City experiences unexpected sales tax spike

Federal funds distributed earlier this year to stimulate spending in response to the pandemic is suspected of spurring local spending and an unexpected boost in Muskogee’s sales tax revenue. 

City councilors budgeted for a 10% decline in the important revenue stream, which hit a high that has been seen only once since February 2008. The only other month since then when sales tax revenue exceeded $2.31 million was May 2017, when officials attributed a spike in the monthly deposit to a one-time anomaly.

Data compiled by the Oklahoma Tax Commission show the city’s share of sales tax revenue disbursed this month totaled $2.31 million. That represents a 13.49%, or $311,911, increase from the $1.99 million disbursed to the city in July 2019.

July disbursements primarily represent local sales tax collected from May business activity. Totals include taxes collected on actual sales reported by businesses required to file electronically from May 16 to May 31 and estimated sales from June 1 through June 15.

The agency this month disbursed more than $162.32 million in sales tax revenue to municipalities statewide — that was up $3.46 million from the nearly $158.86 million disbursed in July 2019. Counties that assess a sales tax shared disbursements totaling $26.55 million and use tax revenue totaling nearly $4.58 million.

Muskogee County’s share of the sales tax revenue totaled $472,284, up 10.55% from the $422,478 it received in July 2019. The July disbursement of use tax to Muskogee County coffers totaled $65,947, up 20.34% from the $52,535 deposited a year ago.

City Manager Mike Miller said he believed the one-time payments to taxpayers of $1,200 that were part of the early relief package approved by Congress attributed to most of the increased consumer spending. While councilors budgeted for a projected decline in sales tax of 10%, Miller said he “would love for that to turn out to be too pessimistic.”

“I am worried that the increase may be directly related to the one-time stimulus and possibly the short-term COVID-19 unemployment benefits,” Miller said shortly after a round of layoffs were announced by one of the city’s largest private-sector employers. “I don’t think the increase for this month is sustainable, and I’m not sure what the drop-off would be.”

Muskogee posted 19.28% increase in its use tax collections compared with the same period year ago. The state agency’s most recent report shows use tax revenue disbursed this month to the city of Muskogee totaled $259,948, up $50,123 from the $209,824 deposited in July 2019.

Use tax revenue, which can swing wildly from month to month, is generated primarily by purchases of out-of-state goods for in-state use or consumption. City councilors direct up to $1.2 million of the city’s 4 percent use tax annually toward the city’s economic development efforts.

Revenue from the 4 percent municipal sales tax — along with tobacco and franchise taxes — typically make up just more than half of the city’s general fund.

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