The Golden State reported lower than expected sales tax receipts in the second quarter of 2023, showing an overall decline of 2.8% in sales and use tax revenue compared to the same period in 2022.

“A sharp decline of 20% in service station and petroleum provider receipts was the largest contributor to the decline in statewide results. That’s a big change from what we saw this time last year when the war in the Ukraine and other world events pushed the global cost of crude oil to record highs,” stated Andy Nickerson, President/CEO of HdL Companies, the leading provider of revenue enhancement, technology and consulting services for local governments.

Sustained wet conditions hindered building and construction projects, while higher interest rates constrained commercial development. Meanwhile, the automobile and transportation sector declined 1.4%, despite an increase in new car registrations and the effect of rental car agencies restocking their fleets. However, rental car sales are wholesale transactions with sales tax only being charged when the cars are rented.

“Spending at local restaurants and hotels was a bright spot in the data with gains of 3.5%,” noted Nickerson. “People are eating out more and business and leisure travel have accelerated.”

HdL Companies expects sales tax receipts to decrease modestly throughout the remainder of 2023, before leveling off in early 2024. Cooling consumer confidence and greater pressure on household budgets may lead to lackluster holiday shopping. “The possibility of a longer slowdown in economic activity is lessening as the Federal Reserve has cooled on interest rate hikes to combat inflation,” Nickerson concluded.

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 is dedicated to supporting local governments across the U.S. with revenue enhancement, technology and consulting services that enable cities, counties and special districts to better serve their constituents. Founded in 1983, HdL Companies’ comprehensive approach to revenue management is trusted by over 700 local governments. The company has successfully recovered over $3 billion in revenue for client agencies. For more information, visit hdlcompanies.com.

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