HdL Companies Report California Local Sales and Use Tax Declines in Q3 2024

BREA, Calif.--(BUSINESS WIRE)--California's local one cent sales and use tax receipts for the months of July through September 2024 were 2.3% lower than the same quarter one year ago, after adjusting for accounting anomalies. This decline marks a weak start to the 2024-25 fiscal year for many California agencies.

"The third quarter is traditionally a period of pleasant weather and robust statewide tourism," said Andy Nickerson, CEO of HdL Companies. "However, this year, we saw a notable drop in tax receipts compared to the previous year."

The Autos-Transportation sector experienced a significant decline of 4.8%, marking the seventh consecutive quarter of downturn. While used auto returns and leasing activity have shown improvement, revenues from new car sales struggled due to sustained high interest rates, tightened credit standards, and increased auto insurance costs. Elevated inventories for many dealers continue to apply downward pressure on prices and growth into 2025.

The home repairs and construction industry, typically buoyed by the summer season, also faced challenges. High consumer interest rates and limited access to equity for homeowners have sidelined new projects as developers await more favorable investment conditions.

Brick-and-mortar general consumer retailers saw a pullback of 3.8%. Consumers are gravitating towards lower-priced and discounted items over higher-priced luxury goods, forcing merchants to reconsider inventory needs. Additionally, fierce competition from online merchants continues to impact local stores, with holiday shopping expectations remaining soft.

Fuel-generating taxpayers had a rough quarter, with a combination of consumption declines and falling fuel prices driving comparisons down by 13%. The Food-Drugs category also saw a decrease of 2.8%, influenced by the contraction of national drug store locations and a steady decline from cannabis merchants dating back to 2021. Similar percentage declines are expected for the upcoming end of the 2024 quarter.

Despite an improvement in statewide tourism over 2023, revenue from restaurants experienced only a modest gain of 0.7%. This included a dramatic drop from fine dining establishments, consistent with spending trends in other sectors. State-mandated minimum wage requirements remain a challenge, with higher menu prices reducing patron visits.

"These sluggish results solidify 2024 as a down year," added Nickerson. "Recent reductions to the Federal Funds Rate aren’t anticipated to help until later in 2025. Agencies should expect fiscal year 2024-25 sales taxes to stay flat or decline slightly as sluggish economic conditions leave consumers cautious in their spending patterns, especially for big-ticket items and discretionary products."

View a complete table of sector and regional data. Each quarter, HdL Companies reports on California’s sales tax receipts and their impact 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 900 local government agencies nationwide. The company has successfully recovered more than $3 billion in revenue for clients. Visit hdlcompanies.com for details.