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Sep 11

Sales Tax Distribution Report & Advice

Posted on September 11, 2017 at 11:23 AM by Paige Worsham

August 2017
  June 2017 Collections - August 2017 Distributions
Linda S. Millsaps

In August, North Carolina local governments are expected to receive $257.72 million in sales tax distributions, based on June 2017 sales. This is an increase of $6.14 million, or 2.44%, from the same time last year. However, it is also a substantial decline from last month, as reflected in the graph below.


And as usual, we see a similar trend when Articles 43 and 46 are excluded.

august 2

While this is much lower than we would have anticipated, officials at the NC Department of Revenue indicate that a large number of refunds were issued this month: thirty-nine million ($39.0), which is far more than usual.

For a deeper look at the data, consider the graph below. This shows the change from 2016 Collections to 2017, by month, for the first six months of the year.


Comparing the totality of 2015-16 to preliminary 2016-17 numbers, annual growth is likely to be in the 7% range statewide.

Looking forward

For several months we have been indicating that counties should expect continued “slow, and slowing, economic growth” through much of 2017-18. This sentiment is again borne out by business responses in the monthly Carolina Business Survey, conducted by the Federal Reserve Bank of Richmond. Each month business leaders in the Carolinas are asked their view of key current and expected (six months in the future) economic indicators. The graph below reflects the previous eighteen months of replies as the responses relate to likely hours worked and wage rates, looking forward six months. As the graph indicates, while still positive, the responses have been less rosy as the year progresses.

august 4

In terms of particular market segments, the most recent Federal Beige Book suggests that, for our region, real estate sales have increased modestly, with strong demand for lower to mid-range homes. Many home builders report labor shortages, although part of the challenge may be related to lower than average construction wages in North Carolina. Travel and tourism, particularly in the coastal counties, had been strong, with anticipation of a particularly good late summer. However, the extended power outage at the Outer Banks may significantly impact those numbers.

G.S. 105-524 Distribution

As you will recall, the General Assembly requires the NC Department of Revenue to deduct an amount from the Articles 39, 40, and 42 collections each month, and redistribute those funds to 79 specific counties, per the percentages outlined in G.S. 105-524. Last year, in the first year of the new law, the statutorily-required distribution was $84.8 million. The law also requires that the amount be adjusted each year to reflect the percentage change in overall sales tax collections. Preliminary estimates from the Department suggest the redistributed amount for 2017-18 will be approximately $91.02 million, a 7% increase over last year. The new figure will be used beginning with July collections, which are distributed in September.

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