(WJHL) – April was expected to be the cruelest month for Tennessee sales and use tax collections due to COVID-19. It was — though it didn’t bite as harshly as many expected, particularly in rural counties and also in Northeast Tennessee.
Across seven Northeast Tennessee counties, for instance, local option sales tax revenues were 3.3 percent higher than in April 2019. Statewide those figures dropped 8.2 percent year to year.
The Tennessee Department of Revenue, spurred by state and local lawmakers eager for more clarity as they finalize fiscal 2021 budgets, released figures reflecting April’s collections a few days earlier than normal.
Statewide, sales and use taxes were 13.4 percent lower than April 2019. While extremely painful, the $105.9 million decline wasn’t as bad as many people had forecast.
“Early projections and fears expressed to us were that we might see anywhere from a 30 to 50 percent decrease in tax revenue collections when business closures began in March,” State Rep. David Hawk (R-Greeneville) said Thursday. Hawk serves on the house Finance Ways and Means Subcommittee, the first stop for many budget-related matters.
Local option sales taxes are added on to the state’s 7.0 percent sales tax, usually at 2.25, 2.5 or 2.75 percent. Collections were extremely varied, with differences seeming to reflect the decrease in travel.
Counties where people tend to travel for shopping saw decreases. Smaller counties whose residents often leave to spend in larger markets, on the other hand, saw big increases in local option sales tax receipts.
Johnson, Unicoi and Hawkins counties all grew collections by between 26 and 29 percent. Carter County’s collections were up 18.3 percent and Greene’s 14.1 percent.
Washington County, the most reliant on spending from outside the county, had a 6 percent decrease in revenue — nearly a quarter million dollars — from April 2019. Sullivan County had a much smaller decrease of 1.3 percent, or $56,000.
Half the local option sales tax collected goes to education.
It wasn’t hit as hard statewide as the 7 percent state sales tax because it only applies to the first $1,600 of a single item. So for instance, state sales tax on a $10,000 car bought in Johnson City is $700 — the full 7 percent. But rather than $250, the local option tax would be just $40, or 2.5 percent of $1,600.
Across seven counties, total local option revenue was actually $408,638 higher than in April 2019. Statewide, it was $19.4 million lower, led by an $8.2 million drop in Davidson County (22.1 percent).
Groceries up, apparel hammered: Interesting patterns persist
When it came to what people were and weren’t buying, patterns established in March continued.
Building material tax receipts were up 53 percent and food stores up 16 percent — an increase of almost $22 million between the two.
That was more than eliminated by a 10 percent drop in auto dealers and service stations, a 22 percent drop in furniture, a 40 percent drop in eateries and bars, and a whopping 75 percent decline in apparel and accessory stores. Between them, those four categories were off by $64 million from a year earlier.
It was an inhospitable environment for lodging and personal services. Hotel/motel tax receipts plunged by 84 percent, from $26.9 million to $4.3 million. Personal services receipts were down 46 percent.