6.1. SR 05-07-2018 - Laserfiche WebLink

Home Browse Search

Local Option Sales Tax Analysis for Elk River, MN 7 Trade Area Analysis and Calculations Extension conducted a trade area analysis of retail and service sales in select merchandise categories, estimating the amount of taxable sales subject to sales taxes that were made by local residents, as well as those made by non-residents. Use tax is insignificant compared to sales tax proceeds and is calculated differently. Extension calculated expected sales for the city in each merchandise category and compared this calculation to actual taxable sales, as found in Minnesota Department of Revenue sales tax statistics for the same category. Actual sales greater than expected sales indicate the city attracts sales from outside the city or has sales greater than one would expect from only its residents. Extension used the difference between potential and actual sales to set reasonable estimates of spending by residents and non-residents across all categories. These estimates also helped inform adjustments for each category. Expected sales calculations are based on average statewide spending by merchandise category and the population of the city, then adjusted by the level of income in Sherburne County and the typical pulling power of similar-sized cities. Specifically, expected sales result from city population, state per capita taxable sales, index of income, and average pull factor for cities within 20% of Elk River’s population (see sidebar and Appendix B for definitions). The section that follows, “Trade Area Analysis by Merchandise Category,” details the initial and adjusted trade area calculations for all merchandise categories. The sections labeled “Analysis with Adjustments” lists the final estimate of sales generated by non-residents. A rationale for adjustments and conclusions is also included. Expected Sales estimate the dollar amounts for purchases made by local residents if local residents spend as much as the average Minnesota resident. Expected sales are calculated by the following formula: (T ÷ PMn) x PER x (YSC ÷YMn) x Typical Pull Factor = Expected Sales T = Total Minnesota taxable sales for a merchandise category PMn = Population of Minnesota (5,485,238) PER = Population of Elk River (23,987) YSC = Per capita income of Sherburne County residents ($41,396) YMn = Per capita income of Minnesota resident ($50,912) Typical Pull Factor = Average per capita sales for communities within 20% of the population of Elk River for a merchandise category ÷ per capita sales in MN for same merchandise category