Dec. 20, 2023

Sioux Falls sales tax revenue is back in “slight positive territory” but still not growing as fast as inflation.

Director of finance Shawn Pritchett characterized the returns that way Tuesday in presenting a monthly report to the Sioux Falls City Council.

Sales tax in November, which largely represents sales from October, grew 1.8 percent, which is “still below what you would consider inflation at this point, so we’re still not positively seeing any growth number there,” he said.

The 12-month rolling average, up 3.2 percent, “is going to continue to come down,” Pritchett continued, noting it’s now trending below the city’s historical sales tax growth rate of 4 percent to 4.5 percent.

The entertainment tax revenue showed its first year-over-year decline since November 2022, though it essentially broke even and “is a more volatile portion of our tax base, but it’s also more discretionary,” Pritchett said, adding it also “could be an aberration” because restaurants, which make up more than 50 percent of that tax revenue, are still up 18 percent.

The 12-month rolling average for the entertainment tax is up 7.8 percent.

The lodging tax was down 8 percent.

By industry, trends over the past few months appear to be mostly holding. Sales for department and general merchandise stores, which would reflect some early holiday shopping, were up 2 percent, on par with what’s being reported nationally for later in the holiday season.

Downward trends in lumber, hardware and garden supplies as well as softness in home furniture continued. Eating establishments saw a spike in October, while grocery sales were down slightly. The business sector, including manufacturing, wholesale and business services, continues to lag behind last year.

Inflation is at 3.1 percent, down from 3.2 percent the month before and coming off a peak of 9.1 percent in June 2022.

“We’re slowly working our way down on the inflation side,” Pritchett said, pointing to a reduction in energy costs and a 2.9 percent inflation rate for food, which “continues to reduce overtime, which is a positive for many families and individuals nationwide and in our community.”