COVID-19 Impacts on Florida May Tax Revenues

Florida’s general revenue fund is the main source of discretionary funding for the State. This January, the State’s economists estimated that the State would receive $36.2B in general revenue during the State’s fiscal year: July 1, 2019 – June 30, 2020. Of that amount, approximately $12.5B (34.5%) was expected to be received in March through June 2020. 

Today, the State’s Office of Economics and Demographics Research released the May Detailed Revenue Report providing details regarding receipts and distributions to the State’s general revenue fund during the month of May and reflects April sales and use tax activity during the Governor’s Safer at Home order. This Revenue Report reflects the State has lost a net $1.455 billion due to COVID-19 and related economic impacts year-to-date based on the January forecast. 

Prior to the COVID-19 pandemic, the State’s economists were projecting a June 30, 2020 fiscal year surplus of approximate $2.1B. That previous projection will be directly reduced by the $1.455 billion COVID-19 impact.

Sales and Use Tax

• From March through June 2020, the State previously estimated it would collect approximately $8.9B in sales tax revenue to be deposited into the general revenue fund. Traditionally, eighty to ninety percent of the revenues in the general revenue fund come from sales and use tax.
• In March, sales tax general revenue collections were $598.2M under the estimated $2.48B in revenues (-24%).
  • A significant portion of the sales tax shortfall was driven by tourism associated activities ($283.9M under estimate or -42%).
  • Automobile sales for the month were $103.8M (-22.5%) under estimate.
  • The Governor’s Safer at Home order was in place for approximately half of March.
• In April, state sales and use tax total adjusted collections were $695.4M under the estimated $2.19 in revenues (-32%).
  • Tourism associated activities were $379.3M (-65.6%) below estimates and automobile sales were $127.6M (-30%) below estimates.
  • Local Government Half-Cent collections were $66.4M (-36%) under estimate.
  • The Governor’s Safer at Home order was in place for the whole month of April.
• The combined March and April sales tax general revenue impact is -$1.29 billion.

Corporate Income Tax

• From March through June 2020, the State previously estimated it would collect approximately $1.3B in corporate income tax revenue to be deposited into the general revenue fund.
• On April 27, the Florida Department of Revenue deferred the May 1 corporate income tax payment deadline to June 1 for calendar year filers. See Emergency Order #20-52-DOR-003. This deferral likely resulted in a reduction of $246M (-53%) in April corporate income tax receipts, and it’s possible that those payments will be shifted to the June Revenue Report.
• In May, corporate income tax collections were $55.1M (-25.7%) below estimates.
• The combined April and May corporate income tax revenues are $301.1M below estimates.

Corporate Filing Fees

• While not normally a significant monthly general revenue source, corporate filing fees were substantially reduced in April. From April through June 2020, the State previously estimated it would collect approximately $181M in corporate filing fees to be deposited into the general revenue fund.  Historically, this three-month period accounts for 44% of the annual corporate filing fee collections.
• On March 27, the Florida Department of State extended the corporate filing and payment deadlines to June 30, 2020. See Emergency Order DOS 2020-01. While this deferral resulted in a reduction of $56.9M (-61.2%) in April estimated corporate filing fees, it’s likely that those payments will be shifted to June 30.
• In May, corporate filing fees were $35.3M (-49%) below estimates.

We believe Florida’s resilient fiscal policies have put it in a good position to weather this economic storm. The State appears to be collecting enough revenues to avoid having to dip into the approximately $2.2B in its reserve funds during the state fiscal year ending June 30. The State also has $4.6B currently available under the CARES Act to use to potentially offset some of the state and local revenue losses directly due to COVID-19. 

We hope this information has been helpful. If you have any questions, please feel free to give me a call at 850-459-0992.

French Brown is a shareholder in Dean Mead’s Tallahassee office where he assists businesses with Florida tax planning and controversies. Brown began his legal career at the Florida Department of Revenue and now offers clients more than 12 years of experience practicing in state and local taxation. He may be contacted at fbrown@www.deanmead.com.