Public agencies across the Golden State are continuing to rebound from the financial impacts of the COVID-19 lockdown. The state’s local one-cent sales and use tax revenue from April to June 2021 was 37% higher than the same quarter’s revenue in 2020. That quarter was the most adversely impacted sales period of the pandemic due to Shelter-in-Place directives.
Up to this point in California’s recovery, some regions experienced steeper gains than others. However, the latest data shows that statewide, most regions saw similar growth. “Overall, California is experiencing a fairly strong recovery,” Andy Nickerson, President and CEO of HdL Companies commented. HdL is the leading provider of revenue enhancement technology and consulting services in the public sector, each quarter reporting on California’s sales tax receipts and impacts on local governments.
Nickerson continued, “We’re anticipating sustained sales tax growth through the end of 2021, but supply chain challenges are causing shortages and leading to inflationary effects in many categories of goods.”
From April to June, new and used car dealer sales surged in comparison to the prior year as many consumers with money to spend were in a near buying frenzy after more than a year of ascetic pandemic living. However, auto inventories may be stretched thin in coming quarters due to the continued shortage of microchips that plagued the industry this year. Meanwhile, the building and construction industry continued showing gains as housing prices spiked over the last year. General consumer goods receipts also marked a steady and expected come back, led by family apparel, jewelry and home furnishing stores.
As consumers flock back into retail locations and with AB 147 fully implemented, growth from the county use tax pools that was largely enhanced by out-of-state online sales activity in the previous quarter returned to a more traditional gain of 9%. These results also included the reallocation of tax dollars previously distributed through the countywide pools to specific local jurisdictions that operate in-state fulfillment centers. The business and industry category, which encompasses fulfillment centers, medical-biotech vendors and garden-agricultural supplies, jumped 26%.
Many restaurants reopened indoor dining in June, positively impacting the restaurant and hotel category with a strong, much-needed rebound. However, labor shortages and rising menu prices continue to be a concern.
“Pent up demand for travel and experiences, the return of commuters with more costly fuel, and labor shortages are putting upward pressure on prices and will affect consumer’s discretionary income and tighten growth by the start of 2022,” Nickerson concluded. Public agencies will need to continue evaluating their sales tax strategies, economic development tactics and revenue measures to adjust.
A complete table of sector and regional data is available by clicking here.