Sales Tax Steady Performer Tennessee's latest tax revenue data is out and, predictably, the mainstream media is focusing on the overall number and accepting the spin proffered by the Sundquist administration's Finance Commissioner, Warren Neel. But in accepting Neel's version, they miss the real and very important truth: the sales tax is producing revenue on pace with last year, despite an economic slowdown for much of the fiscal year.

And while overall tax collections are down $82 million in the first eight months of collections for the fiscal year compared to a year ago, the decline appears to be heavily related to a recent change in the schedule for collection of franchise and excise taxes .

Tennessee's sales tax collections rose 1.39 percent in March over March 2001, but franchise and excise tax collections were down 24.44 percent. For the year, F&E collections are down $124 million compared to a year ago. There may be a simple reason for that: Under Tennessee law, companies are not required to pay their franchise and excise taxes until the 15th day of the fourth month after the end of their business fiscal year. According to the Tennessee Department of State, most businesses in Tennessee use the calendar year as their fiscal year; hence, F&E taxes are not due until April 15.

In a slow economy, it is doubtful that businesses rushed to send checks in early.

Incidentally, a year ago this month, Neel used a temporary dip in F&E collections to deceptively support claims the state faced a shortfall. He announced monthly revenue totals in April by highlighting a $98 million decline in franchise tax revenues and claiming it proved the state faced a huge shortfall - but Neel failed to mention that most Tennessee companies don't have to pay the tax until mid-April, so the April number, which covers March collections, was borderline meaningless. Indeed, a month later F&E collections soared to $293.8 million in April, $93 million more than the budgeted estimate for that tax for that month. That erased the previous month's F&E 'deficit' and boosting overall revenues to a $69.5 million surplus over the "budgeted estimate" for revenues that month. A fully detailed examination of Neel's deception last year and my exposing of it is posted here.

The message for taxpayers is: always be wary of Neel's numbers. Study them for spin. Don't swallow them whole. And for legislators, the message is this: wait for the May numbers. Otherwise, there's a very good chance you'll be making important public policy choices based on the half-truths and bad information propagated by the current administration.