Stuck at home last spring and summer as cases of COVID-19 soared, Arizonans found something else to do: shop online.
Online shopping in Maricopa County jumped up by about 27% from March, when Gov. Doug Ducey issued a stay-at-home order, to May, when the lockdown was lifted, according to taxes collected for online sales. By November, it had increased by about 71%.
Those numbers don’t give a complete picture of online spending in Arizona because they only capture local purchases from retailers that don’t have stores or warehouses in the state. This includes at least the portion of Amazon sales through third-party vendors. Big-box stores, such as Target and WalMart, also submit tax collections for online sales, but it falls under a different category.
Nationally, Americans spent about 40% more online and mail-order shopping in November compared with March, according to a U.S. Census retail survey.
New online sales tax collection bolsters local budgets
Luckily for Arizona cities, a new law went into effect just in time for them to reap the benefits of the new online shopping era, helping to fill cities’ budget holes as taxes from entertainment, hotel and restaurants dropped.
Starting in October 2019, businesses without stores or warehouses in Arizona had to start paying taxes for all online sales they made to Arizona shoppers. States across the country have passed similar laws since 2018 when the U.S. Supreme Court ruled that states could require online retailers to collect sales taxes.
The new law in Arizona meant hundreds of thousands of dollars more in revenue for large cities every month, just before COVID-19 began to spread in the state and a stay-at-home order forced more people to shop online.
Monthly collections in metro Phoenix cities
Here’s a look at how much each large Phoenix-area city collected in May from online sales made in April, when the stay-at-home order was in effect:
- Avondale $99,438.
- Chandler $310,148.
- Gilbert $316,676.
- Glendale $358,482.
- Mesa $597,300.
- Peoria $238,893.
- Phoenix $2,223,772.
- Scottsdale $495,719.
- Surprise $223,759.
- Tempe $243,810.
These taxes accounted for about 2% to 4% of total sales taxes the cities collected in May, at the same time entertainment, hotel and restaurant tax collections dropped significantly.
For the most part, cities wouldn’t have seen this money had the law not gone into effect, although Chandler’s Management Services Director Dawn Lang clarified that the city already had been collecting some of the money before the new law — it was just categorized differently.
Also, Lang said, the collection of these taxes isn’t perfect. The dramatic increase in collection over the last year could have been partly because more sellers are properly complying with the law as time goes on.
But Lang also said the new money has helped fill some of the loss in revenue that the city saw in the hardest hit areas, such as hotels and restaurants.
Phoenix staffers told the City Council it was part of the reason why Phoenix didn’t face the looming shortfall that officials predicted when the pandemic began.
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