2Q 2024 California Sales Tax Returns Remain Flat Despite Challenges, Reports HdL Companies

BREA, Calif.--(BUSINESS WIRE)--California’s local one cent sales and use tax receipts during the months of April through June were 0.6% lower than the same quarter one year ago after adjusting for accounting anomalies. The second quarter, traditionally the beginning of the summer spending season, saw relatively flat returns compared to a year ago. For many California agencies, this also marks the end of the 2023-24 fiscal year, where statewide sales tax revenues were down 1.3% from the 2022-23 fiscal year.

Consistent with recent trends, auto and transportation receipts fell 6.2% – the largest sector decline this quarter. Sustained high interest rates, tightened credit standards, and increased cost of insurance all converged to impact returns. While inventory levels for many dealerships have rebounded, it’s only creating downward pressure on prices, further constraining receipts.

Summer weather usually marks fruitful periods for building and construction, however, as property owners struggle to access equity for improvements, year-over-year receipts declined. Although the price of lumber and materials is now more affordable, new projects have been sidelined by developers until financing and mortgage costs drop further.

Similarly, as the price of consumer goods has cooled with moderate inflation rates, returns from multiple merchants have curtailed. Men’s and women’s apparel, home furnishings, electronic, appliance, and specialty stores could not escape the change in shopper preferences for lower priced items from large brick-and-mortar retailers and discount department stores.

Restaurants experienced only a modest gain of 0.7%. As AB 1228 is enacted – state law increasing California’s minimum wage at designated eateries – third party data reports that foot traffic to all such establishments decreased during this same time period. Not only are diners selecting less expensive places to eat, but many have been pushed to limit their frequency of dining out.

Multiple sectors experienced mild growth including allocations from the countywide use tax pool and the business and industrial group, both benefiting from online shopping. Fuel and service stations also saw growth as drivers continue to hit the road even as gas prices remain elevated.

Halfway through the current calendar year, revenue trends remain fairly flat, only slightly lower than a year ago overall. Although the Federal Reserve recently reduced the Fed Funds Rate, helping temper the cost of financing, personal consumption forecasts remain insipid through the remainder of 2024. Consumers are likely to wait for greater improvement of household economic conditions before extending themselves again, inspiring the next sales tax growth cycle.

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 supports local governments with revenue enhancement, technology and consulting services. Founded in 1983, HdL Companies’ comprehensive approach to revenue management is trusted by more than 800 local government agencies nationwide. The company has successfully recovered more than $3 billion in revenue for clients. Visit hdlcompanies.com for details.