Colorado Springs sales tax collections surged in March to the biggest gain in more than four years amid booming online sales and housing construction, according to a report from the city’s Finance Department.
Revenue from the city’s 2% sales tax surged 18.7% from March 2020 to $14.1 million. That’s the largest percentage increase since December 2016 and the second largest in more than 20 years. Despite the COVID-19 pandemic, sales tax numbers have increased on a year-over-year basis for nine consecutive months, including gains of at least 9% every month starting in October.
“Almost every economist has been saying that between pent-up demand, stimulus checks, enhanced unemployment benefits and fewer pandemic restrictions, you have a perfect scenario for off-the-charts growth,” said Tatiana Bailey, director of the University of Colorado at Colorado Springs Economic Forum. “It will get even better when more restrictions are lifted on Friday and continue to improve. The flip side is inflation. There are constraints on the supply side that could trigger a round of inflation.”
March sales tax collections largely reflect business activity in February. Gains in miscellaneous retail — which includes online sales and such businesses as sporting goods stores, pet supply stores and jewelry stores — and building materials fueled more than half of the March increase.
Collections from miscellaneous retailers were up 60.3% from a year earlier, while sales of building materials were up 41.2% during the same period; those were the two biggest percentage increases among the 15 industry categories tracked by the city.
Collections from hotels and motels declined 35.1%, but collections from restaurants rose for the first time since November and posted the biggest percentage increase since February 2020.
Colorado Springs Mayor John Suthers called the overall increase “truly remarkable and really dramatic. The only major sector not firing on all cylinders is tourism, which is still down 20%. If we get that back to normal quickly, and I think we will, we are in for a remarkable year. A double-digit increase for the year is very realistic.”
Revenue from the city’s tax on hotel rooms and rental cars was down nearly 20% to $304,479 and has declined 12 consecutive months by double-digit percentages from the same month a year earlier.
The city levies a 2% sales tax on consumer and business purchases of vehicles, appliances, business machines and many other items.
The tax is a key economic indicator and funds more than half of the city’s general fund that pays for public safety, roads and other services.
The city also collects special sales taxes for road repair, public safety and trails, parks and open space that totaled nearly $8 million in March.
Other highlights from the sales tax report:
• Collections from the city’s use tax, paid on equipment businesses buy outside the city, jumped 16.6% in March from a year earlier to $712,494 and is up 12.7% this year to $1.37 million.
• Overall sales and use collections in March were up 18.5% from a year ago to $14.8 million and this year are up 13.9% from the same period last year to nearly $30 million.
• Among other retail categories, sales of commercial machines were up 36.3%, sales from medical marijuana dispensaries were up 33.3% and sales of furniture, appliances and electronics were up 31.2%.