Business Community Government
City ahead of pace on sales tax collections
The city of Gig Harbor made more revenue from sales taxes than staff originally predicted so far this year. But there’s a caveat: All of this data comes with a bit of a lag, meaning it’s missing at least one key event of the past months.
The two-month lag means “this is really economic data from February,” city Finance Director Scott Larson explained during a brief presentation to the city council at its May 28 study session.
“There are some headwinds that we’re facing — most recent inflation numbers are fairly high [and] everybody feels it when you go to the gas pump and you have to pump fuel,” Larson said. “There’s a lot of [macroeconomic] uncertainty. All of this data is pre-Iran, so I don’t have the newest data yet.”
More than $9M projected this year
“There’s payers that will have economic activity from February that are still not in these numbers just because of when they filed,” he also noted, referring to when businesses file their taxes. “They are annual filers or quarterly filers. There is a lag, so this is as good of data as we can get at any one time.”
Larson also later told Gig Harbor Now in an email that there is a bit of an “economic lag between when a taxable transaction takes place and when the city actually sees sales tax revenue. That lag for a monthly tax filer is about two months, meaning the revenue we collected in April represented economic activity from February.”
According to Larson’s presentation, sales tax generated $2.96 million in city revenue through April 2026. The city predicts it will collect about $9.30 million in sales tax revenue this year, notably more than the $8.92 million predicted in the 2026 budget.
To create this forecast, the city laid out a sales tax revenue range it expects to collect for future months. It used a relatively wide forecast interval to account for uncertainty in the economy and consumer spending trends.
A slide from a city presentation on sales tax revenue.
Who pays
Larson also broke down the amount of revenue the city generates from Gig Harbor residents, Washingtonians, and out-of-state visitors. Out-of-state consumers generate almost half of the city’s sales tax revenue, with the rest coming from Gig Harborites and other Washington neighbors.
A slide from a city presentation on sales tax revenue.
He also highlighted that while construction revenue slowed, it could be attributed to the seasonal nature of the industry. Consumer spending is also down, “but it’s not looking too bad because those are six-month numbers. It looks a lot bigger than it really is, month-over-month.”
“We’ve got a lot of different sectors represented within our base, as well as a broad geographical representation of where our taxes come from, but all that kind of goes to say we’ll keep monitoring,” Larson said. “There’s a lot of macroeconomic issues that have the ability to creep into this, and we’ll keep the council updated as to how to change, especially as we start thinking about the budget. Sales tax is the biggest … single revenue source we have. It matters a lot, especially because it pays for some of the vital services that don’t have dedicated funding sources like police or parks and planning — things like that.”
New tax not part of analysis
The analysis did not include the public safety sales tax the city enacted last year.
The city projected that tax would bring in $1 million a year to support law enforcement. By law, 15% of that total must go to Pierce County.
Larson later clarified in an email to Gig Harbor Now that the study session presentation focused only on the city’s general 1% sales tax, and “was intended to illustrate trends in the city’s primary unrestricted revenue source, including revenue growth, taxpayer composition, and diversification of the tax base.”
“The public safety sales tax was not included in the analysis because it is a separate, restricted revenue source with specific statutory spending requirements and was outside the scope of the presentation.”