As the number of retail businesses continues to increase in Yakima County, so does the sales tax revenue they generate for local government.

The Yakima Herald-Republic examined sales tax figures from the Yakima County budget and the budgets of five cities that receive sales tax revenue, and while the COVID-19 pandemic slowed the stream of money in some cases, the upward trend of the 2010s has continued.

“It’s a significant portion of our city revenue,” said Jennifer Ferrer-Santa Ines, the city of Yakima’s finance director. “Since May, we’ve had a continuing trend of (COVID restrictions lessening), and the city continues to see higher collections of sales tax.”

Different rates across the state

Sales tax rates differ throughout Washington and even across Yakima County as governing bodies and voters adjust rates to support their general funds and specific purposes.

Across Washington, shoppers pay 6.5% tax on all non-exempt purchases they make, either in person or online. The online purchases are taxed according to the home where they are delivered.

Medicine, groceries and gasoline are examples of items exempt from the state sales tax, according to the Department of Revenue website.

Five cities in Yakima County receive sales tax revenue: Yakima, Union Gap, Sunnyside, Toppenish and Grandview. The overall sales tax rate is 8% in Grandview and Toppenish (with each city’s tax rate at 1.5%), 8.2% in Sunnyside (the city’s tax rate is 1.7%) and 8.3% in Yakima (the city tax rate is 1.8%).

All other areas pay a sales tax of 8%, with 6.5% set by the state, and 1.5% set by Yakima County.

Union Gap is unique in that purchases made there are taxed at 8.2%. Of this amount, 6.5% is state sales tax, 1.5% county sales tax, and 0.2% the city’s sales tax.

The 0.2% tax was approved by Union Gap voters and is used to provide free transit services through bus routes and the Dial-a-Ride program, acting City Manager Gregory Cobb said.

“That 0.2% is dedicated to transit,” Cobb said. “Each municipality in the state has the ability to assess a 0.2% tax for transportation.”

According to state law, transportation benefit districts — which can range in size from a portion of a city to multiple counties — may be established by a public vote to enact a sales tax rate of 0.2% to support transportation activities.

Other sales taxes may be levied for other specific purposes, leading to some double-digit rates on the west side of Washington. The state’s highest sales tax is 10.5%, which is paid in Lynnwood, Bothell, Mukilteo and Mill Creek.

Yakima has chosen to fund its Transportation Benefit District using a vehicle license fee, Ferrer-Santa Ines said.

“There is an extra $20 fee when someone renews their vehicle’s registration, which we receive from the state,” she added. “That money goes to specific uses, such as roadways and transportation.”

Revenue trending upward

For the most part, “sales and use taxes” revenue for Yakima County and the five cities with their own sales tax has risen steadily since 2013.

Actual revenue figures from 2013 to 2020 (the revenue for 2021 is not complete until Dec. 31) indicate growth in annual sales tax ranging from 28% to 58% in four of the six taxing bodies.

Yakima County fared the best, seeing its $8,656,709 in 2013 sales tax revenue grow to $13,657,540 in 2020, an increase of just over $5 million, or 58%.

Yakima has the most sales tax revenue of any government body, going from $24,972,000 in 2013 to $32,007,000 in 2020, an increase of $7.035 million, or 28%.

Grandview and Toppenish have more modest sales tax revenue, but saw those amounts increase 47% and 36%, respectively, between 2013 and 2020.

Sunnyside sales tax revenue between 2016 and 2020 increased from $2,787,416 to $3,259,722, a jump of $472,306, or 17%.

Effects of the pandemic

Union Gap’s growth was on a similar trajectory from 2013 to 2019, increasing 16% — from $3,888,732 to $4,506,141. But with the Valley Mall shuttered for several months during 2020 due to COVID-19 restrictions, Union Gap sales tax revenue fell to $4,123,820 in 2020, an 8% decrease.

The other taxing entities did not appear to be affected much by pandemic-related business closures in 2020 and part of 2021. Yakima’s Ferrer-Santa Ines believes stimulus checks helped keep families spending despite COVID-related shutdowns.

“To me, the stimulus checks helped with sales tax revenue,” she said. “Some retail establishments closed down, but we had additional money. While we might not have been eating out at restaurants, we were certainly spending it on other things.”

Ferrer-Santa Ines is more concerned that recent inflation could force people to curb their discretionary spending, noting the Consumer Price Index has risen from 1.6% in January of this year to 6.2% in October.

“At this point, people haven’t changed their spending habits (due to inflation), but if prices continue to go up, something’s got to change,” she added.

And any slowdown in consumer spending — and the sales tax revenue it generates — would have an impact on city budgets.

For Yakima, its sales tax provides 39.1% of all General Fund revenue, and 12.9% of total government revenue in the 2022 proposed budget, which estimates $37,278,000 in sales tax revenue for the calendar year.

Sunnyside is also optimistic, budgeting $3,500,000 in sales tax revenue in its proposed 2022 budget.

About 65% of General Fund revenues will come from property taxes, sales taxes, and utility taxes in 2022, said Elizabeth Alba, interim city manager in Sunnyside, as she presented the budget proposal to City Council members.

“Fortunately, these revenue streams have remained relatively stable throughout 2020 and 2021, and are expected to remain constant in 2022,” she added.

Contact Joel Donofrio at jdonofrio@yakimaherald.com.

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