HdL Sales Tax Report for CY2017 Q4 SalesSales Tax Update
In Brief
Top 25 producers
In AlphAbetIcAl Order
www.hdlcompanies.com | 888.861.0220
Q42017
Encinitas
Encinitas’ receipts from Octo-
ber through December were 2.7%
above the fourth sales period in
2016. Excluding reporting aberra-
tions, actual sales were up 5.0%.Gross receipts were depressed by
a onetime event that elevated year
ago returns in the countywide use
tax allocation pool. Once reporting issues were re-
moved in sporting goods holiday
quarter retail was up 4.6%. Recent
openings including home furnish-
ing outlets accounted for the lion’s
share of the increase compared to
last year.New eateries boosted results
in casual dining and fast-casual
restaurants. Robust growth in au-
to-related sectors was overstated
by a fund transfer that temporarily
spiked the auto lease category. Service stations and food and
drugs under performed due to multi-
ple payment deviations.Net of aberrations, taxable sales
for all of San Diego County grew
3.0% over the comparable time pe-
riod; the Southern California region
was up 3.5%.
City of Encinitas
First Quarter Receipts for Fourth Quarter Sales (October - December 2017)
Published by HdL Companies in Spring 2018
7 Eleven
Best Buy
BevMo
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
Ralphs
REI
Rosanos Unocal 76
Ross
Scotty Cameron Gallery
Shell Gas & Car Wash
Target
TJ Maxx
USA Gasoline
Verizon Wireless
Vons
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 2016
4th 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
$10,281,007 $9,897,993
1,718 5,082
1,305,282 1,345,446
$8,974,007 $8,547,465
2017-182016-17
Point-of-Sale
County Pool
State Pool
Gross Receipts
REVENUE COMPARISON
Three Quarters – Fiscal Year To Date
NOTESSales Tax UpdateQ4 2017 City of Encinitas
$0
$2,000
$4,000
$6,000
$8,000
SALES PER CAPITA
Encinitas
Q4
14
Q4
17
Q4
15
Q4
16
County California
29%
Cons.Goods
16%
Restaurants
13%
Autos/Trans.
13%
Pools
9%
Fuel
8%
Food/Drug
7%
Building4%
Bus./Ind.
Encinitas This QuarterREVENUE BY BUSINESS GROUP
Q4 '17*
Encinitas
ENCINITAS TOP 15 BUSINESS TYPES
Business Type Change Change Change
County HdL State*In thousands of dollars
44.2%16.6%15.1% 87.2 Auto Lease — CONFIDENTIAL —
2.5%11.6%5.9% 192.4 Building Materials — CONFIDENTIAL —
-9.3%3.5%0.8% 288.1 Casual Dining
1.9%8.3%6.6% 70.4 Convenience Stores/Liquor
4.6%4.1%4.4% 259.1 Discount Dept Stores — CONFIDENTIAL —
-0.2%5.8%4.6% 121.6 Electronics/Appliance Stores
0.1%2.1%3.6% 95.7 Family Apparel
77.0%8.9%4.8% 96.0 Fast-Casual Restaurants
-2.6%-1.5%-2.7% 177.9 Grocery Stores
16.8%2.6%1.9% 130.3 Home Furnishings
7.4%2.6%-0.1% 292.6 New Motor Vehicle Dealers — CONFIDENTIAL —
5.2%5.0%6.0% 165.6 Quick-Service Restaurants
2.3%11.4%8.9% 306.3 Service Stations
-8.7%4.4%1.7% 71.0 Specialty Stores
40.8%-8.5%-5.1% 154.3 Sporting Goods/Bike Stores
4.0%5.1%5.1%
-10.8%
2.7%
3,130.1
471.2
3,601.3
Total All Accounts
County & State Pool Allocation
Gross Receipts
-10.8%0.8%
2.7%3.6%
California Overall
Factored for accounting anomalies,
statewide fourth quarter receipts from
local government’s one cent sales tax
were 4.4% higher than the holiday
quarter of 2016.
Rising fuel prices and solid gains from
building/construction supplies, restau-
rants and e-commerce were the primary
contributors to the overall increase. A
healthy quarter for auto sales and con-
struction equipment were additional
factors. Tax revenues from general
consumer goods sold through brick and
mortar stores rose a modest 1% over last
year’s comparable quarter while receipts
from online sales increased 13.2%.
Performance for the inland areas of the
state were generally stronger than the
coastal areas which had earlier recovered
from the previous downturn.
Nexus Issue to be Revisited
In 1992, the U.S. Supreme Court
ruled in Quill v. North Dakota that
businesses lacking a physical presence
or “nexus” in a state cannot be required
to collect or remit that state’s taxes.
This does not excuse buyers from
paying a corresponding use tax but the
costs of enforcement, particularly on
smaller purchases, is difficult and local
brick and mortar retailers are placed at
a competitive disadvantage.
California has been more effective at
collecting use tax than most states
with an aggressive program of audit-
ing major business purchases, requir-
ing CPA’s to report unpaid use tax on
client’s annual returns and requiring
businesses with annual gross receipts
of $100,000 or more to register for the
purposes of reporting use tax.
The State has also increased the
number of out-of-state sellers required
to collect sales tax through broader
definitions of what constitutes physical
presence including a requirement that
larger internet retailers collect and
remit sales tax if paying a commission
for customer referrals obtained via a
link on a California seller’s website.
Still, the estimated revenue losses are
substantial particularly for agencies
with voter-approved transactions tax
districts. Because of Quill, retailers are
not required to collect the tax for
purchases in an adjacent jurisdiction
if the retailer has no physical presence
in that jurisdiction. The resulting loss
to local governments projected by the
State Board of Equalization in 2016-17
was $756 Million in uncollected tax
revenues and losses to the state of $697
Million:(https://www.boe.ca.gov/
legdiv/pdf/e-commerce-2017F.pdf).
Congress has refused to act on nu-
merous attempts to seek legislative relief
over the last two decades. However,
three justices – Clarence Thomas, Neil
Gorsuch and Anthony Kennedy have
recently expressed doubts about the
Quill decision with Kennedy noting in
2015, that the ruling has produced a
“startling revenue shortfall” in many
states as well as “unfairness to local
retailers and customers.”
In January 2018, the U.S. Supreme
Court agreed to hear arguments in
the case of South Dakota v. Wayfair
Inc. where Wayfair is challenging the
State’s recently adopted requirement
that retailers collect and remit, or pay,
sales tax on purchases made by South
Dakota residents.
Oral arguments are scheduled for April
with a decision expected by the end of
June 2018.