Commissioner of the Tennessee Department of Finance and Administration Butch Eley announced Friday that tax revenues to the state for the month of February exceeded the budgeted estimates by $190.9 million, which puts the fiscal year surplus at $1.3 billion.
February revenues of $1.13 billion represent an 11.06 percent growth rate or $112.7 million more than February of last year.
On an accrual basis, February marks the seventh month in the 2020-2021 fiscal year. All seven months have seen surpluses in excess of $100 million, the highest surplus being in January with $380.1 million.
“The two largest contributors to the state’s tax base, sales and corporate tax revenues, delivered extraordinary growth for the month of February,” Eley said.
The state’s sales tax collections for February were $167 million or 24.5 percent ahead of the budget.
Eley reported that the growth represented January consumer sales activity in almost all segments of the state’s economy, except for the restaurant and bar industry.
He also attributed the boost to online sales tax revenues, approximately $44.5 million of which came from remote sales and marketplace facilitator laws passed in 2020.
Effective in October 2020, the Tennessee General Assembly started taxing marketplace facilitators for sales it made or facilitated of $100,000 or more in the previous year.
Eley said that to date, the online sales tax revenues account for about 66.4 percent of Tennessee’s sales tax revenue growth.
That sales tax revenue growth has been significant, accounting for just over $900 million or 70 percent of the state’s year-to-date surplus.
Of course, the additional online and marketplace facilitator tax has just been passed on to Tennessee consumers, where they did not previously pay that tax.
The state’s second highest source of revenue, the corporate or franchise and excise (F&E) tax, were $16.1 million or 42.4 percent more than budgeted for February. The F&E tax is also $350 million or 34.8 percent ahead for the fiscal year.
Eley cautioned, though, that April and June are large corporate tax filing months and can be quite volatile.
Tennessee’s inheritance and estate, gas, petroleum special, beer, business, privilege, gross receipts and alcoholic beverage taxes combined to contribute $21.4 million to February’s surplus revenues.
Meanwhile, the state’s income, tobacco, motor vehicle registration, motor vehicle title, mixed drink, TVA’s payments in lieu of taxes, motor vehicle fuel, severance and coin-operated amusement tax revenues were all less than budgeted for February by a combined $13.8 million.
The state’s four major Funds – General, Highway, Sinking and City and County – are exceeding the budget by a combined 16 percent for the fiscal year. The four Funds, combined, are ahead of last fiscal year to date by 5 percent.
However, the Highway Fund is behind this time last year by $55.5 million or nearly 9 percent. This, despite the boost in revenues to the Fund put into place through the legislature’s passage in 2017 of the gas and fuel tax-increasing IMPROVE Act.
The tables from the Department of Finance and Administration detailing the revenue collections for February and the fiscal year to date can be viewed here.
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Laura Baigert is a senior reporter at The Tennessee Star.