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FISCAL FACTS

Sales tax revenues surge as retail, other sectors see shifts

  • 2 min to read

Sales and use tax revenues in Wisconsin increased markedly in the first four months of 2021 when compared to the same period in 2019, another sign that economic activity is rebounding strongly from the COVID-19 crisis. Yet this revenue growth also shows notable shifts in key sectors that could have potential impacts on state and local finances.

A key component of the state’s overall robust revenue growth in 2021 is enhanced collections from its 5% sales tax. The nonpartisan Legislative Fiscal Bureau, in its most recent estimate of state revenues for the 2021 fiscal year ending June 30, projected sales tax collections will be up 8.4% over the previous fiscal year — the most since 1984.

This analysis examines sales tax revenue trends in greater detail. We rely on data from the Wisconsin Department of Revenue on state and local sales and use tax revenues as reported by businesses on their returns to the state. For this analysis, due to the historically anomalous nature of the economy in 2020, we primarily look instead to the most recent comparable pre-pandemic period in 2019, a year that generally was marked by strong economic and tax revenue growth in Wisconsin and nationally.

We find state sales and use tax revenues were up $240.1 million, or 15%, from January through April of 2021 (the most recent months for which this data is available) relative to the same stretch of 2019.

Most Wisconsin counties also collect an additional sales tax of 0.5%. For the 66 counties that have collected this tax since at least 2019, the data shows revenues increased through the first four months of 2021 by 16.4% relative to the same period in 2019.

A key factor in the overall sales tax revenue increase was the retail sector, which provides slightly more than half of all sales tax revenues collected in Wisconsin. Revenues in this sector increased by more than $236 million, or 32%, in this period of 2021 relative to 2019.

The non-store retail subsector, consisting primarily — though not exclusively — of online retail, saw a jaw-dropping 143% increase in sales tax revenue in January to April of 2021 relative to those months in 2019.

Yet not all sectors enjoyed this good fortune. General Merchandise Stores, which primarily include department stores, saw a revenue decline of 12%. And sales tax revenues fell 39% for Miscellaneous Store Retailers, which include florists, office supply and gift stores, and used merchandise stores.

Overall, these sales tax collections trends suggest that state and county finances are enjoying enhanced fiscal strength.

Notably, however, the shifts among retail subsectors may have major implications for future state and local finances. As we noted in our June Focus report, “The Online Effect,” while most states’ coffers will benefit from sales taxes collected on these online transactions, Wisconsin has an unusual law that requires certain online sales tax revenues to be offset with income tax cuts.

This information is provided to Wisconsin Newspaper Association members as a service of the Wisconsin Policy Forum, the state’s leading resource for nonpartisan state and local government research and civic education. Learn more at wispolicyforum.org.

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