Varying degrees of circumstance affect restaurant sales tax revenue

tporter@lsjournal.comAugust 30, 2013 

Many variables have contributed to a slight decrease in revenue derived from fast food and sit-down restaurant sales for the city of Lee’s Summit compared to last year at this time.

According to data (see accompany graph) supplied by Nick Edwards and Conrad Lamb, members of the city’s finance department, sales tax revenue from sit-down restaurants decreased every month from January through April of this year, as did revenue generated from fast food restaurant sales compared to a year ago.

The reasons for the decrease differ, but the state of the economy and extreme weather patterns are chief among them, Edwards, a management analyst with the city, said.

“Things that are impacting the numbers are outside of our control,” Edwards said. “One of those would be the inflation number. If prices for goods and services are going up, then we can expect to see more sales tax revenue. The other factor is growth; our population. If more residents are here, they are probably going to shop more and more here. Third, are changes with the state and federal taxation rate.

“At the beginning of 2013, the payroll tax was adjusted so that 2 percent of your payroll tax went to fund Social Security. That change in and of itself took 2 percent less disposable incomes out of our pockets. Another factor, at least locally, is weather. It sounds silly, but weather is a driver. We had some fairly significant snow events (this past winter) and I suspect our residents wouldn’t want to drive to go eat with 12 inches of snow on the ground.”

Sit down restaurants suffered the largest decrease in January, when revenue generated this year was 11.1 percent less than last year. In February, the decrease was 32 percent, followed by a 15 percent decrease in March and a nearly 6 percent decrease in April.

For fast food establishments, the decrease was 6 percent in January; nearly 22 percent in February; nearly 11 percent in March; and just more than 3 percent in April.

On the other end of the spectrum, sales tax revenue generated from grocery sales and utilities increased every month this year compared to last year. For instance, grocery sales tax revenue was 2.4 percent higher this past January compared to last January. The total went up in February, with an 8.4 percent increase from last year.

The sales tax revenue from groceries generated in March of this year was 7.3 percent higher than the previous year, and April’s totals were nearly 1 percent higher than last year.

On the utilities side, there was a 2.2 percent increase in sales tax revenue compared to last year, and a 0.7 percent increase in February. The total for March was nearly 33 percent higher than last year, and April saw an increase of 2 percent compared to the previous year.

“It was a cool spring, therefore there was more natural gas sold than last year,” said Lamb, the city’s director of finance. “That might be what is pushing that one higher as opposed to a mild summer and there is not as much electricity being used.”

Bill Wrisinger, co-owner of two Lee’s Summit Sonic Drive-In restaurants among the 19 owned in the Kansas City area by Wrisinger-King, said the business has not seen a decrease in sales in 17 of the restaurants over the past year despite a recovering economy. He mentioned several variables as to why others might be feeling the pinch, but the weather may have played a significant role in sales tax reductions.

“The weather in Kansas City in winter 2011-2012 was basically blessed with no snowfall,” Wrisinger said. “We had an unseasonably warm winter, which helped a majority of restaurants have a strong sales year. We had several dates this year where we had significant snowfall. Cities closed down. (Shopping malls) closed down. People take caution during bad weather.

“When we look at those days, those days are never made up at that point and time. That can have an impact year over year from that perspective. But, I think in general, the reason year 2013 is trending softer is based on the strength of 2012, which was so strong.”

Edwards said its the city’s hope that the next few months bring a higher revenue of sales tax.

“Sales taxes are a big portion of the city’s revenue,” he said. “We have what we call the big three – sales tax, property tax and franchise tax. Based upon our fiscal year 2014 budget, over 22 percent of general fund revenues are expected to come from sales tax. That’s a big chunk for us.”

Lee's Summit Journal is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service