were a year ago, even with a host of pandemic closings and slowdowns. The story was the same for many communities across the state.
The Kansas Department of Revenue recently released its August sales tax report, but because of normal delays in reporting, the numbers really reflect sales that were primarily made in June. It is not surprising that sales tax collections started to see a bounce-back in June compared to May or April. The economy was showing signs of starting to open back up in June. But I’m not sure many people would have expected activity in June 2020 to be stronger than activity in June 2019.
The report, though, says it was. Sales tax collections in Lawrence were up by 1.9% compared to the same time period a year ago. In other words, the report suggests that despite the number of businesses that were closed or had curtailed their operations in June, the amount of taxable sales in the city increased by about $2.5 million compared to the same period a year ago.
That increase actually wasn’t all that impressive compared to some other major retail markets in the state that saw big surges. Here’s a look at the one-month totals:
• Salina: up 20.4%
• Sedgwick County: up 11.5%
• Shawnee: up 10.2%
• Manhattan: up 10%
• Topeka: up 8.9%
• Olathe: up 8.7%
• Kansas City: up 6.7%
• Lenexa: up 5.8%
• Lawrence: up 1.9%
• Overland Park: down 2.5%
The list is an interesting one. When I first saw the Lawrence number, I thought what a great surprise it was. Then, looking at this list, you could be a bit disappointed that Lawrence’s numbers weren’t better. I think the list shows a couple of things: 1. Lawrence’s economy continues to face some extraordinary challenges as one driven primarily by college students. 2. Lawrence’s economy remains more shut down than many places in the state.
But that is merely speculation. While we are speculating, though, it may be more fun to speculate on why numbers are up so much across the state. I thought there might be a statistical anomaly at play. I’ve asked the Department of Revenue to weigh in what it thinks is going on, but I haven’t really gotten much of an explanation.
I haven’t ruled out that there is something odd going on with the statistics, but as I think about it more, I believe we could be seeing a genuine boost. The reason: Pent up demand. The previous two sales tax reports — reflecting sales made in April and May — were bad. Consumers may have just decided in June that they couldn’t wait any longer. And certainly, we have heard tales of how some businesses are having their best months ever. Just because some of the more visible businesses in our communities — restaurants and bars, for example — are struggling, doesn’t mean everyone else is.
There is one other factor, I suppose, that could be coming into play: Vacations. June normally is a month where activity is slower in Lawrence and many communities because people are out traveling elsewhere. Travel certainly has slowed down. Perhaps people are spending their vacation money in local businesses rather than elsewhere. That also could explain why Lawrence’s uptick is a bit smaller than some other places. Not that Lawrence has Disneyland or anything like it, but its economy may be a bit more reliant on tourism than some of the others on that list. While locals were spending their money here, it was offset by the fact that travelers were not.
But all of that is pure speculation, so take it for whatever you think it is worth. What is clear is that the one-month bounce back hasn’t been enough to make up for the downturns experienced earlier in the year. Lawrence’s total sales tax collections for 2020 are still on the wrong side of the ledger.
Year-to-date, Lawrence’s sales tax collections are down by 2.9%, or about $495,000. But that is nowhere near as bad as what City Hall budget-makers had projected. As we have reported, it is clear the city is unlikely to hit that worst-case scenario, and these numbers make it even clearer.
The outlook improves considerably when you factor in another type of tax the city collects. The city collects a use tax on purchases made online. Those tax numbers continue to be up. That was a trend even before the pandemic, but it has continued as online sales have become more prevalent.
The August report shows the city’s use tax collections were up nearly 40% from the same period a year ago. For the year, they are up about 6.5%, or about $141,000. While those numbers are good, they are not enough to make up for the year-to-date downturn in sales taxes. Between the two taxes, collections are still down more than $350,000.
Plus, it also is worth remembering that in June, the period this report measures, people were still getting their $600 per week special unemployment benefits. That’s not the case now, and it will be worth watching whether local economies take another dip as a result.