Why New York State local sales tax revenue is on upswing

Strong economic conditions drove municipal sales tax collections across New York to the highest first-half increase in eight years during the first six months of 2018, State Comptroller Thomas DiNapoli said Wednesday.

A report released by DiNapoli showed that local tax revenue grew 6% in the first half, with collections rising to $8.5 billion from $8 billion in the same period last year. The 2018 tax growth follows gains of 3.3% during the first half of 2017 and 1.7% in the first six months of 2016.

“Local sales tax growth is showing sustained improvement across much of the state,” DiNapoli said in a statement. “The upcoming back-to-school and holiday shopping seasons may bolster what has already been a strong start to 2018.”

DiNapoli attributed the tax collections rise to continued low unemployment, high consumer confidence and rising inflation. He also noted that many local governments, especially in upstate regions, were beneficiaries of a sales tax boost resulting from increased sales of motor fuels.

New York saw a surge in sales tax collections throughout the state, with growth in 54 of its 57 counties outside of New York City. The biggest increases came in Hamilton County (38.9%), Sullivan County (18%), Fulton County (14.7%), and Tioga County (12.5%).

New York City sales tax collections grew by $250 million (6.9%) in the first half of 2018 marking its biggest year-over-year increase since 2013. DiNapoli said the Big Apple’s sales tax increase accounted for 45% of the state’s nearly $484 million growth statewide.

“As history has proven, sales tax can be an unpredictable revenue source for our local governments,” said DiNapoli. “I urge municipal officials to be cautious if planning for future growth.”

Of the 17 other cities in New York that impose their own general sales tax, 14 saw increased collections, led by Gloversville (32.3%). DiNapoli said municipal officials attributed the gains to large one-time purchases made by a local business in the first quarter of 2018. The cities of Norwich (12.7%), Mount Vernon (10.6%) and Saratoga Springs (9.7%) also experienced strong first-half growth. The cities of Oneida, Rome, and Salamanca saw decreased sales tax revenue, due mostly to technical adjustments, according to DiNapoli.

New York’s first-half sales tax report came a month after a U.S. Supreme Court ruling allowing states to mandate the collection of sales taxes by online retailers even if there is no physical presence. DiNapoli said in the report that it remains unclear what impact the court decision will have on future New York revenue.