July 20, 2022

For the first time since the city began tracking remote retailer sales, sales tax collection decreased year over year.

Remote retailers — meaning those that do business online — reported 10 percent less in sales tax collections in June than they did one year ago, director of finance Shawn Pritchett told the Sioux Falls City Council on Tuesday.

“You’re kind of seeing, at least in my estimation, maybe some softness occurring in the consumer side,” he said.

He also pointed to lesser increases in other categories, including a 7 percent increase in eating establishment revenue, a 9 percent increase in department stores and a 5 percent increase in grocery stores.

The overall growth was driven by manufacturing, and wholesale trade reported strong gains.

“Agriculture, which is not shown on here, also came in strong the last couple of months,” Pritchett said. “The business transaction side of things, that’s kind of what’s carrying our sales tax over the last couple of months.”

After a couple of months of slight reduction, inflation hit 9.1 percent in June, he said, “which is the largest 12-month increase we’ve seen since November of 1981, so we’re certainly living through some unprecedented times at least in terms of what most of us have gone through.”

It’s still being driven in large part by energy prices, he said. Those were up 41.6 percent, the largest increase since 1980, and food was up 10.4 percent.

Overall, city sales tax revenue in June, which represents sales in May, increased 12 percent, part of a 17.5 percent increase on average for the past 12 months.

Factor out inflation, and “you’re still left with really about a 3, 3.5 percent growth in terms of that, and that’s pretty solid compared to our historical norms,” Pritchett said.

Entertainment tax revenue was up 12 percent, and the 12-month rolling average is a 24 percent increase.

Lodging tax revenue is up 56.7 percent but also is being driven by increased rates, Pritchett said.