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Sales Tax Returns Rebound in California, HdL Companies Finds Trends Positive

Public agencies across the Golden State are continuing to rebound from the financial impacts of the COVID-19 lockdown. The state’s local one-cent sales and use tax revenue from January to March 2021 was 9.5% higher than the same quarter in 2020, despite agencies across the state experiencing uneven gains. “Overall, California is experiencing a fairly strong recovery,” Andy Nickerson, President and CEO of HdL Companies, commented.

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“Looking ahead, we’re anticipating sustained growth through the end of 2021”

HdL is the leading provider of revenue enhancement technology and consulting services for local governments, and each quarter, it reports on California’s sales tax receipts and impacts on local jurisdictions.

Based on the latest data from the California Department of Tax and Fee Administration, the Bay Area, Central Coast and metro areas of Southern California experienced losses. Meanwhile, the inland regions of Sacramento, San Joaquin Valley, the Sierras and the Inland Empire experienced gains of 22.1% in revenue.

“This disparity is evident not just among regions, but also entire industries with similar trends of past quarters appearing yet again,” Nickerson continued. “Some specific spending categories continue to experience solid growth while other categories continue to struggle.”

Strong performance by the auto/transportation and building/construction industries helped push overall receipts higher. Weak inventories and scarcity for products increased the price of both new and used vehicles, RVs, boats, and lumber which were a major driving force for higher tax revenues. E-commerce sales also continued to rise, as did brick and mortar retail sales, which collectively showed solid improvement of 11% statewide.

Although indoor dining resumed in many California counties, restaurant and hotel recovery still lagged behind other major categories. Similarly, while commuters and travelers slowly began returning to the road and taking flight in early 2021, the rebound for gas stations and jet fuel trailed too. However, HdL expects both industries to see revenues climb in the coming quarters as more workers return to offices and summer tourism heats up.

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“Looking ahead, we’re anticipating sustained growth through the end of 2021,” Nickerson concluded. “Pent up demand for travel and experiences are likely to begin shifting the consumer’s dollars away from taxable goods, which could have a positive outcome on tourist communities within the state. All the while, public agencies will need to continue evaluating their sales tax strategies, economic development strategies and revenue measures to adjust to these changes.”

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