Taxed sales in Alabama exceeded $18.5 billion in November and December 2023, a record level of spending for the holiday season.
Sales in the traditional holiday shopping months grew 2.8% compared to the same two months in 2022. The pace of growth for holiday sales fell short of the 4% that the Alabama Retail Association had projected.
Sales tax collections for all of 2023 grew 3.42% over 2022, based on state records.
“In spite of rising inflation and interest rates, consumer spending remained resilient in 2023,” said Alabama Retail Association President Rick Brown. “Our members expect flat to slow growth in 2024, although they say consumer spending continues to surprise them.”
2024 FORECAST
Retail sales in Alabama should be flat or grow 2% or less in 2024, the Alabama Retail Association projects. Nationally, retail economists Wednesday projected a 2.5% or 3.5% growth for retail. The National Retail Federation excludes automobiles, gasoline and restaurant sales from its sales numbers, while Alabama Retail only excludes gasoline.
HOLIDAY RECAP
Taxed sales in Alabama for the final two months of the year reached $18,533,359,904.70, according to the Alabama Revenue Department. Nationally, holiday retail sales grew 3.8%, according to the National Retail Federation’s analysis of U.S. Census data.
Alabama’s $18.5 billion in holiday spending is based on sales tax collections on general merchandise, restaurant and other food service, automobiles, machinery and vending, plus collections made through the state’s Simplified Seller Use Tax (SSUT). Alabama Retail defines holiday spending as all taxed sales during the months of November and December. If machinery and automobiles are removed from the $18.5 billion total, Alabamians spent $15,106,147,885.32, or about 3.12% more for holiday 2023, than in the same months of 2022.
During the 2023 holiday, collections from remote sellers grew 17% in December and 18% in November. Remote sellers collect a flat 8% tax from Alabama consumers. In all of 2023, those collections grew 17%.
“Alabama ended 2023 with a holiday season growth rate more in line with pre-pandemic levels,” said Brown. Holiday spending growth in Alabama ranged from 2.66% to 5.15% between 2014 to 2018. Alabama’s holiday spending growth jumped to almost 10% in 2019, then exploded to almost 12% and more than 15% in 2020 and 2021, respectively. In 2022, the holiday spending growth rate in our state was slightly more than 5%.
JANUARY DIP NOT INDICATIVE OF WHAT’S TO COME
In January, total sales tax collections in Alabama dropped almost 6.6%, compared to the double-digit growth experienced in January 2023. Regular sales taxes this January dropped by almost $20 million, or 8.4%. Of the $19.7 million in regular sales tax loss in January, $9 million can be attributed to the 1% reduction in the tax rate on SNAP-eligible foods. “The remaining reduction in overall sales tax collections may be attributed to various economic factors but we cannot pinpoint singular circumstances,” the Revenue Department told Alabama Retail. One factor impacting sales and the corresponding taxes is that stores in much of north Alabama were closed because of snow and ice for as many as five days in mid-January. While most kept their online operations going, both employees and customers were unable to travel safely to storefronts. Families also often reduce discretionary spending in January to give them time to pay off December credit card bills.
January 2023 saw a 14% jump in total sales tax collections from January 2022. No other month of 2023 saw anywhere near that kind of growth. Regular state sales tax collections in January 2024 outpaced the January 2022 collections by more than $8.4 million, a further indication that the January 2023 growth was an anomaly.
This January, Simplified Sellers Use Tax collections grew slightly more than 1%, or almost $600,000.
By February 2024, total sales tax collections in Alabama grew by 5.4% with regular sales taxes growing less than 1% and the simplified sellers use tax growing almost 30% over the previous February. National economists reiterate that while growth has slowed, consumer spending remains sturdy.
WHAT OUR RETAILERS ARE SAYING
While our members in north Alabama said they did experience a dip in sales in their stores that were closed for two or more days in January, most Alabama retailers are reporting flat to double-digit growth for the first quarter of 2024.
Furniture stores, which saw phenomenal growth during the pandemic while Alabamians improved their homes and outdoor spaces, are seeing a downturn, which they attribute to a “saturated market during the pandemic” and the rising cost of groceries, fuel and housing.
Some reported a bump in sales associated with having an extra day in February due to it being a leap year.
Growth rates for the gift, clothing and accessory retailers we spoke with ranged from 5% to 25%. Several said they expect an uptick in late March related to Easter buying.
Overall, Alabama’s retailers are being conservative with their outlooks for 2024. Some mentioned that “election years can be tough on business.”
ECONOMIC IMPACT OF RETAIL
According to a new study out Monday, 27% of jobs in Alabama in 2022 were supported by the retail industry. The PricewaterhouseCoopers (PwC) study shows Alabama with 472,900 people directly employed with retail, including food services and drinking places. Our state had 69,478 retail establishments and directly contributed $28,327,000 to the state’s gross domestic product.
Retail employs almost 1 in 4 of all employees in the private sector in Alabama. According to the March Alabama Labor Market News (January data), retail trade and food service/drinking places employed 401,400 Alabamians in January.
The Alabama Retail Association represents retailers, the largest private employer in the state of Alabama, before the Alabama Legislature and the U.S. Congress. Through sales of food, clothing, furniture, medicine and more, our 4,300 independent merchant and national company members touch almost every aspect of daily living. Since 1943, we’ve worked to promote what’s best for the retail industry in Alabama. Whether voicing the retail view when public policy is made, educating members about issues that impact them, negotiating rates for benefits and services or communicating the retail story, the Alabama Retail Association and its members are better together.
MEDIA CONTACT: Nancy King Dennis | 334.551-0643 (d) | 334.868.2195 (c)
Originally posted March 21, 2024; updated April 3, 2024, with Alabama’s February sales tax collections.