The Golden State showed lower than expected results in sales tax receipts in the first quarter of 2023, reporting an overall decline of 1.1% in sales and use tax revenue compared to the same period in 2022. Impacts of weather on building and construction and decreases in fuel prices at the pump contributed to the decline.

“Wet weather conditions along with a slight pullback by consumers during the post-holiday period had a significant impact on sales and use tax receipts in the first quarter of the year,” stated Andy Nickerson, President/CEO of HdL Companies, the leading provider of revenue enhancement technology and consulting services for local governments.

The building and construction industry was impacted the most by weather conditions. When coupled with lower lumber prices, the sector saw a 9.7% statewide drop. The decrease in fuel prices at the pump also played a role in the state’s overall decline in sales tax returns. Receipts from gas stations and petroleum providers were down 8%. Big box retailers also selling fuel experienced a similar impact and when combined with weak results from department stores, overall general consumer goods’ returns were down slightly.

“Spending at local restaurants and hotels was a bright spot in the data, showing gains of 9%,” noted Nickerson. “The auto industry continued to experience challenges. Despite a 10% decrease in actual auto sales in California, sales tax receipts for the category increased by 8% due to higher car prices.”

Sales tax receipts are expected to decrease modestly throughout the remainder of 2023, then begin a nominal recovery in early 2024 with the Federal Funds Rate, unemployment levels, and discretionary spending influencing future outcomes. “While it appears the Federal Reserve’s actions to fight inflation are taking effect, any lasting downward pressure on consumer pricing could also hinder short-term growth,” Nickerson concluded.

View a complete table of sector and regional data here. Each quarter, HdL Companies reports on California’s sales tax receipts and 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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