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Kingsport seeing bump in sales tax collections

Matthew Lane • Dec 17, 2018 at 9:09 AM

KINGSPORT — Sales tax collections in the Model City are up — for both the past fiscal year and the first quarter of the current fiscal year.

According to financial information from the city, local option sales tax collections:

— For FY 2018 were $17.8 million, up 3.8 percent from FY 2017.

— For the first quarter of FY 2019 were up $106,000 or 6 percent.

This increase in sales taxes reverses a drop the city experienced from 2016 to 2017, when collections fell by 1.7 percent — from $17.4 million to $17.1 million.

“While we’ve not had new developments, we’ve seen empty storefronts refilled,” City Manager Jeff Fleming said, noting the replacement of Hancock Fabrics, Pier One and Old Navy with Jo-Ann’s, Five Below and Burke’s respectively.

“Sometimes the bigger name brand store doesn’t generate as much volume in sales as perhaps as the one that replaced it.”

WHY NUMBERS ARE RISING

There are factors influencing sales tax collections that go beyond what you perceive as the traditional retail trade, Fleming said. One example is online collections.

“The past couple of years, Tennessee has been more aggressive in trying to get online businesses to voluntarily submit sales taxes and many have complied,” Fleming said. “That’s driving a lot of it.”

Another change taking place in the world of retail is with ordering items online and picking them up locally at the store or restaurant. Walmart, Food City, Target, Panera and even McDonald’s are just some of the businesses now offering this convenient service.

“That’s driving sales back locally that were going completely outside the community,” Fleming said. “And that’s important because 25 percent of our revenue comes from sales taxes.”

FACTS & FIGURES

When looking at year to year comparisons, here are a few categories of retail sales in Kingsport that stand out, according to Fleming.

— Real estate: Five years ago, Kingsport was down 12 percent. Last year, it was up 16 percent.

— Manufacturing was slightly down last year, but over the past decade it’s been up 32 percent.

— Non-classified items (online sales) have grown from $97,000 10 years ago to $570,000 last year.

“Manufacturing accounts for 13 percent of our sales tax revenue,” Fleming said. “If manufacturing sales are strong, then that has a good bearing on us. It’s not something we can control, but it’s something we benefit from when times are good.”

CHRISTMAS SEASON

Historically, December is the best month of the year for sales tax collections. In Kingsport, it amounts to more than 10 percent of the total amount generated for the year. Last year, nearly $2 million in local option sales tax was collected in the Model City in December.

“I’m optimistic that a lot of folks are going to shop locally, and when they shop online we’ll get credit for that too,” Fleming said.

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