Sept. 25, 2023

It’s not a big drop, but sales tax revenue is lagging behind the prior year in Sioux Falls for the first time since 2020.

In August, revenue was down 0.1 percent.

That represents sales tax collected mostly in July.

The city is “trending down from the high rates experienced” since 2020, Tom Huber, the city’s assistant director of finance, said in a report last week to the City Council.

“We believe we’ll continue to see this average settle in to align with our general expectations going forward.”

Sales tax revenue is up 6.3 percent on a 12-month rolling average.

“Could it slip further down? It could,” Huber said. “We have other revenue sources that kind of balance it out, but it’s something we’re watching. We’re coming off some really big months from ’22.”

A look at the city’s top 10 industries based on taxable sales shows what’s contributing to part of the year-over-year drop. The top 10 represents 59 percent of sales tax revenue.

Some of the biggest drops came in lumber, hardware and garden supplies; grocery stores; business services; and manufacturing.

Increases came in what’s considered miscellaneous retail stores as well as remote retailer sales.

Consumers continue to eat out, with eating establishments reporting a 4 percent increase in sales tax. That contributes to a 1.6 percent increase over last August in the entertainment tax, remaining at 9.3 percent on the 12-month rolling average, “reflecting the more discretionary-type spending that is significantly more variable from month to month,” Huber said.

The lodging tax was down 2.4 percent compared with August 2022 and up 5.3 percent year to date.

“Overall revenues are on track with our general expectations,” Huber said.