By BOBBY HARRISON
State Economist Darrin Webb cites economic angst, not internet shoppers, for the prolonged period of sluggish sales tax collections for the state.
The collection of the sales tax, the state’s largest source of revenue, was sluggish during the past fiscal year and started the new fiscal year on an even more dismal note. The anemic sales tax collections is one of the reasons state revenue has not met projections, resulting in multiple budget cuts, layoffs of state employees and the elimination of some programs.
“I think it is primarily the economy,” Webb said in an emailed response when asked about the sluggish sales tax collections. “We have had no upward momentum this year. Year over year income growth is modest.”
On a positive note, use tax collections for the month of July were a $4 million, or 31.6 percent, above what was collected the previous July.
The 7 percent sales tax is collected by Mississippi retailers on most items and remitted to the state. The 7 percent use tax is collected on remote or out-of state sales. The out of state retailers are not required to collect the tax on their sales to Mississippians.
While state law mandates that purchasers pay the 7 percent use tax if it is not collected by the retailer, few do. And at the same time, many fear that the drop in the sales tax is related to the fact more people are shopping online.
Many state officials are hoping the fact that internet retail giant Amazon and others started voluntarily collecting the use tax for the state will help make up for any loss in sales tax revenue.
July collections indicate that might be occurring. But for the just completed fiscal year, ending June 30, use tax revenue was down even more than sales tax revenue – $4.2 million or 1.8 percent compared to the sales tax being down 0.33 percent.
Of the internet or use tax collections, Webb said, “Certainly it is a growing issue and it does diminish sales tax collections, but it isn’t more of a problem in Mississippi than in other states.
“In fact given our lower (internet) connectivity, it is probably less problematic here. Sales tax has performed better in some of the other states than in Mississippi. As I understand, the Amazon money is coming in about as expected. But that is not a lot of money in the grand scheme.”
Department of Revenue spokeswoman Kathy Waterbury said through May, the state has garnered $36 million in use tax revenue collected voluntarily by 1,887 companies, including 21 collecting the tax for the first time this calendar year. Amazon is among those 21.
The sales tax accounts for more than 35 percent of total state revenue or $2.06 billion for the previous fiscal year while the use tax makes up about 4.5 percent of total revenue or $235 million for the previous fiscal year. Mississippi has a method to collect the tax on large out of state purchases, such as automobiles and large items purchased by companies.
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