Throughout most of 2020, states worried about their sales tax revenues. Headlines about mandatory closures of businesses forecast huge drops in state revenues, largely because of the loss of sales tax revenues from businesses that had to close. Retailers, restaurants, hotels, gyms, and hairdressers were shut down and the economy was seriously affected.
States and cities panicked over their budgets, worrying that the loss of sales tax revenues would threaten basic services.
Instead, 2021 headlines are showing higher sales tax revenues for 2020 across the nation.
Take Siloam Springs, Arkansas, as an example. Their sales tax receipts for 2020 were 13.8% higher than in 2019. Their receipts were up year over year by double digits for 9 months out of the year.
And it’s not just Siloam Springs.
- Nearby Ft. Smith, Arkansas, increased. by 6%.
- Dare County, North Carolina, saw increases from 8 to 12%.
- The entire state of Georgia brought in 4.8% more in sales taxes.
- Virginia racked up an increase of 5.2%.
Brookings predicted a decline of $155 billion in sales tax revenues for 2020. With many states seeing an increase, overall state revenues average just 5% less than last year
The Wayfair decision helped out
Huge increases in online shopping helped states that began collecting sales taxes from online sellers. The Wayfair decision, which allowed states to require online sellers to collect sales tax, came just in time to allow many states to benefit from the rise in online shopping that took place during the pandemic.
Online shopping was as much as 71% higher during the holidays. Experts estimate that 2020 showed an overall increase in online shopping of 32.4% over 2019. In fact, online retail was so strong in 2020 that it made up for the losses in physical shopping and left retail sales just about the same as in 2019.
The economic effect of the coronavirus was uneven
The pandemic didn’t hit everyone evenly. Restaurants, nightclubs, and tourist attractions shut down, but plenty of office workers just began working remotely. Healthcare, manufacturing, and financial services boomed. In many cases, the people who were hardest hit had been among the lowest paid before the coronavirus hit.
While many people suffered financially, more affluent Americans generally did well in 2020 — often better than they were doing before the pandemic. The stock market did okay and the number of millionaires and billionaires in America increased.
Plenty of ordinary Americans had the same incomes, plus stimulus checks, and fewer places to spend their money. These consumers often stocked up on household goods rather than spending less.
Sales tax compliance matters
So if you were thinking that sales tax would just go away in 2020, that didn’t happen. You still need to figure out sales tax calculation and filing, even if the pandemic made things complicated in your business last year.
Try Sales Tax DataLINK. We’re affordable, and accurate, and we have American CPAs on hand who will help you any time you need support. Call 479-715-4275 and let us impress you.