U.S. News

Sales tax collections rise in U.S. states: report

A woman loads a vehicle with her purchases at Costco in Fairfax, Virginia, January 7, 2010. REUTERS/Larry Downing

WASHINGTON (Reuters) - Sales tax revenues in U.S. states rose in December from their anemic state in November but are still far from returning to the levels seen in the middle of last decade, according to a report released on Wednesday.

More than a quarter of states in a survey conducted by economic newsletter The Liscio Report met or exceeded forecast sales tax collections, up from 18 percent in November.

In November, no state registered sales tax revenue growth over the year, but by December 13 percent enjoyed growth.

“Also, the margin between forecasts and collections in states that did not meet their forecasts narrowed considerably in December,” according to the report.

Those numbers could change quickly, it said. The states reporting year-on-year growth were concentrated in the Midwest, where the federal automobile industry bailout boosted manufacturing sales and inventories.

Growth is “the first step out of this mess,” but revenue in some states hit hard by recession remains below 2006 levels.

States rely on sales and income taxes to support spending programs but revenue over the last year has plummeted.

Last week, a report from the Rockefeller Institute of Government found the first three quarters of 2009 marked the biggest decline in state tax collections since at least 1963.

Still, the institute found that the drop in revenue in November was less dramatic than in previous months, showing that the states may be reaching equilibrium.

Reporting by Lisa Lambert; Additional reporting by Karen Pierog in Chicago; Editing by James Dalgleish