Weak Sales Tax Collections Push Arkansas Revenues Down

by Lance Turner  on Wednesday, Sep. 5, 2012 11:48 am  

Michael Pakko, the chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock.

LITTLE ROCK - Arkansas finance officials say a drop in sales tax collections pushed the state's revenues below expectations and below last year's figures.

The Arkansas Department of Finance and Administration said Wednesday that the state's net available revenues in August totaled $369.1 million. That's $4.6 million below last year and $3 million below forecast.

The department said the drop was driven by a shortfall in sales tax collections, which totaled $178 million last month. The sales tax collections were $2.8 million below last year and $9.3 million below forecast.

Since there is a one-month lag in sales tax collections, the figures don't reflect last month's back-to-school tax holiday -- the state's second -- that took place from Aug. 4-5. Businesses are also not required to report all sales of property by category.

Officials said consumers may have postponed purchases until the holiday.

"Sales and Use taxes were down in all business and consumer-related categories except automobile sales," the report said. "In addition, some spending for school supplies and clothing in July may have been postponed to take advantage of the sales tax holiday in August."

Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock, said while the sales tax drop is "of some concern," he sees no cause for panic or to revise the forecast.

Pakko said the decline is consistent with softening conditions during the summer. DF&A reported last month that July sales and use tax collections were down 0.6 percent from the same time last year.

Because of July's decline, Pakko said he expected to see a rise in sale tax collections in August. But the effects of the sales tax holiday, which won't fully be known until next month, make forecasting those collections difficult.

Wednesday's report also noted that individual income tax fell 1.2 percent from last year to $189.7 million, which DF&A attributed to calendar effects from payroll timing. DF&A expected the decline. This year's figure was 0.4 percent above forecast.

Meanwhile, corporate tax collections for the month fell 31 percent from last year to $3.7 million. DF&A said August is traditionally a low month for those collections.

For the fiscal year beginning July 1, Arkansas revenue was $773 million, about 1.6 percent above forecast and 3 percent above last year's level.

(The Associated Press contributed to this story.)



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