HdL reports strong California sales tax returns in Q2 2022 and warns slower growth by year end

The Golden State showed continued strong gains in sales tax receipts in the second quarter of 2022, reporting an overall 10% spike in sales and use tax from April through June when compared to the same quarter last year. These returns mark the sixth consecutive quarter of double-digit growth since the pandemic periods in 2020.

“Commuters returning to offices combined with the Russia-Ukraine conflict continuing to put upward pressure on oil prices have left Californians facing the highest average price per gallon on record resulting in fuel and service station receipts 42% higher than last year,” stated HdL Companies President/CEO Andy Nickerson. HdL is the leading provider of revenue enhancement technology and consulting services for local governments. Each quarter, it reports on California’s sales tax receipts and impacts on local jurisdictions.

“The restaurant and hotel sector also drove dramatic gains to local agencies across the state, a trend likely to continue through 2022,” noted Nickerson. Led by consumer desire to dine out, a steady rise in tourism and business travel, higher menu prices and great weather, the restaurant sector continues to flourish, showing 18% growth. Theme parks, entertainment venues and hotels showed the strongest growth with casual dining establishments remaining solid.

The automobile sector experienced modest gains for new car dealers and rental car operators, however sales of used autos and leasing activity began to cool. Brands prioritizing full electric and hybrid models still appear to be the most attractive with consumers, however increased financing rates may cause even their volume to dampen. Tight inventories that contributed to dramatic price increases over the last 18 months are also showing signs of loosening as brands release newer models in greater numbers.

General consumer goods categories saw steady returns largely propped up by retailers also selling fuel. In comparison with the prior year when consumers were buying merchandise at a record pace, the current returns from apparel and jewelry stores grew moderately with home furnishings showing a slight decrease.

This quarter also marks the end of fiscal year 2021-22. This is the second year in a row showing overall double-digit gains with statewide growth showing 15.3%.

Overall, higher priced goods through periods of consistent demand have led to economic inflation. “The Federal Reserve Board’s recent actions to curb inflation are anticipated to put downward pressure on sales of autos, building materials and financed general consumer goods, resulting in slower growth by year end and into 2023,” concluded Nickerson.

View a complete table of sector and regional data.