California Sees Slight Uptick in Q1 2025 Local Sales Tax Receipts, While Economic Uncertainty Persists

HdL Companies’ latest analysis signals a cautious outlook on the shift in statewide economic momentum.

BREA, Calif.--(BUSINESS WIRE)--An analysis by HdL Companies shows California’s local one-cent sales and use tax receipts for the first quarter of 2025 increased by a modest 0.34% compared to the same period in 2024, after adjusting for accounting anomalies. While this marks the first positive shift following eight consecutive quarters of decline, HdL economists caution that the rebound may be temporary amid continued economic volatility.

“Local governments are navigating uncharted territory, where slight gains can be quickly offset by global pressures, shifting consumer behavior, or policy changes,” said Andy Nickerson, President and CEO of HdL Companies. “Our role is to help agencies understand these trends and their revenue implications so they can plan proactively and continue delivering essential services.”

The first quarter—typically the lowest for sales tax collections—was shaped by post-holiday spending patterns and seasonal weather. Still, the autos-transportation and building-construction sectors showed notable improvement. Used vehicle sales and leasing led the autos rebound, reflecting a shift toward more affordable options and short-term commitments. In construction, delayed repairs and rebuilds in storm- and wildfire-damaged areas, particularly in Southern California, drove strong demand for building materials.

Additional gains came from business-industry and countywide use tax pools, largely due to ongoing strength in online retail. Goods shipped from in-state warehouses were reported under business-industry, while out-of-state shipments contributed to county pool revenue.

Meanwhile, fuel-related receipts declined by 5%, continuing a trend driven by lower global crude oil prices. The impact also extended to general consumer goods, as consolidated reporting by major retailers blurred category performance. Post-holiday dips in apparel, sporting goods, and variety store sales added to the decline. Cannabis-related tax revenues also continued their two-year decline, weighed down by bankruptcies, market oversaturation, and alternative consumer channels.

Looking ahead, sales tax performance reflects broader economic uncertainty. Key variables include federal interest rate decisions, trade negotiations, and recent Middle East conflicts that temporarily spiked crude oil prices. In summary, “uncertainty” remains the most accurate descriptor of California’s current and future economic climate.

View a full table of sector and regional data.

About HdL Companies

HdL Companies partners with local governments to deliver revenue enhancement, technology, and consulting services. Since 1983, HdL has helped more than 900 agencies nationwide recover over $4 billion in revenue. Learn more at hdlcompanies.com.