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Tama’s phantom retail sales tax mystery continues

October 16, 2010
By John Speer, Editor
TAMA NEWS-HERALD -Last week’s report in The News-Herald of a 51 percent drop in Tama retail sales has done little to result in explaining how spending here dropped from $34.5 million to $16.9 million from 2008 to 2009.

Just as how sales took off in a three-year reporting period beginning in 2006, the return to earlier levels remains a mystery.

The reports are from the Iowa Department of Revenue.

Liesl Eathington, an Economics Department analyst at Iowa State University,suggested in an email reply to a News-Herald inquiry: “The Utilities category is usually the culprit for anything really strange in the state’s retail sales tax numbers.”

Eathington wrote, “ That category includes telecommunications and related firms, electric and gas utilities, water and sanitation utilities, and transportation and warehousing companies that make retail sales. Frequently, these types of firms have a very large service territory that extends well beyond the city’s own population and may even extend into other counties. Even though many of their customers reside elsewhere, their sales are reported from the location of the sales tax permit holder. This can create an artificially high level of sales in the jurisdiction that contains the firm. 

“Because the state has phased out the sales tax on residential gas & electric utilities, I would suggest concentrating on the telecommunications-type firms first. You might learn that there was a firm that provided internet access or telecommunications in your area during the period in question.”

In a check with Tama City Hall, no such enterprise could immediately be identified.

Whatever the case, the lower sales tax collection means increased costs to Tama residents for services which were paid from the sales tax revenues.

City Clerk Judy Welch said last week the city contribution totaling $54,000 to the Tama-Toledo Family Aquatic Center operations was funded by sales tax.

Toledo also directs the sales tax revenue to the pool operations and bond payments, City Clerk Carolyn Brownfield said. Sales tax revenue for Toledo dropped 19 percent over the same period.

With the drop in Tama and Toledo, retail sales county-wide slipped nearly 20 percent overall.


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