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HdL Sales Tax Report for CY2017 Q2 SalesSales Tax Update In Brief Top 25 producers In AlphAbetIcAl Order www.hdlcompanies.com | 888.861.0220 Q22017 Encinitas Encinitas’ receipts from April through June were 5.9% above the second sales period in 2016. Ex- cluding reporting aberrations, actual sales were up 3.0%.A new business addition helped boost revenues for grocery stores. A negative accounting adjustment in the same period of the prior year temporarily inflated results for drug stores. Higher fuel prices caused the increase in totals for service sta- tions.Continued consumer interest in dining out and several new additions helped boost revenues for both fine dining and fast casual restaurants. Quick-service restaurants also ex- perienced robust growth this period. General consumer goods report- ed mixed results, with gain reported for sporting goods/bike stores and family apparel. Positive accounting adjustments were responsible for the growth in electronics/appliance stores, while a double payment in the prior period negatively impacted totals for home furnishings.The City’s share of the countywide use tax pool decreased 0.7% from the comparison period. Net of aberrations, taxable sales for all of San Diego County grew 2.9% over the comparable time pe- riod; the Southern California region was up 3.4%. City of Encinitas Third Quarter Receipts for Second Quarter Sales (April - June 2017) Published by HdL Companies in Fall 2017 7 Eleven AT&T Mobility 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 Quick Shine Car Wash REI Rosanos Unocal 76 Ross Shell Gas & Car Wash Target TJ Maxx Trader Joes USA Gasoline Valero Vons Walmart Supercenter $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 SALES TAX BY MAJOR BUSINESS GROUP 2nd Quarter 2016 2nd Quarter 2017 General Consumer Goods Restaurants and Hotels Autos and Transportation County and State Pools Fuel and Service Stations Food and Drugs Building and Construction Business and Industry $0 $0 $3,297,615 $3,113,888 (1,518) 949 398,676 401,387 $2,900,456 $2,711,551 2017-182016-17 Point-of-Sale County Pool State Pool Gross Receipts Less Triple Flip* REVENUE COMPARISON One Quarter – Fiscal Year To Date *Reimbursed from county compensation fund NOTESSales Tax UpdateQ2 2017 City of Encinitas $0 $1,000 $2,000 $3,000 $4,000 SALES PER CAPITA Encinitas Q2 14 Q2 17 Q2 15 Q2 16 County California 27% Cons.Goods 18% Restaurants 13% Autos/Trans. 12% Pools 9% Fuel 8% Food/Drug 8% Building5% Bus./Ind. Encinitas This QuarterREVENUE BY BUSINESS GROUP Q2 '17* Encinitas ENCINITAS TOP 15 BUSINESS TYPES Business Type Change Change Change County HdL State*In thousands of dollars 16.7%15.5%-2.4% 58.4 Auto Lease — CONFIDENTIAL — 0.2%6.0%2.9% 189.3 Building Materials — CONFIDENTIAL — 0.3%2.1%0.7% 293.3 Casual Dining 11.7%5.2%6.3% 66.5 Convenience Stores/Liquor 4.1%3.2%2.6% 207.3 Discount Dept Stores — CONFIDENTIAL — 17.5%0.2%-3.4% 109.6 Electronics/Appliance Stores 9.9%4.0%5.0% 87.2 Family Apparel 48.3%9.3%5.9% 78.9 Fast-Casual Restaurants 8.1%2.1%1.3% 156.2 Grocery Stores -19.3%0.4%1.8% 119.6 Home Furnishings 11.9%3.2%0.6% 260.5 New Motor Vehicle Dealers — CONFIDENTIAL — 7.8%5.8%6.2% 166.8 Quick-Service Restaurants 4.1%8.6%10.8% 314.0 Service Stations 3.9%0.9%1.6% 69.1 Specialty Stores 13.7%-15.1%-15.4% 139.0 Sporting Goods/Bike Stores 6.4%2.4%7.0% -1.3% 5.9% 2,900.5 397.2 3,297.6 Total All Accounts County & State Pool Allocation Gross Receipts -5.5%-9.9% 1.4%4.1% California Overall Local government’s one-cent share of statewide sales and use tax from trans- actions occurring April through June was 3.2% higher than the same quarter of 2016 after payment aberrations are factored out. The largest percentage increases were from the countywide allocation pools, building supplies and rising fuel prices. Auto sales and restaurants continued to post solid gains. Except for value priced apparel and dollar stores, most categories of general consumer goods were down or flat with the growth in online shopping shifting tax receipts to in-state distri- bution centers or to the countywide allocation pools. Receipts from business and industrial transactions were lower than last year’s comparable quarter because of declines in new alternative energy projects. Ag- ricultural and new technology related purchases exhibited healthy gains as did sales of warehouse and construction equipment. Most other categories were down from 2016. Where does the Money Go? E-commerce, technology and changing consumer preferences have retailers un- dergoing a dizzying transformation as they compete for customers through online websites, mobile apps, home de- livery, social media, pop-up/flex stores and pick-up lockers as well as traditional brick and mortar businesses. The changes in how goods are invento- ried, sold and delivered has created some confusion in allocating local sales and use tax. However, it still involves three basic principles: • Location where the sale is negotiated • L oc at ion of good s at t ime of sa le • Ownership of goods being sold Place of sale continues to be Califor- nia’s primary rule for allocating local sales tax. If the inventory is owned by the seller and is located in-state, the tax goes to the location that participates in the sale, either by receiving the order or shipping the goods. If the order is taken outside the state but the seller owns the inventory and delivers the goods from inside California, the tax is allocated to the jurisdiction where the warehouse is located. Otherwise, the tax is shared by all agencies in the county where the goods are shipped on a pro-rata basis through the county allocation pools. Ownership of the goods being sold is also a factor. In order for an agency to receive a direct allocation of local tax for goods shipped from a California fulfillment center, the location must be the retailer’s place of business and not owned or operated by a separate legal entity. If the retailer has no place of busi- ness in California, the only opportunity for local tax is an indirect allocation through the countywide pools For jurisdictions with transactions tax overrides, that tax goes to the place of purchase rather than the place of the seller. For example, the sales tax on the purchase of an automobile goes to the seller’s location. However, the transac- tions tax, if any, goes to the jurisdiction where the buyer’s vehicle is registered.