Written by George Maragos Thursday, 03 April 2014 00:00
Sales tax revenue is the County’s biggest source of income, accounting for over 40 percent of total annual revenues. Therefore, it is gratifying that the final sales tax figures for 2013 show an increase of 6.3 percent to $1.13 billion over the prior year. This was on top of another healthy increase of 4.2 percent in 2012.
Yet, some worrisome signs appeared towards the end of 2013. The sales tax revenue during the holiday shopping season declined 12.4 percent compared to a year before. One reason for the drop in sales tax receipts towards year-end may have been a shift in consumer shopping habits from brick-and-mortar stores to online, which reduced the amount of sales tax revenue. Another factor for the drop-off in holiday sales tax receipts may also be due in part to flat income growth for consumers; income grew only .25 percent in November and not at all in December.
At first glance, a mix of flat income growth and shift to online commerce looked troubling. However, a recent federal court decision requiring online vendors collect and submit sales tax has boosted revenues, up about 9.7 percent in January-February, based on sales that were not taxed before 2014. This trend is anticipated to provide higher sales tax revenues in 2014 than the two-percent growth projected in the budget.
The bad news is that the accelerating shift to online sales will mean potentially lower sales for brick-and-mortar stores and less local retail jobs. Additionally, the absence of income growth will further dampen sales and jobs.