MuskogeePhoenix.com, Muskogee, OK

Local News

October 13, 2013

City reverses tax slide

Revenues from recent sales highest in seven months

Muskogee snapped its seven-month decline in sales tax revenue in October with a year-over-year increase of 4.41 percent.

Data compiled by the Oklahoma Tax Commission and the city treasurer’s office show disbursements this month total nearly $1.97 million. That is up $83,141, or 4.41 percent, from the more than $1.84 million reported for the same period a year ago.

The October disbursement was based upon taxes collected on actual sales reported Aug. 16-31 and estimated sales for Sept. 1-15. The turnaround made up some of the ground lost during the first three months of the fiscal year that began July 1.

City Treasurer Jean Kingston said sales tax collections for the fiscal year to date total nearly $7.72 million. That is down 1.2 percent, or $93,893, from the $7.81 million disbursed during the first four months of fiscal year 2013.

Interim City Manager Roy Tucker said October sales tax disbursements typically are higher because they reflect back-to-school sales reported during the second half of August. Although the state has an annual “sales tax holiday,” municipalities are reimbursed for lost revenue.

“We are excited that we are on track with what we projected for the October reporting period,” Tucker said. “It did allow us to make some progress toward recovering some of the losses we experienced during the first three months of the fiscal year.”

But Tucker was cautious, noting that disbursements in November and December could be marred by the partial shutdown of the federal government. Muskogee could be hit particularly hard because of its high concentration of federal jobs affected by the budget impasse in Washington.

“I am really afraid the furloughs we have seen here with the federal government will leave us with a deficit during the next couple of months,” Tucker said. “If we have 600 people who are furloughed for any length of time, that is going to show up in sales at our local merchants.”

The partial shutdown began Oct. 1 after Senate Democrats rejected demands by House Republicans to defund the Affordable Care Act. The House subsequently passed alternative measures that would have delayed all or parts of what has become known as Obamacare. The Senate rejected each measure.

Because of the lag between the time sales taxes are collected by merchants and disbursed to municipalities, the impact of the federal government shutdown won’t be known until November. Depending upon the length of the shutdown, the impact still could reverberate into December or thereafter.

Tucker said other steps have been taken since September to ensure that the city is receiving its share of sales tax revenue. An investigation to identify reasons for the seven-month decline in year-over-year revenue found one local retailer who has three stores but no sales tax permit. Tucker said the city reported the finding to the Oklahoma Tax Commission.

As a preventive measure, Tucker said procedures have been established to prevent businesses from opening before a sales tax permit is issued. The procedure will require a notice to anyone who opens a new commercial water account about reporting and remitting requirements.

Tucker said that once a determination is made that the business named on the commercial water account is required to remit taxes on sales, it will be required to obtain a permit before opening. Tucker said coordinating efforts between the water department and city clerk’s office should help capture revenue that might be lost otherwise.

The city’s share of October use tax collections also increased significantly when compared with figures reported for the same period a year ago. The October report shows that Muskogee received $120,195 in taxes collected on purchases of out-of-state goods for in-state use or consumption, up 34.78 percent from the $89,180 disbursed in 2012.

Although that provides some cushion for the city coffers, the lion’s share of the city’s use tax collections is dedicated to economic development. Beginning this year, up to $1.2 million of Muskogee’s use tax collections will be deposited into the city’s economic development fund.

Tucker said that although the reversal of the decline in sales tax revenue is heartening, department heads have been instructed to maintain conservative spending policies.

Reach D.E. Smoot at (918) 684-2901 or dsmoot@muskogeephoenix.com.

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