December tax collections of $4.24 billion shattered last year’s mark for the final month of the year and exceed estimates by more than 40 percent, but the windfall is likely temporary with state revenue officials attributing much of gains to a change in state law that allows certain businesses to avoid federal limits on state and local tax deductions.

The Department of Revenue reported Wednesday that the state in December 2021 collected $1.4 billion more than in December 2020 and $1.23 billion more than estimates for the month.

But DOR also said much of that money will be returned through refunds.

Still, even after adjusting for the business tax changes, the department said December tax collections exceeded last year’s haul by $520 million, or 18.3 percent, and beat estimates by $635 million.

“December 2021 revenue collections increased in all major tax types in comparison to December 2020 collections and the December 2021 monthly benchmark, including withholding, non-withholding, sales and use tax, corporate and business tax, and ‘all other’ tax,” Revenue Commissioner Geoffrey Snyder said. “The increase in withholding is likely related to improvements in labor market conditions.”

Snyder said many pass-through entities, or businesses that pass all income on to owners and investors, elected to pay excise taxes at the business entity level, and will then be able to claim credits equal to 90 percent of the tax paid.

Pass-through entity members who also paid taxes on their estimated business income will also be eligible for refunds.

After accounting for the expected refunds, Snyder said fiscal 2022 year-to-date collections are $2.67 billion higher than after the first six months of fiscal 2021 and trending $1.55 billion, or 10 percent, above budgeted projections.

Sales taxes totaling $771 million in December were up 33.5 percent from last year, and the $108 million in meals taxes were $27 million higher than projected and $44 million more than last December. 

(Copyright (c) 2022 State House News Service.

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