HdL Companies Reports Persistent Decline in California Sales Tax Returns in 4Q2023

BREA, Calif.--(BUSINESS WIRE)--The Golden State closed 2023 with a fourth quarter of year-over-year decline, showing a drop of 2.5% compared to the same period last year, after adjusting for accounting anomalies.

“Despite being the traditionally high-performing quarter, California's local one-cent sales and use tax receipts saw a marked decrease. This decline reflects consumer challenges balancing higher prices and financing costs with essential household needs,” reports Andy Nickerson, President/CEO of HdL Companies, the leading provider of revenue enhancement, technology, and consulting services for local governments.

Sales of general consumer goods faced lackluster results during the holiday shopping period, declining by 3.4%. Home furnishings, women’s apparel, shoes, and electronic-appliance stores experienced the most significant reductions.

The autos and transportation sector, particularly luxury vehicles, experienced a notable 6.2% drop due to higher interest rates, tightened credit standards, and increased inventories. Improved auto leasing activity was the lone bright spot in this sector.

Receipts from fuel and service stations mirrored the overall decline, impacted by lower fuel prices. Recent increases in global crude oil prices suggest growth in this sector over the coming year, indicating a potential reversal of this trend in 2024.

“Positive news emerged in the form of 1.0% growth in use taxes remitted via countywide pools, marking the first positive rebound after four consecutive quarters of decline,” noted Nickerson. Overall online sales volume remains steady, seeing more taxes allocated directly to local agencies via in-state fulfillment centers and retail outlets. Restaurant sales also remained steady, showing modest 1% growth, with casual dining outperforming fine dining establishments.

“These improvements contrast with the statewide decline of 2.3% over the 2023 calendar year, driven by elevated inflation and interest rates, leading consumers to reassess their spending habits,” Nickerson cautioned. As the Federal Reserve considers a delay in softening rates, HdL Companies anticipates consumer spending may continue to stagnate, delaying a return to normal historical growth trends in 2024.

View a complete table of sector and regional data. Each quarter, HdL Companies reports on California’s sales tax receipts and their impacts on local jurisdictions.

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 more than 750 local governments across the U.S. The company successfully recovered more than $3 billion in revenue for client agencies. For more information, visit hdlcompanies.com.