HdL Sales Tax Report for CY2019 Q4 SalesSales Tax Update
In Brief
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Q42019
Encinitas
Encinitas’ receipts from Octo-
ber through December were 5.4%
above the fourth sales period in
2018. Excluding reporting aberra-
tions, actual sales were up 2.1%.The primary factor in this improve-
ment was a 42% surge in alloca-
tions from the countywide use tax
pool, which has been boosted by a
recent legislative change that allows
the State to collect tax revenue from
small, third-party sellers on inter-
net-based, market-platforms.The City also received a large busi-
ness-industrial tax payment for the
sale of equipment delivered to a lo-
cal company from outside of Califor-
nia. A chic new restaurant opening
was also positive.Service station receipts were
down, but the decline was magnified
by aberrations associated with pay-
ment timing. Home furnishing sales
were lower.Net of aberrations, taxable sales
for all of San Diego County grew
5.6% over the comparable time pe-
riod; the Southern California region
was up 4.4%.
City of Encinitas
First Quarter Receipts for Fourth Quarter Sales (October - December 2019)
Published by HdL Companies in Spring 2020
7 Eleven
76
Best Buy
BMW of Encinitas
Chevron
Dick’s Sporting Goods
Encinitas Ford
Financial Services Vehicle Trust
Hansen Surfboards
Herman Cook Volkswagen
Home Depot
Home Goods
Pacific Coast Grill
REI
Ross
Shell
Shell Car Wash At Encinitas Ranch
Target
TJ Maxx
Trader Joes
Valero
Valero
Vons
Vuori
Walmart Supercenter
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
SALES TAX BY MAJOR BUSINESS GROUP
4th Quarter 2018*
4th Quarter 2019*
General
Consumer
Goods
County
and State
Pools
Restaurants
and
Hotels
Autos
and
Transportation
Fuel and
Service
Stations
Food
and
Drugs
Building
and
Construction
Business
and
Industry
*Allocation aberrations have been adjusted to reflect sales activity
$7,430,675 $7,950,765
2,828 3,493
1,212,155 1,044,275
$6,215,692 $6,902,996
2019-202018-19
Point-of-Sale
County Pool
State Pool
Gross Receipts
REVENUE COMPARISON
Two Quarters – Fiscal Year To Date (Q3 to Q4)
NOTESSales Tax UpdateQ4 2019 City of Encinitas
$0
$1,000
$2,000
$3,000
$4,000
SALES PER CAPITA *
Encinitas
Q4
16
Q4
19
Q4
17
Q4
18
County California
*Allocation aberrations have been adjusted to reflect sales activity
27%
Cons.Goods
18%
Pools
17%
Restaurants
12%
Autos/Trans.
9%
Fuel
8%
Food/Drug6%
Building4%
Bus./Ind.
Encinitas This Quarter*REVENUE BY BUSINESS GROUP
*Allocation aberrations have been adjusted to reflect sales activity
Q4 '19*
Encinitas
ENCINITAS TOP 15 BUSINESS TYPES**
Business Type Change Change Change
County HdL State*In thousands of dollars
-2.3%3.2%1.1% 74.5 Auto Lease
-1.8%1.4%2.8% 183.5 Building Materials — CONFIDENTIAL —
9.0%3.8%4.0% 313.8 Casual Dining
-7.4%-0.3%1.2% 76.5 Convenience Stores/Liquor
-2.0%3.6%4.1% 237.1 Discount Dept Stores — CONFIDENTIAL —
-9.6%-6.6%-6.9% 106.5 Electronics/Appliance Stores
-4.4%1.3%2.5% 100.5 Family Apparel
1.4%4.3%2.4% 101.1 Fast-Casual Restaurants
0.1%1.3%3.4% 170.6 Grocery Stores
-22.4%-2.1%2.7% 101.1 Home Furnishings
1.0%-3.4%-2.1% 283.4 New Motor Vehicle Dealers — CONFIDENTIAL —
-2.3%1.9%2.5% 156.9 Quick-Service Restaurants
-7.3%0.2%-2.0% 322.2 Service Stations
-9.6%-3.8%-5.0% 74.7 Specialty Stores
-0.3%-3.0%-6.7% 139.6 Sporting Goods/Bike Stores
0.2%0.4%-2.9%
33.4%
2.1%
3,055.5
677.1
3,732.6
Total All Accounts
County & State Pool Allocation
Gross Receipts
37.7%26.7%
5.6%4.2%
** Accounting aberrations such as late payments, fund transfers, and audit adjustments
have been adjusted to reflect the quarter in which the sales occurred.
California Overall
Statewide sales and use tax receipts from
2019’s fourth quarter were 4.2% higher
than last year’s holiday quarter after fac-
toring for accounting anomalies.
The increase came from the accelera-
tion in online shopping which generated
huge gains in the countywide use tax
pools for merchandise shipped from
out-of-state and from California based
fulfillment warehouses in those cases
where the warehouse is also point-of-
sale. This segment was further boosted
by the first full quarter of California’s
implementation of the Wayfair vs South
Dakota ruling that requires out-of-state
retailers to collect and remit sales tax on
merchandise sold to California custom-
ers. The ruling has led to an increase
in sales tax receipts of roughly $2.95
per capita while also producing double
digit gains for in-state online fulfillment
centers.
In contrast, soft sales and closeouts
resulted in a decline in almost every
category of brick-and-mortar spend-
ing during the holiday season while
new cannabis retailers helped boost
what would have been a soft quarter
for the food-drug group. Most oth-
er sales categories including new cars
and business-industrial purchases were
also down. Restaurant group gains were
modest compared to previous quarters.
Overall, the rise in county pool receipts
offset what would have been otherwise,
a flat or depressed quarter for most ju-
risdictions.
Covid-19
The coronavirus impact will first be
seen in next quarter’s data reflecting
January through March sales. Based on
recovery rates being reported in some
Asian countries, the virus’s disruption
of supply chains will be deepest in the
first and second quarter and largely
resolved by mid-summer. However,
recovery from social distancing and
home confinements could take longer
with the deepest tax declines expected in
the restaurant/hospitality, travel/trans-
portation and brick-and-mortar retail
segments. Layoffs and furloughs are also
expected to reduce purchases of new cars
and other high cost durable goods. The
losses from the state’s high-tech inno-
vation industries may be more modest
while the food-drug and online retail
groups could exhibit increases.
Assuming that the virus is largest con-
tained by the end of September, HdL’s
economic scenario projects that tax de-
clines will bottom out in the first quarter
of 2021 but with only moderate gains
for several quarters after. Data from
previous downturns suggests that the
return to previous spending is not im-
mediate and often evolves. Businesses
emerge with ways to operate with fewer
employees and more moderate capital
investment. Consumers take time to ful-
ly get back to previous levels of leisure
travel, dining and spending and may
permanently transfer to newly discov-
ered services, activities and/or online
retail options.