California’s Q3 2020 retail sales falter
Public agencies throughout California are struggling as the pandemic continues to cause havoc for local governments. The state’s local one-cent sales and use tax from sales occurring July through September was 0.9% lower than the same quarter one prior. The losses were geographically concentrated in the Bay Area, coastal regions and communities popular with tourists. Meanwhile, much of inland California including the San Joaquin Valley, Sacramento region and Inland Empire exhibited gains of 7.2%.
The data behind these numbers is from the latest reported information from the California Department of Tax and Fee Administration. HdL Companies, a leading provider of revenue enhancement technology and consulting services for local governments, provides quarterly insights on California’s sales tax receipts and the impact on local jurisdictions.
“Not all recoveries are created equal. The pandemic economy has pummeled cities like San Francisco and Anaheim that depend on tourism, which show retail sales down 18% and 17% respectively. While cities like Sacramento and Fresno are seeing strength in retail sales as consumer stay home, improve their domiciles or invest in big assets like new cars, boats and RV’s,” Andy Nickerson, HdL’s President/CEO, commented, “Cities and counties are experiencing widely differing financial impacts due to the pandemic, and we foresee some of these changes being permanent as consumer habits have forever been changed by the pandemic. This will impact strategies for local governments to generate tax revenues they require to service their communities.”
A 23% decline of fuel sales, brick and mortar retail and restaurants were the primary contributors to the Q3 overall statewide decline. The losses were largely offset by a continuing acceleration in online shopping (up 43% over the comparison quarter) that produced huge gains in county use tax pools where tax revenues from purchases shipped from out-of-state are allocated and in revenues apportioned to jurisdictions on a pro rata basis.
Additional gains came from sales of autos, RV’s, food-drugs, sporting goods, discount warehouses, building material suppliers and home improvement purchases. Some categories of agricultural and medical supplies/equipment also performed well.
Although the slight decline in comparable third quarter receipts reflected a significant recovery from the second quarter’s deep year over year decline of 17%, the fall coronavirus surge and reinstated restrictions, combined with uncertainty around federal stimulus programs, suggest a more significant drops in forthcoming revenues from December through March sales. HdL will release an analysis of that data in April 2021.
Significant recovery in local government sales tax revenues is not anticipated until the 2021-22 fiscal year (beginning July 1, 2021) with full recovery dependent on the specific character and make up of each jurisdiction’s tax base. As the recovery accelerates, its anticipated that consumers will shift more spending back to non-taxable services which will further diminish tax revenues going to local governments.
“Full economic recovery will likely look different than before the pandemic. Recent surveys suggest that 3 out of 4 consumers have discovered new online shopping alternatives and half of consumers expect to continue these shopping habits. In the world of sales tax revenues, this means a more aggressive shift of revenues allocated through countywide use tax pools and industrial distribution centers rather than stores fronts,” concluded Andy Nickerson.
A complete table of sector and regional data is available for download by clicking here.
About HdL Companies
HdL Companies is dedicated to supporting local governments across the U.S. with revenue enhancement, technology and consulting services that enable cities, counties and special districts to better serve their constituents. Founded in 1983, HdL Companies’ comprehensive approach to revenue management is trusted by over 500 local governments. The company has successfully recovered over $3 billion in revenue for client agencies. For more information, visit hdlcompanies.com.
Contact: Jennifer Pierce, HdL Companies, (714) 879-5000