The West Virginia Department of Revenue today released revenue numbers for the month of July, the official start of fiscal year 2017.
General Revenue Fund collections of slightly more than $225 million were $32.6 million below estimate and 10.6 percent below last year’s receipts. Consumer Sales and Use Tax collections of $64.6 million were nearly $22.1 million below estimate and 23.1 percent below last year’s receipts.
Revenue Secretary Robert S. Kiss attributes the shortfall to a sharp decrease in monthly Consumer Sales Tax collections as well as lagging income tax collections.
“A number of factors played a role in the $19.4 million decline of tax receipts from the start of Fiscal Year 2016 including greater participation in the local sales tax program, the timing of annual transfers, a significant spike in nontaxable health care claims in June, and flooding across the state that financially devastated so many West Virginians. Uncertainty regarding the outcome of the state’s budget for this fiscal year also may have eroded consumer confidence in both May and June taking a toll on sales tax collections.”
West Virginia’s quarterly local tax distribution totaled more than $11.2 million, an increase of $7.4 million over the prior year. The amount of net change in receipts as reflected by the local tax distribution was a negative $5.1 million for the month.
Per statutory requirements, the state annually transfers a lump sum of sales tax collections to the Division of Highways in July equal to 6 percent of 40 percent of the total value of executed contracts in the prior fiscal year. Due to a couple of large contracts, the $12.5 million transfer in July was $3 million more than last year’s transfer and $3.5 million ahead of the transfer estimate.
PEIA’s higher-than-normal claims are significant because health care purchases are generally exempt from sales tax.
Total state sales tax collections were down roughly 10 percent during the month. Other factors involving revenue transfers to local governments and to special revenue funds pushed the final results to a decline of more than 23 percent.
Personal Income Tax collections of $116.4 million were $11.2 million below estimate and 1.3 percent below of prior year receipts. The decline gain in net revenue from the prior year was due to both lower withholding tax receipts and higher refund payments. Income withholding tax payments of $107.8 million were 1.5 percent below prior year receipts and continue to reflect a sluggish labor market. Tax refund payments were more than 31 percent, or $1.7 million, ahead of last year due to some delays in processing associated with additional refund fraud screening activities.
General Revenue Fund Severance Tax collections of negative $6.7 million were $2.1 million above estimate due to lower-than-expected refund payments for the month. The net number reflects the payment of two separate quarterly local coal severance tax distributions totaling $6.38 million. In addition, another $14.4 million was deposited in the Infrastructure Bond Fund during the month. Total net state and local severance tax collections for the month were slightly more than $14 million. Collections fell short of the monthly estimate by $0.6 million and fell short of prior year receipts by more than 31 percent.
Tobacco Products collections totaled $13.5 million in July exceeding estimate by $5.7 million and last year’s collections by 33 percent. Deputy Secretary Mark Muchow said the jump in tobacco revenues should even out as time passes.
“The jump in July revenues reflects reaction to the general increase in Tobacco tax rates that became effective at the beginning of July,” Muchow said. “We expect these changes to produce a volatile revenue collection pattern over the next few months before a more settled long-term trend begins to emerge later this fiscal year. We do expect tobacco revenues to nearly double from last year’s $100 million in collections.”
Other revenues of interest:
• Due to a carryover of receipts to early August, collections for both the Business and Occupation Tax and the Insurance Premium Tax fell short of their estimates in July. Business and Occupation Tax collections of nearly $5.6 million were $0.6 million below estimate and 44 percent below prior year receipts. Insurance Premium Tax collections of nearly $22.2 million were $4.0 million below estimate and 17 percent below prior year receipts. In both cases, expected surplus collections in August should largely erase these July collection deficits.
• July is not a major collection month for the Corporation Net Income Tax. However, net receipts of $3.9 million were nearly $3.1 million below estimate and 52 percent below prior year receipts.
Total State Road Fund collections of nearly $57.7 were $2.3 million above estimate, but 8.2 percent below prior year receipts in July. The decline in tax collections from the prior year was led by a 19.3 percent drop in Motor Vehicle Sales Tax collections from $20.5 million last year to $16.5 million this year. In addition, Motor Fuel Excise Tax receipts were 6.7 percent below prior year collections but more than $5.1 million above estimate.