Statewide local sales tax collections in the third quarter of 2020 declined by 9.5 percent, or $452 million, over the same quarter in 2019. This decrease, while alarming in a typical year, was still a marked improvement from the 27.1 percent drop in the second quarter, which reflected the peak of the economic impact to date from the COVID-19 pandemic. New York City’s steep decline of nearly 22 percent in sales tax revenue was the main driver behind the overall drop in local government collections in the third quarter.

New York State imposes a "general sales tax" at a single rate on most goods and some services. Counties and cities can impose their own local sales tax in addition to the State rate. Local sales tax revenue is a major part of local government finances, amounting to $16.9 billion in 2019. This report is an update to the Office of the State Comptroller’s March 2015 publication on local government sales taxes in New York State.

This snapshot highlights the results for counties, cities, towns and villages that reported for local fiscal years ending (FYE) 2019. These scores, therefore, provide a baseline for local government fiscal preparedness in the period just prior to the pandemic. To provide additional context for these results, this snapshot also examines some of the biggest local government fiscal stress risk factors arising from the COVID-19 crisis.

Local government sales tax revenue declined by 7.8 percent, or $111 million, in August compared to the same month last year. This drop in revenue is similar to the overall decline in July of 8.2 percent, though much less extreme than the early months of the pandemic when sales tax collections plummeted by double digits. All but two counties in the state experienced decreases in overall collections for August, and New York City’s collections dropped by 7.1 percent.

Sales tax collections for local governments in July totaled $1.3 billion, or $116 million less than in July 2019. Although the month’s collections are down compared with last year, the decline is less steep than at any time since March, when the COVID-19 pandemic began to affect sales tax collections. Nearly every county in every region of the state saw decreases, and New York City experienced a 7.3 percent decline. | Regional Table [.xlsx]

Sales tax revenue for local governments in the second quarter of 2020 totaled $3.3 billion, a decline of $1.2 billion compared to the same period last year. The second quarter drop came after a 4.6 percent increase in first quarter collections, the strength of which was partly due to better collection of taxes on internet sales from small, out-of-state merchants. However, within the second quarter, collections for the month of June showed some improvement in most regions with many upstate counties experiencing year-over-year growth.

Our State’s local governments are being tested on many fronts as a result of the COVID-19 Pandemic. This report will examine some of the major risks to these revenue sources, the dependence of local governments on each, and the effects of federal government actions to help keep local governments afloat thus far.

Overall, 35 entities were classified as being in some level of stress, with 10 designated as being in significant fiscal stress, 8 in moderate fiscal stress and 17 susceptible to fiscal stress.

This report describes the fiscal oversight OSC provides to local governments faced with the serious fiscal challenges of budgeting with fewer resources to fund rising expenditures, all while staying within the recently enacted property tax cap.

Sales taxes are an important source of revenue for New York State's local governments. This revenue stream has helped local governments cope with the rising cost of providing services and mitigate property tax increases. Sales tax revenues now exceed the real property tax as the largest revenue source for counties.