State Treasury: NJ sales tax sees summer rebound for first time during COVID-19

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July was the first month since before the COVID-19 pandemic began in February and March that sales tax collections – and by extension consumer spending – fared better than in 2019.

Wednesday morning data from the state Treasury show that in August, New Jersey collected more than $890 million from the sales tax, compared to $866 million in August 2019 for a 2.9 percent increase.

“Due to the one-month lag in sales tax collections, August revenue reflects consumer activity in July,” clarified State Treasury Elizabeth Maher Muoio in a statement.

Beginning in mid-March, Gov. Phil Murphy enacted a sweeping set of business closures meant to clamp down on the number of public spaces where people might gather and, as a result, risk exposure to COVID-19.

That saw the indefinite shuttering of non-essential retail, malls, casinos, theaters, sit-down dining, gyms, nail and hair salons, many forms of construction, elective surgeries, and indoor amusement places. Those restrictions have only gradually been lifted starting in mid-June.

What followed, as a result of the mass shutdowns, has been the worst economic recession since the Great Depression with record-high unemployment and 1.5 million New Jerseyans out of work.

Sales tax collections for April, which reflected March consumer spending, dropped nearly 14 percent from $906 million in 2019 to $782 million in 2020. Then in May, which reflected the numbers from April, the sales tax dropped 20 percent from the year prior—from $766 million in 2019 to $544 million in 2020.

The cratering state tax revenue prompted legislative leadership and the Murphy administration to retool the state’s 12-month spending plan between June 2020 through that time next year to account for the billions of dollars in lost revenue.

Both sides have until Sept. 30 for the governor to sign a new spending plan. Murphy, at an unrelated event in South Amboy on Tuesday, said he was confident that there would be no government shutdown, and that he would sign a budget sent to him by the Legislature before the deadline.

August was the first full month since the spring that Americans went without an added $600 a week in federal pandemic unemployment assistance – the program expired at the end of July –, which coincided with a stall in consumer spending, according to a Tuesday report from the U.S. Department of Commerce.

Retail sales in August increased just 0.6 percent from July, while a 1.2 percent increase from June to July was revised to 0.9 percent. The August increase was in part fueled by increases in gasoline prices, the department said.

But any translation from retail spending to sales tax collections in August would not be seen until the Treasury’s report for October. And many transactions are not subject to the sales tax in New Jersey, such as “most clothing, most items of food and drink … and prescription drugs,” according to the state Division of Taxation.

Income tax revenue for August was $808.4 million, a 5.3 percent drop from last year. Meanwhile, revenue from the corporate business tax in August was almost $28 million, a 172 percent drop from the $38.6 million collected last August.