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Dec 15

Sales Tax Distribution Report & Advice

Posted on December 15, 2015 at 10:36 AM by Paige Worsham


December 3, 2015 Report

Good news! After particularly weak sales tax showings for the previous two months, this month’s distribution report includes a small tick upwards. As the graph below indicates, there was an increase of $5.27 million in October (December distribution). This is a change of 2.45%.

Dec. 3_a

Article 43 and 46 collections, which do not include food, continue to show weaker performance than the other sales tax Articles. Sales tax revenues overall are still below what we saw statewide in June, July, and August. Conversations with the Local Government Division of the NC Department of Revenue suggest that some of the recent sluggishness may be attributed to some shifts in the timing of sales tax refund requests. However, this timing does not explain the entire trend.

Dec. 3_b
The Federal Reserve Bank of Richmond’s monthly survey of business activity indicates that our region’s economic expansion continues to slow. The current general business conditions index, which reflects the opinions of Carolina business leaders, shows that October and November conditions were unchanged. This follows two months of decline and leaves us at “the lowest level in more than a year and a half.” The measures showing expectations for business activity six months from now were also lower.

Dec. 3_c

Charts provided by the Richmond Federal Reserve

On the positive side, despite weaker business growth, most businesses report steady labor demand. This continues a six-month trend. Unfortunately, the reported mismatch between skills needed and trained workers also continues. And this mismatch may be at least part of the reason that North Carolina’s unemployment rate has been higher than the national and regional rates for both September and October.

                         Dec. 3_d

On the spending side, nationwide, business orders experienced a small increase, and may be a positive signal for business investment. However, it appears much of this investment may be occurring in other states (such as Maryland and Virginia, which are recently seeing a more robust recovery). Consumer prices, excluding food and energy, rose 1.3%. This is similar to the growth seen in the previous two months.

Black Friday and Holiday Shopping

Preliminary numbers suggest that Black Friday was more of a cyber day than ever before. According to the National Retail Federation (NRF), almost the exact same number of people shopped online (103 million) as braved the stores (102 million). Depending on online compliance, this shift could have big implications for local sales tax numbers.

The NRF reports that the average spending per person over the holiday weekend totaled nearly $300. Another organization, RetailNext, shows overall spending was actually down 1.4% from last year (due to methodology changes at the NRF, year over year data is not available).

Looking ahead

Going forward, Wells Fargo is forecasting that the U.S. economy will become more stable in 2016 with growth between 2.5% and 2.6%. Wells Fargo also assumes a small but ongoing increase in interest rates throughout the year. Economists with the N.C. General Assembly are still calling for a “stable, yet modest growth pattern” for the next few months. So overall the economy is growing, as is spending, but at a rate lower than some of our nearby states.

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