Thanks to federal aid during the COVID-19 pandemic and an otherwise booming economy, Connecticut is generating budget surpluses after years of struggling to close the gaps by cutting services and cutting government jobs deemed unprofitable. essential.

Sales taxes are Connecticut General Fund’s second largest source of revenue after income taxes, which generated a 9% increase in fiscal year 2021 to $10.3 billion. That was still about $500 million below income tax revenue for fiscal year 2018.

But sales tax collections surpassed the previous record of $4.7 billion in fiscal year 2020, as individuals and businesses spent federal funds from the U.S. bailout and recovery plans. previous pandemic relief and recovery. Annual sales tax gains from previous years were between $20 million and $200 million.

State Tax Services Department officials could not be reached this week for details on the product and service categories that generated the largest sales tax increases in fiscal year 2021.

The CEO of Dollar General expressed confidence last week in the outlook for the consumer economy as pandemic relief programs wind down.

“A lot of the stimulus money has now dissipated,” CEO Todd Vasos said on a conference call. “But I’ve always said that with our primary client, as long as she’s in a paid job, that’s probably the main driver of her confidence to spend. And there’s no doubt that she currently has a gainful employment and that she can work as many hours as she wishes or not.

Connecticut collects a 6.35% tax on most purchases, with exceptions allowed for food items and niche product categories like safety equipment or luxury vehicles. Buyers are expected to pay “use” tax in cases where sales tax is not levied on the goods and services they purchase, such as online or in the few states that do not charge sales tax. sale as New Hampshire.

The base rate is the 18th lowest in the nation, considering states with combined sales taxes like New York that allow local governments to levy their own sales taxes.

New York also saw strong increases in sales tax collections, with an 18.6% gain for the first 10 months of 2021 compared to the same period in 2020. The New York State Comptroller said indicated that this is mainly the result of more people seeking entertainment outside of the reopening of home and offices, with a ripple effect on purchases of meals out and petrol. But a boom in real estate sales in Connecticut and New York could also have contributed, as people furnished rooms or undertook renovations.

In 2019, before the pandemic disruptions to commerce, individuals and businesses spent $175 billion on goods and services subject to Connecticut sales and use taxes, with the DRS yet to release numbers for 2020.

Includes earlier reports by editors Julia Bergman and Ken Dixon.

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