Thousands out of work, but sales tax revenue up for some localities. Leaders point to Supreme Court

PORTSMOUTH, Va. (WAVY) — If the COVID-19 pandemic had struck two years earlier, local leaders say the financial situations facing local and state governments could be much worse than it already is.

When the governor’s executive orders shut down portions of the economy in late March, local governments tried to prepare for the loss in tax revenue surely to follow. It was estimated that Virginia Beach alone could face a $67.3 million loss.

This past week, Alice Kelly, Virginia Beach’s finance director, revealed to City Council that for the month of August, hotel taxes were down 27 percent from 2019, restaurant taxes were down 13 percent and admissions taxes were down 65 percent.

However, sales taxes for the month were up 11 percent.

There is a similar story in Isle of Wight County where general sales tax revenue was up about 10 percent during the first few months of COVID-19 restrictions. This, despite essential retail stores being forced to close for all of April and half of May under the governor’s executive orders.

“We actually had some retail sales or retail stores that were really hurt by COVID, were really struggling and yet we were seeing our sales tax numbers go up,” said Don Robertson, Isle of Wight County’s assistant county administrator.

There is a belief thanks belong to a 2018 Supreme Court ruling.

In a 5-4 decision, the court ruled in favor of the state of South Dakota which believed it had the right to impose sales taxes on most purchases residents made from retailers that may not even have a brick-and-mortar presence in the state.

“It really helped us out during COVID-19,” Robertson said. “As people began to shop more online for supplies for whatever we needed, we actually saw our sales tax figures go up.” 

While sales tax doesn’t make up a majority of local budgets, Robertson said anything helps.

“Our retail sales were really hit hard by COVID. No doubt that we would have seen some pretty significant decline in our sales tax revenues (had online sales not allowed to be taxed),” Robertson said.

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