Holiday shopping fails to reverse slumping sales taxes in Sullivan

J. H. Osborne • Feb 13, 2008 at 12:00 AM

BLOUNTVILLE — The holiday shopping season didn’t pull local sales tax revenues out of a multi-month slump, according to a report released Wednesday by Sullivan County’s budget office.

Cumulatively, sales tax revenues in Sullivan County are running about 1.9 percent below last year at this point, according to that report.

A seven-month spreadsheet by the budget office shows sales tax revenues from December sales fell by more than 2.13 percent compared to December 2006.

It’s the sixth drop in seven months.

County officials had hoped the holiday season, coupled with new shopping opportunities — especially in the Kingsport area — would bring sales tax revenues back above last year’s levels.

The drop follows the exit of Sam’s Wholesale Club from Kingsport’s retail lineup.

There’s no doubt that contributed to the drop, Sullivan County Accounts and Budgets Director Larry Bailey said in December.

But he and other county officials were hopeful the loss would be offset by the openings of Kohl’s, Target and multiple other retailers at the Kingsport Pavilion development on Stone Drive; a second Kingsport Lowe’s on the city’s west end; and the recent reopening of Food City and other businesses at Crown Point on Eastman Road.

Instead, sales apparently dropped in both ends of the county.

Sales tax revenues are generated when money is spent on goods and services at businesses throughout the county and its cities. The money is used by local governments, largely, to support school systems.

When a consumer pays sales tax locally, it is sent to the state, which redistributes it back to the county and its cities based on collection site.

Sometimes the wrong location is cited when collections are reported to the state. When discovered, the state makes an adjustment. That process can be blamed, partially, for Sullivan County’s overall drop this year — because it artificially inflated the numbers for January 2007, Bailey said.

That month, there was a more than $300,000 adjustment in Sullivan County’s favor for sales taxes that had been collected in the Johnson City portion of the county — and incorrectly distributed back as if they had been collected in Washington County, Bailey said.

Because of that adjustment, in January 2007 sales tax revenues from the Johnson City portion of Sullivan County totaled about $341,000. For January 2008, the total was about $13,000.

On paper that creates a dramatic drop, but the $13,000 figure is more representative of a normal month’s revenue for that area, Bailey said.

Sales tax revenue is typically distributed back to localities two months after being collected.

Taxes collected during December, for example, come back to the localities in February.

Local-option sales tax revenues are split 50/50 — with half going to school systems in the county, and the other half going to the local government where the collecting business is located.

Each $1 of local-option sales taxes collected in Kingsport, for example, generates 50 cents for the county’s three school systems (the money is split based on average daily attendance) and 50 cents for city coffers.

Since August, sales tax revenues from non-city portions of the county are up nearly 10 percent — about $335,000 — compared to this time last year.

The school systems get half that amount — and Sullivan County’s Highway Department receives most of the other half.

Sales tax revenues within the city of Bristol are up since August, as well, by about 1.75 percent, or about $108,000.

But Bristol — like Kingsport, Bluff City and Johnson City — saw a drop in sales tax revenues generated in December.

From the report:

• Sales tax revenues received by local governments in Sullivan County from August through this month totaled more than $27.35 million. That’s down from nearly $27.88 million for the same period last year.

• For the same period last year, the state sent about $17.48 million total back for sales taxes collected within the city of Kingsport — with half, or about $8.74 million — going to the city of Kingsport’s coffers and the other half being split among local school systems.

• This year the Kingsport total for the period was down about 3.28 percent (or $572,500) to $16.9 million, with half — roughly $8.4 million — going to city coffers, and the other half going to the school systems.

• Kingsport’s non-school share, since fiscal year 2008 began on July 1, shows a total decrease of $286,238 compared to last year at this point.

• The Sullivan County school system’s year-to-date share is about $7.58 million, down about $243,000 compared to this point last year, a decrease of 3.1 percent.

• The Bristol City Schools system’s year-to-date share is about $2.41 million, a drop of about $11,000 compared to this point last year.

• The Kingsport City Schools system’s year-to-date share is about $3.7 million, down about $8,000 compared to this point last year.

• The city of Bristol’s year-to-date non-school share is about $3.12 million, up about $54,000 compared to this point last year — a growth of 1.75 percent.

• Bluff City’s year-to-date share is about $197,000, down about $22,000 compared to this point last year.

Fiscal year 2008 began July 1 and covers the county’s finances — and that of other local governments — through June 30, 2008.

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