Local government sales tax collections declined by 10 percent overall in 2020, or $1.8 billion, compared to the previous year, according to a recent report issued by New York State Comptroller Thomas P. DiNapoli. This decline was actually a bit steeper than the drop during the Great Recession, when local sales tax collections fell 6 percent statewide in 2009 compared to 2008.
New York City’s sales tax collections were hit much harder than the rest of the state. Since New York City was hit earliest and hardest by the Covid-19 pandemic, it had a 35 percent decline during the second quarter, compared to 19 percent for the rest of the state, and double-digit declines continued in the third (21.9 percent) and fourth (18.5 percent) quarters, even as other areas in the state were beginning to see growth.
The pandemic also caused a dramatic shift in consumer spending during the spring and summer months. Restaurants and other eating places, traveler accommodation, and clothing store sales plummeted from March to May, though sales improved slightly over the summer as certain Covid-19 restrictions were lifted. Conversely, beer, wine, and liquor sales, as well as internet content publishers and broadcasters saw large bumps. Of course the major change is the e-commerce boom that happened in 2020. From March to May, e-commerce sales increased 132 percent ($3.1 billion) and from June to August increased 134 percent ($3.4 billion). In total, mand nexus vendors reported $7.7 billion in taxable sales in the six months from March through August. This type of sale made up 4.7 percent of the total taxable sales in New York during that time.
However, recent amendments to the tax law reduced the amount of statewide county sales tax collections paid to counties. Both aid and incentives for Municipalities (AIM)-related payments to towns and villages, and deposits into the Distressed Provider Assistance Account are funded through withholdings from county sales tax collections.