Local Sales Tax Collections Decline By 10 Percent In 2020 .

OFFICE OF THE NEW YORK STATE COMPTROLLERThomas P. DiNapoli, State ComptrollerLocal Sales Tax Collections Decline by 10 Percent in 2020,With Major Shifts in Consumer SpendingOverviewLocal sales tax collections declined by 1.8 billion, or 10 percent, in 2020 over the previous year.1 Bycomparison, collections only dropped 6 percent in the 2009 recession compared with 2008.In the first quarter (January-March) – mostly occurring before the economic impact of the COVID-19 globalpandemic swept through New York – collections grew by 4.6 percent over the same quarter the previousyear. (See Figure 1.)However, collections plummeted by 27.1percent in the second quarter (April-June)compared to the second quarter in 2019.State-mandated closure of non-essentialbusinesses in late March led to a spikein unemployment and a sharp declinein retail and food services sales in thefollowing months.2The third quarter (July-September) andfourth quarter (October-December)continued to experience decreases –although less steep – at 9.5 percent and7 percent, respectively. This was likelydue, in large part, to the reopening ofmany non-essential businesses in June,although some restrictions were still inplace.3 Collections increased outsideof New York City in the third and fourthquarters, compared to the same timeperiod in 2019.Figure 1Figure 1Percentage Change in Statewide Local Sales Tax CollectionsPercentage Change in Statewide Local Sales Tax Collections15%Annual Year-Over-Year10%5%2.0%2.3%Quarterly 25%-30%1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q201520162017201820192020Source: New York State Department of Taxation and Finance (Tax and Finance), with calculations by the Office of theStateComptrollerSource:New (OSC).York State Department of Taxation and Finance (Tax and Finance), with calculations bythe OfficeofNewthe StateComptroller(OSC).Notes:IncludesYork City(NYC). Adjustedfor correction adding 238 million to collections for NYC in calendar year2015.Notes: Includes New York City. Adjusted for correction adding 238 million to collections for NYC incalendar year 2015.Division of Local Government and School AccountabilityFebruary 2021

In general, New York City’s sales tax collections, in all four quarters, were affected much moreseverely than sales tax collections throughout the rest of the State. The City experienced a35 percent decline in the second quarter, compared with 19 percent in the rest of the State,and double-digit declines continued in the third and fourth quarters, even as other areas werebeginning to see growth. (See Figure 2.)New York City’s steep dropFigure 2in 2020 collections wasparticularly significant,Quarterly Year-Over-Year Change in Local Sales Tax Collections,because it typically generatesCalendar Year 2020more than 40 percent ofstatewide local sales taxFirst QuarterSecond QuarterThird QuarterFourth Quartercollections. As noted in earliersales tax reports, the City was8.0%2.3% 4.6%1.3%hit earliest and hardest by thepandemic, both in infectionrates and economic impact.As a major tourist and-18.5%-19.0%-21.9%business destination, NewYork City was particularly-34.9%affected by travel restrictions,the closure of major attractionsNew York CityRest of Statesuch as museums andBroadway theaters, and thereduction in daytime populationSource: Tax and Finance, with calculations by OSC.caused by people working fromNotes: “Rest of State” includes all counties and cities located outside of New York City.home. In addition, its nonessential businesses were notable to reopen as quickly and fully as those in the rest of the State. (To view quarterly and annualcollections in 2020 by region and taxing jurisdiction, see the Appendix on page 6. For a detailedspreadsheet, see Monthly and Quarterly Local Sales Tax Collections by Region.)County CollectionsCounty sales tax collections decreased by 0.9 percent (outside of New York City) in 2020 comparedto those in 2019. Despite this overall decline, county collections were stronger than some expectedat the outset of the pandemic. In fact, due to growth in the third and fourth quarter, a majority ofcounties (30 of 57) experienced overall growth in 2020. (See Figure 3 on page 3.)2Office of the New York State ComptrollerFebruary 2021

Delaware County had the largestyear-over-year increase at 10.7percent, followed by Oswego (10.5percent) and Westchester (9.8percent) counties. In Westchester’scase, much of the growth wasdue to a tax rate increase (from3 to 4 percent) that addedapproximately 91 million to itssales tax collections. It is less clearwhat contributed to the growth inDelaware and Oswego. However,recent changes to the way theState collects taxes from certainout-of-State vendors is likely afactor. (For more details, see the“Consumer Spending and InternetRelated Sales” section on page 4.)Conversely, nearly half of allcounties (27) suffered declines,with Tompkins County recordingthe steepest drop, down 10.4percent, followed by Seneca (7.5percent), Otsego (7.1 percent) andAlbany (6.8 percent) counties.Figure 3Figure 3Change in County Sales Tax Collections,Change in County Sales Tax Collections, Calendar Year 2019 to 2020Calendar Year 2019 to 2020ClintonFranklinSt. age Change Year-Over-YearIncrease more than 10%Increase between 5% and 10%Increase less than 5%Decrease less than 5%Decrease between 5% and 10% 2021 Mapbox OpenStreetMapDecrease more than New York CityNassauSuffolkSource: TaxFinance,withwithcalculationsby OSC.Source:TaxandandFinance,calculationsby OSC.Notes: IncludescountyandandNewNewYork YorkCity collections.Notes:IncludescountyCity collections.In addition to the impact that the pandemic had on sales tax collections, recent amendments tothe Tax Law reduced the amount of statewide county sales tax collections paid to counties out ofthe gross amounts reported above. Starting in December 2019, State-funded Aid and Incentives toMunicipalities (AIM) payments to 1,325 towns and villages were eliminated and replaced with “AIMrelated” payments, funded with withholdings from sales tax distributions to counties. In 2020, theseAIM-related payments totaled 59.1 million.4According to current law, these withholdings will continue in 2021, and an additional 87.5 millionwill be withheld from sales tax distributions to counties, to be deposited into the State’s DistressedProvider Assistance Account.5 However, the 2021-22 State Executive Budget proposes a changethat would reduce AIM-related withholdings for some counties. The proposal shifts the remaining137 towns and villages currently receiving AIM to AIM-related payments funded with countysales tax, but reduces all such payments by 20 percent. Under this proposal, county sales taxwithholdings for this purpose statewide would total 54.1 million in 2021, rather than the current 59.1 million, although the impact on individual counties would vary.6February 2021Division of Local Government and School Accountability3

Consumer Spending and Internet-Related SalesRecent county level data fromthe State for the March-Mayand June-August periodsshows dramatic shifts inconsumer spending duringthe spring and summermonths. Figure 4 displaysthe effect on six industrygroups selected because theygenerate some of the largestdollar amounts of taxablesales in New York and sawespecially notable increasesor decreases between thetwo years in these periods.7(See Figure 4.)Figure 4Year-Over-Year Change in Taxable Sales for Selected IndustryGroups in New York, 2019 to 2020March to MayJune to August132.9% 134.2%( 3.1B) ( 3.4B)86.6%( 712M)20.1% 26.7% 24.6%( 265M) ( 286M) ( 278M)-39.5%-39.5%-56.7% (- 4.3B)(- 802M)-71.0%(- 6.0B)-84.4% -77.7%(- 1.6B)(- 2.6B) (- 2.7B)Restaurantsand OtherEating cShopping & MailOrder HousesOtherInformationServicesBeer, Wine,and Liquor StoresStatewide, “restaurantsand other eating places,”Source: Tax and Finance, with calculations by OSC.Notes: For more details on these industry groups, go to www.naics.com/search/.“traveler accommodation,”and “clothing stores” eachexperienced steep decreasesin year-over-year taxable sales, with the biggest hits in March-May, although sales improvedslightly in the June to August period as certain COVID-related restrictions began to be lifted.Conversely, the pandemic bolstered spending in other industry groups, such as “beer, wine, andliquor stores” and “other information services” (i.e., internet content publishers and broadcasters).This was especially true for “electronic shopping and mail-order houses,” which includes majoronline-only retailers, such as Amazon.8There was some regional variation in these developments. Notably, sales in New York City wereaffected very differently from those in the rest of the State. As previously mentioned, the City washit earliest and hardest by the pandemic, so it experienced steeper declines in the most severelyimpacted industry groups, and less strong growth in the faster-growing industry groups fromMarch to August.Year-over-year taxable sales in electronic shopping and mail-order houses, alone, more thandoubled over 2019 in both the March to May and June to August periods. A couple of factors helpexplain this category’s growth. Consumer spending habits changed during this period when brickand-mortar stores were closed, and even afterwards, as many consumers continued to avoidcrowded places. In addition, more online sales were taxed this year than during the same period in2019, due to the State’s recent ability to tax sales made by smaller out-of-State sellers to New Yorkresidents. The Department of Taxation and Finance, which has been separately tracking the salesfrom these “marketplace and nexus vendors,” says that most of them are included in the electronicshopping and mail-order houses industry group.94Office of the New York State ComptrollerFebruary 2021