Tennessee is bringing in tax dollars far faster than projected, and is now $1.3 billion ahead of expectations for the fiscal year that concludes at the end of June.
The figures reflect another strong month in February, which show that it isn’t just a matter of state finance leaders making conservative estimates because of the pandemic.
February tax collections were 11% higher than the same month in 2020, just before the pandemic disrupted the economy.
Finance Commissioner Butch Eley cited “extraordinary growth” for sales and corporate taxes and noted that consumer sales grew in almost all business sectors other than bars and restaurants.
Another key boost for Tennessee since October has been a new tax requirement for online marketplaces. It applies to a wide range of websites that people sell products on, including eBay and Etsy. Previously, individual vendors had to collect and turn in those taxes — leaving room for errors — but the online platforms are now collecting and remitting automatically.
The result is more online sales taxes flowing into the state and counties. In the past four months, more than $150 million came in this way. The Department of Revenue tells WPLN News that it cannot precisely compare how much more is coming in this way compared to prior reliance on individual vendors.
Overall, the finance commissioner says the state is on track to have a budget surplus for the year. At the same time — and despite the $1 billion accumulated thus far — Eley’s monthly message has been cautious.
He notes April and June can be volatile as many companies filed their corporate taxes. And that the ongoing flow of federal aid complicates longer-term projections.
“We must remain cautious,” he said.