July 21, 2021

Sales and entertainment tax revenues are way up in Sioux Falls, but inflation is heading that way too.

Sales tax collections received in June, which represent sales from May, were up 28.3 percent year over year. For the 12-month period, they’re up 7.7 percent.

“We’ve seen some fairly significant increases,” said Shawn Pritchett, the city finance director, adding that the numbers aren’t always telling because the decrease was so big during the lows of the pandemic.

So the city also compared 2021 results with 2019 – and sales tax in June still was up more than 16 percent.

Department store sales in 2021 versus 2019 were up 23 percent, and eating establishments were up 16 percent. The biggest increase was in remote, or online, retailers, which saw sales up 107 percent compared with 2019.

“We are seeing fairly strong activity,” Pritchett said. “You’re seeing a lot of retail and consumer goods in that 15 to 20 percent range over 2019.”

While “everything across the board was good, I think you’re still seeing those stimulus impacts there that we’ll be watching to see how much longer they continue.”

The entertainment tax was up 67.4 percent year over year in June, with a 5.5 percent increase over the 12-month period. It’s up 8 percent compared with 2019.

“A big portion of what we’re seeing in activity in the entertainment tax is driven by a recovering lodging industry,” Pritchett said, adding that restaurants also play a big role in it.

The lodging tax is up a whopping 252 percent year over year, though it’s up 16 percent compared with 2019, and when some issues with remitting lodging tax are taken into consideration, it’s probably more like flat, Pritchett said.

“But that’s a really positive place to be,” he said, adding Sioux Falls continues to outperform its peer communities in travel.

Inflation is trending up with a 5.4 percent inflation rate for June, up from 5 percent from the previous month. It was less than 1 percent a year ago.

“There’s a couple things that are driving that,” Pritchett said. “One, gasoline for motor vehicles for driving it to the extent it’s contributing about 1 percent, and the other one interestingly is used cars.”

Over the past month, the price of used cars went up 45 percent, he said, pointing to supply chain challenges and stimulus payments as some reasons behind the increase.

The labor force is showing some encouraging signs, up 8 percent from its pandemic low.

Overall, it’s a similar narrative to what the city has experienced the past few months, Pritchett said.

“We’re seeing a slow labor force growth, escalating inflation, record (building) permits continuing throughout this year, increasing sales and entertainment taxes, and expenses that are coming in within expectations.”