photo by: Adobe Stock

A sales receipt is shown in this file photo.

With about half the year in the books, a story about the Lawrence economy is beginning to emerge: Brick and mortar stores are slow, ‘buy now’ buttons are busy, and City Hall budget-makers are holding on.

Lawrence is performing worse than any other major retail market in the state when it comes to traditional sales tax collections, but is the growth leader when it comes to the special type of tax charged for online purchases.

The trade, thus far, has not been an even one for city officials who rely heavily on the sales tax dollars to pay for the city’s basic operations.

When you combine traditional retail sales tax collections and the special tax charged for online purchases — called a use tax — the city’s total collections are up 2% for the year. At first blush, you might put that in the category of a modest but solid increase.

But then, remember inflation. (You know, that thing that makes the vein in your neck bulge when you are standing at the grocery checkout.) Given that inflation has been well above 2% for the entire year, the fact that Lawrence’s tax collections are up only 2% is likely a sign that Lawrence shoppers are buying less than they were a year ago. For example, the annual rate of inflation thus far for the entire U.S. is 4.2%, according to federal figures. If everybody was buying the same amount of goods as a year ago, and all those goods went up by the rate of inflation, sales tax collections should be 4.2% higher for no other reason than inflation.

While it is never quite that nice and tidy in the real world, the fact that Lawrence’s collections have risen at a rate far below inflation is a strong sign that people in town are simply buying less as the economy tightens.

When you break down the numbers, it is not hard to see where they are buying less — at traditional brick and mortar retail stores. Looking at just traditional sales tax collections for the year, they are down 0.8% from the same period a year ago. Of the 11 major retail markets we track in the state, Lawrence is the only one that is in negative territory for the year.

Here’s a look at those numbers:

Lenexa: up 7.3%

Kansas City, Kan.: up 6.9%

Manhattan: up 5.9%

Sedgwick County: up 5.4%

Shawnee: up 4.5%

Overland Park: up 3.9%

Olathe: up 3.3%

Salina: up 3.0%

Merriam: up 1.6%

Topeka: up 0.1%

Lawrence: down 0.8%

Statewide: up 2.4%

Compare those numbers to the use tax collections, which is the type of tax you pay when you are shopping at major, out-of-state online retailers like Amazon. Thus far this year, Lawrence has seen a 17% increase in use tax collections compared to the same time a year ago.

I’ve been reporting for a few months that those use tax numbers are up significantly. However, I had been uncertain whether that type of increase is unique to Lawrence or is just a sign of the times in our modern economy. So, this month, I gathered data on use tax collections for the other major retail markets in the state.

The numbers certainly suggest that Lawrence consumers are moving to online shopping more aggressively than consumers in other Kansas communities. Lawrence had the highest growth rate for use tax collections of any major retail market in the state. In fact, Lawrence’s growth rate was more than twice the average growth rate. Here’s a look at those numbers, which measure the citywide use tax collections in each community year-to-date.

• Lawrence: up 17.6%

• Sedgwick County: up 13.3%

• Salina: up 12.4%

• Lenexa: up 8.3%

• Olathe: up 7.0%

• Merriam: up 7.0%

• Manhattan: up 5.9%

• Overland Park: up 3.9%

• Shawnee: up 3.4%

• Kansas City: up 3.1%

• Topeka: up 1.4%

As I said earlier, the numbers suggest Lawrence consumers are more aggressively turning to online shopping than consumers in many other communities. It is difficult to say definitively that is what has happened because there are a few other ways that use taxes are generated. One way, for example, is that a company buys a piece of equipment from out of state. Instead of paying a sales tax, it pays a use tax in that case. The same goes for construction materials bought out of state for a local construction project. It is impossible to know the purchases of every private company in town, so I can’t rule it out. As for the construction materials, that could be a possibility, but some of the biggest construction projects in town have been KU-related. As such, they generally are exempt from such taxes.

While we can’t be definitive based on the numbers, community leaders certainly can be concerned. If Lawrence consumers are making a big shift to online shopping, that has wide-ranging ramifications. The biggest is that those dollars will be going to out-of-state firms that aren’t generally employing people in Lawrence like a local brick-and-mortar store would.

An aggressive shift to online shopping seems like a possible answer to the question posed by the numbers. But, that said, I’m not sure I have a good answer to why Lawrence would be shifting more aggressively than other communities. Is it due to Lawrence’s younger population? If so, why is the other college community on the list, Manhattan, not seeing such increases?

While we are trying to figure this out, we probably shouldn’t lose sight of the broader picture: Even with a surge in online shopping, consumer activity in Lawrence is soft. That goes back to our total sales and use tax collections coming in quite a bit less than inflation.

That’s the number that may create a problem for City Hall leaders. As we’ve reported, City Hall budget-makers were pretty conservative when they crafted the 2026 budget. After having been burned by some aggressive projections for sales tax growth in past years, the city budgeted only a 1.6% increase for sales and use tax collections in 2026.

So, at 2% growth year-to-date, the city would make its budget and then some, if everything else holds equal the rest of the year. However, that is not the direction matters are trending. When I last did these calculations in April, the city’s combined sales and use tax collections were up 3% for the year. Now, two months, later, they are up only 2%. In a few months, the city’s collections may be below the 1.6% budget figure. If that is the case, the city would be looking at a budget shortfall in a key revenue category.

It will be an issue to keep an eye on as the year unfolds. There are others worth watching too. One is whether the Lawrence economy will see a boost from the World Cup. This June report would not capture any such bump. Due to normal delays in processing, the June report represents sales made basically through early May. That’s before any World Cup visitors would have arrived in Lawrence. While there has been good enthusiasm for the World Cup in Lawrence, I’m hearing mixed reports on whether it is producing significant visitor spending. We have another month or two to wait before the numbers start telling that story.