Big-box, dollar stores push $18 million

Report shows local collection sources; Fayetteville tops area in shoe sales

Big-box and dollar stores generated nearly $18 million, or 18 percent, of total sales tax last year in Northwest Arkansas’ four largest cities. Fayetteville posted the highest number of shoe sales and Rogers pulled in the most dollars from amusement activities such as bowling and golf.

These are just a few details found in local sales tax data from the Arkansas Department of Finance and Administration. The state agency began compiling and releasing a monthly breakdown of taxes by business category early last year that will eventually help city leaders spot trends and evaluate fluctuations.

The state’s finance office already released monthly sales tax reports that showed total collections, but did not show where the money comes from. A mayor or county judge could request a quarterly breakdown, but the information was incomplete and didn’t match up to total collections, said Paul Becker, finance director for Fayetteville.

“There was a push to get more sales tax data in the past two or three legislative sessions. The Legislature backed off because there are arguments on why that data should not be released,” he said. Business owners want to keep sales tax collections confidential so competitors cannot determine sales totals.

The Arkansas Municipal League was a main supporter of the legislative proposal in 2013 that would have required

the Department of Finance and Administration to release detailed sales tax data about individual businesses. The information would have only been released to one person within the local government and would have been exempt from release under the state’s Freedom of Information Act.

The legislative proposal was dropped after the groups came up with a compromise that provided additional information while allowing businesses to retain anonymity. The administration publicly releases the reports each month on its website.

“City finance officers wanted this primarily to work on budgets, to see what is growing and what is declining,” said Don Zimmerman, executive director of the Arkansas Municipal League.

The state generated the report 16 times so far. City and county leaders rely on sales tax to keep their entities running, but most local budget directors said they want more data before they rely on the information.

“Once we get a few years under our belt we will be able to start seeing trends that will help us plan a little better,” said Jackie Crabtree, Pea Ridge mayor. He was active in the Municipal League during the push for change.

Casey Wilhelm, Rogers finance director, said she hasn’t looked at the new reports much yet and relies on yearover-year collections to make her budget projections.

“It doesn’t give you the whole picture, but it is a step in the right direction,” she said. “The data will be more powerful when there are more years to look at.”

Brenda Guenther, Benton County comptroller, believes the reports provide enough useful information that she shared a report with members

of the county’s Finance Committee in February.

“It’s important to know how our sales tax collections look so maybe we can think outside the box when it comes to finding ways to finance projects,” she said. “This allows us to see what is trending for the good and for the bad.”

THE REPORTS

The Department of Finance and Administration uses the North American Industry Classification System to list businesses in more than 200 categories across all industries. Categories include grocery store, full- service restaurant, building equipment contractors and tortilla manufacturing.

There must be at least three businesses in a particular code for it to be listed, said Tom Atchley, the state agency’s excise tax administrator.

“We do that for competitive purposes,” he said. “If we have less than three businesses in a code, it would be easy for competitors to determine sales volume.”

Sales tax for businesses that aren’t listed by their codes are grouped together at the end of the report to keep collection data accurate.

The report also shows use tax collections. Use tax is money residents pay for out-of-state purchases that they didn’t pay taxes on at the time of the sale. The report also shows rebates and audits that can cause a city or county’s tax collections to fluctuate. Atchley said a company has six months to request a sales tax rebate on any business-type expense purchase of $2,500. Audits fix issues such as a business that overpays.

Kathy Deck, director of the Center for Business and Economic Development at the University of Arkansas, said, as with any report, analysis is only as accurate as the data provided.

One month’s collection may jump because a business catches up on past due taxes or it might fall because of a large audit adjustment, she said. Businesses are also not assigned a code, and determine what category they should be in.

“I would be reluctant to make any huge conclusions based solely on this data, but it will make it a bit easier to pinpoint what’s going on,” Deck said.

Changes in sales tax collection must also take other factors into consideration such as population and personal income growth, she said. Northwest Arkansas’ population grew about 2 percent, or 7,604 residents, between July 2013 and July 2014, according to the U.S. Census Bureau.

Sales tax collection on grocery sales seem to confirm the growth. Each of the area’s four largest cities show increases in grocery purchases. Fayetteville had the largest grocery sales tax collection in 2014 at $1.5 million. Only four months of data exist for both 2014 and 2015, and Fayetteville had the largest four-month increase at $86,670.

Building material sales also reinforces the idea of population growth. Fayetteville had the largest sales tax collection last year at $2.1 million while Bentonville had the largest four-month increase at $100,440.

THE NUMBERS

Sales at beer, wine and liquor stores continues to increase in Benton County following the December 2012 public vote to make the county wet. The first liquor stores opened in mid-2013.

Rogers and Bentonville saw jumps in sales tax revenue in the first four months of this year, increasing by $54,612 and $46,283 respectively.

But most of the liquor store dollars are still being spent in Washington County. Fayetteville liquor store sales tax collection was $583,355 in 2014. Other collections last year included: Springdale, $484,496; Bentonville, $164,085 and Rogers, $32,077.

The North American Industry Classification System groups a large swath of recreational activities together into a category titled other amusement and recreation activities that includes golf courses, marinas, fitness and sports center, pool parlors, youth sports teams and bowling centers.

Rogers pulled in $182,272 in sales tax from recreational business last year and collections are up nearly $59,000 comparing the first four months of this year to the same time in 2014. Fayetteville had the single largest monthly collection at $20,595 in March 2014.

The other general merchandise category, which includes warehouse stores, supercenters and dollar stores, is a main sales tax generator across the area and when new stores open it causes the sales tax dollars to shift.

A Walmart Supercenter opened in Springdale last August. Springdale’s other general merchandise sales tax collection reached $ 3 million last year and was $89,059 higher in January than it was in January 2014. At the same time, Rogers’ sales tax dropped $91,019 to $5.7 million and Fayetteville dropped $53,918 to $7.6 million. Washington County’s 1.25 percent sales tax increased $33,774 to $6.9 million.

Becker said part of the loss is offset by a county sales tax. Washington County collects a 1.25 percent sales tax that is divided among the cities and unicorporated areas of the county. Fayetteville collects 36.3 percent of the county sales tax, Becker said.

“When Springdale does well, it also helps us,” he said.

Sometimes smaller towns and businesses in the unincorporated areas help the bigger towns, shown in full-service restaurants. Full-service restaurants are places where patrons typically order, are served and pay when finished. They may serve alcohol and provide carryout services.

Full- service restaurant sales tax collections were down $892 in Springdale and $12,591 in Fayetteville during the first four months of the year. Washington County collections increased $4,159.

Rogers and Bentonville were each up in the first four months, $39,530 and $59,643 respectively. County collections were up $64,735.

“These reports are another tool we can use to budget,” Becker said. “It is certainly better than what we did have.”