A Guide to Sales Tax: For those that know its a thing but not what it does.
One of my aims on this blog is to make shopping in our small towns more appealing to this community. We all hear the “shop local, support our small businesses” tag lines but much of the time we are left wanting... well I’m here to help. I’m going to be focusing on just one of the many benefits of shopping local today. Sales Tax... we all know its a thing, but do we all know exactly what it does? I want to help you look at Sales Tax in a whole new light and not just an amount near the bottom of your receipt.
Every so often, for those of us that are of voting age we get to vote on the approval of raising the city sales tax. You always hear a lot of chatter when a sales tax increase is on the ballot. In the recent years, most rural areas have experienced an increase in the sales tax rate. Sometimes, those increases are met with pretty negative commentary. I want to take the moment to explain why that happens. Over the past several years we have seen our smaller communities move away from shopping locally for their goods and services. This in turn causes the sales tax to need to increase to maintain all the programs and entities that run based off of sales tax income.
To give a simple example, I’ll use Walters Oklahoma since one of our grocery stores is in this town. I’m familiar with the area so I can explain it easier. The sales tax rate in Walters (Cotton County) is 9.5%. Sales tax collected from all local businesses at the end of the month is distributed to three key areas. Of the 9.5% sales tax collected, 3% goes to the city of Walters, 2% goes to Cotton County Oklahoma and the last 4.5% goes directly to the State of Oklahoma. This means that roughly half of the dollars consumers spend in their town and county goes toward the benefit of their town and county. These funds that are distributed to our towns and counties go directly to providing our areas with programs and services that benefit the community. These services are but not limited to your local fire departments, police departments, sheriff‘s departments, the upkeep of city and county roads/highways, parks and recreational serivces, local utility services, town beautification, retention of county and city employees and so many more. Shopping locally in your town and community means that you are DIRECTLY influencing keeping the towns you live in a wonderful place to live for generations to come. Supporting local businesses is simply supporting your town.
Now that you have the breakdown of just how that amount at the bottom of your receipt actually benefits your towns and counties... lets talk about what we see happen more frequently in smaller (especially rural) communities. Every year we see our towns generating less and less sales tax. There are lots of reasons this has happened. For one, the younger generations of these communities often find themselves working out of the towns that they live in. These days with the convenience of online shopping and mobile pickup (which has just increased since last spring when the Covid pandemic rocked our world), we see many more people shopping out of town just for the luxury of being able to leave work, pull into a parking space and have someone bring your order directly out to you. This streamlined shopping experience offered by many large big box chains in all industries has really hampered small community businesses. As a single mama, I get the allure of this experience. Shopping locally and at small businesses in the community that I inhabit and work in is very INTENTIONAL. While this is a hard transition when you are running on a tight schedule while trying to chase my little guy around to all of his activities, I have been really holding myself accountable to spend my dollars where I can see the benefits.
I’m going to throw in a fun bit of information. This information comes from Waurika
Oklahoma where we have another grocery store. I have been fortunate enough to be on a committee the past two years called Shop Local Waurika. I gained some information from the chairman of our committee and President of our local Chamber of Commerce Jacob Eck. When talking about our inaugural year of the Shop Local Waurika campaign for our local newspaper Jacob said, “While other Shop Local campaigns exist in other places, there was an emphasis to build a program that worked for Waurika. The results were amazing. Compared to the same length of time in the previous budget year, our sales and use tax revenues were up nearly *SIXTEEN THOUSAND DOLLARS*.... If we have learned anything from last year’s campaign and even more recently with COVID-19 shutdowns, is that Waurika has everything we need right here at home. In fact, when the larger communities were completely out, they came here to find it. Waurika, we have a thriving community of small businesses that care about you. So get our there and show them your support... Shop Local Waurika”. Being on this committee I also know that during the COVID-19 shutdowns Waruika saw a HUGE increase of sales tax revenue. This was amazing for our small communities and county. It just shows that when our whole communities come together to support their towns they can do some wonderful things. If you have questions about your town’s sales tax revenue get in touch with your local city government. Many times they are more than happy to discuss this with you and are very excited to get the chance to discuss the merits of keeping your tax dollars here and how it benefits our areas. I encourage you all to get to know your towns in this way. I challenge you to learn something new about your community. Knowledge is power.
We also see potential sales tax revenue leaving our towns as the idea of “getting out of town” weekend entertainment. You can sit on our main streets most weekend mornings and watch the mass exodus out of town. Many use a “trip to town” as a treat... go grocery shopping, swing into the department store, grab some household goods at a big box home improvement store, grab supper on the way home and you‘ve made a day of running your errands. In our small southwest corner of Oklahoma, we also find ourselves just a short drive across the Red River and into Texas. This is something we often see and I think is incredibly problematic in my industry especially. You see, the State of Texas does not collect sales tax on grocery purchases. I know this seems very appealing when you’re trying to spread your dollars as far as you can in your monthly budget, but now 100% of your dollars are going to another state. Your money doesn’t benefit you in any way once it leaves your hand. Spending your money in Oklahoma and your town directly benefits YOU. Remember where your sales tax dollars go when it leaves your hands... it goes directly back into your community, county and state. Yes, its not in your bank account but it is still going towards something that benefits you, your children, your family and your neighbors.
Another very common discourse about “why” people shop out of town is “I can get it cheaper at (insert big box chain) in (insert larger town)”. I’d like to take some time to address this as well. I think its important to lay some things out there so that I feel like this community understands pricing (even as just a foundation) in small independent retailers versus big box chains. It all boils down to independent retailers are not given the same wholesale pricing that large box chains are. Plain and simple, independent retailers are not afforded the same luxury of big box chain wholesale pricing. In my own conversations that I have had over time with customers, I always like to give this example. At our grocery stores we sell all of the same items that you can find at any large chain retailer, but we are given very different pricing contracts. Our contracts with say... Coca Cola list us as a “large format” grocery store as opposed to small formats (convenience stores). Big box chains are also considered large format but instead of the upfront wholesale pricing like we get, they are afforded large rebates and deals just based on their buying power. The law of volume is king in this instance. Stores like Krogers, Walmarts, Sams, Aldis and others can easily fill a warehouse of product at stellar pricing. Small independent stores usually do not have this buying capability. Often our orders just fill our shelves and the small areas set aside in our back rooms. Keeping Coca Cola as an example, there are many times where customers will point out that one of those large chains has a spectacular price on 24 pack pop.... much cheaper than I am even able to BUY AT WHOLESALE COST. This happens with so many different vendors on every level. This also happens at the warehouse level from the grocery company that we purchase our groceries from... even with as large as our grocery company’s warehouse is, it is very hard to compete with the buying power of these giant corporations. So its not that we are CHOOSING to charge higher prices on some products, we simply just aren’t able to buy products at the same wholesale price. With all of that said, there are many items that we are highly competitive with on price, lots of times even cheaper BUT have a hard time combating those highly visible and used products (paper products, cleaning supplies, name brand pop, etc) at insane sale prices in those big box chains.
All in all, yes... you may be able to get some products cheaper at large chains BUT once again you have to make the choice to be INTENTIONAL in your shopping and decide what benefits you, your family and your community. If you are living in a town that is suffering from lack of sales tax and usable revenue, then you may need to ask yourself why that is. If you are displeased with your town’s lack of services, high utilities, potholes and poorly maintained roadways, lack of emergency services (many small towns have even lost their police departments), staffing cuts for county emergency management departments, or if you’re feeling like your town just doesn’t look as kept up as it once was... I urge you to think about what taking your tax dollars out of your town has meant. Hopefully this is important to you and you decide to make the choice of being intentional with your shopping.
I would like to take a small trip down memory lane. Did you know that many of our small towns used to be bustling areas of commerce and entertainment? Did you know that towns like Walters and Waurika were equipped with bowling alleys, movie theaters, skating rinks, clothing stores, multiple grocery store options, multiple pharmacies and other businesses? It wasn’t too long ago when the entire community and county would meet up on Main Street USA every weekend and enjoy their shopping and use this time to meet with their friends and families at a local diner or grab a movie. Often times, there would be drawings every weekend or monthly for prizes at local businesses too. These towns were flourishing then, filled with businesses and never lacking a service. Many towns had public pools, golf courses and other recreational areas... all of these wonderful things were possible because the people took care of their towns and communities. They supported their local businesses. Take a look at the pictures I shared below of a vibrant Waurika Main Street. What I would give to have spent a day on that busy Main Street and I love nothing more to see the revitalization of those businesses today thanks to a fabulous group of people in the community working hard to bring commerce to and maintain those businesses remaining on Main Street.
As our wages have increased and our areas of employment have shifted from old time rural community jobs, we have seen the shift of people going out of town for their careers and business dealings. In turn we have seen businesses close one after one, towns become run down, utilities on the rise, and services disappearing in so many of our small rural communities. My aim in this post has been to educate, I know that I was never given a civics lesson in school that taught me about Sales tax and what exactly it means to our communities. Growing up in a small town as well as being fortunate enough to be raised in a small business, I have learned so much at a young age and I feel the need to share this knowledge especially with the younger generations. It never hurts to remind those of us that already know what functions Sales Tax revenue serves but have struggled with our love for convenience over sticking with those businesses that prop up our towns’ pocketbooks. Sometimes I feel that if people knew exactly what Sales Tax revenue is doing for them, then maybe they too will be intentional about where they choose to spend their money. I want everyone’s hard earned money to serve THEM as much as possible and I think by choosing to shop local we are really serving ourselves and our neighbors by ensuring that our towns can collectively serve all of us better.
I hope that this was a simple guide on Sales Tax and if any of you have any questions, comments, concerns or just want to have more insight on how all of this works and how your town stands with sales tax revenue please comment below, shoot me an email or get in touch with me on social media. I am always happy to discuss my passions for supporting our communities! Until next time!!!