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HdL Sales Tax Report for CY2020 Q3 Saleswww.hdlcompanies.com | 888.861.0220 Q3 2019* Q3 2020* Legend $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 SALES TAX BY MAJOR BUSINESS GROUP*Allocation aberrations have been adjusted to reflect sales activity County and State Pools General Consumer Goods Restaurants and Hotels Autos and Transportation Food and Drugs Building and Construction Fuel and Service Stations Business and Industry TOP 25 PRODUCERSCITY OF ENCINITAS HIGHLIGHTS Published by HdL Companies in Winter 2021 SALES TAX UPDATE CITY OF ENCINITAS 3Q 2020 (JULY - SEPTEMBER) 7 Eleven 76 Best Buy BMW of Encinitas Cardiff Seaside Market 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 RCP Block & Brick REI Shell Shell Car Wash At Encinitas Ranch Target TJ Maxx Trader Joes Valero Vons Vuori Walmart Supercenter Encinitas’ receipts from July through September were 11.8% above the third sales period in 2019. Excluding reporting aberrations, actual sales were up 8.1%. However, deferred tax payments from last quarter temporarily exaggerated the cash results. Once these and other reporting aberrations are excluded, actual sales were up 8.1%. This was the second full quarter impacted by the pandemic, with local point of sale receipts down 3.9% compared to the prior year. Restaurants saw significant declines, with casual dining down 26.5%. Many eateries were closed or only able to provide limited services as a result of the pandemic shutdowns. Fuel and service station receipts also were depressed as the cost of gas and overall consumption remains low. As an offset, increases in the building and construction group, as well as the food and drug and autos and transportation groups. The City’s share of the countywide use tax pool allocations jumped 79.9% over the prior year period. This gain was boosted by a combination of new taxes on out-of-state purchases from full implementation of AB147 (Wayfair), and surges in online spending tied to the pandemic crisis and use of federal stimulus funds by households. Net of aberrations, taxable sales for all of San Diego County declined 1.3% over the comparable time period; the Southern California region was down 1.5%. TOTAL:$ 3,778,168 8.1%-1.3%-0.9% COUNTY STATE ENCINITAS 3Q2020 Q3 '20* EncinitasBusiness Type Change Change ChangeCountyHdL State -37.9%-34.2%-26.5% 232.3 Casual Dining -29.0%-31.2%-30.4% 231.4 Service Stations 7.1%8.1%8.8% 173.8 Grocery Stores -10.3%-12.4%-10.2% 158.0 Quick-Service Restaurants 22.0%25.4%19.3% 152.8 Sporting Goods/Bike Stores -3.5%-4.4%1.3% 107.3 Home Furnishings 15.0%19.5%33.9% 96.0 Convenience Stores/Liquor -14.2%-16.4%-18.0% 94.8 Fast-Casual Restaurants -5.4%-3.2%-2.4% 72.9 Auto Lease -21.1%-20.8%-19.4% 70.6 Electronics/Appliance Stores *Allocation aberrations have been adjusted to reflect sales activity *In thousands of dollars REVENUE BY BUSINESS GROUP Encinitas This Quarter* 24% Pools 14% Restaurants 13% Autos/Trans. 8% Building 4% Bus./Ind. 24% Cons.Goods 8% Food/Drug 6% Fuel *ADJUSTED FORECONOMIC DATA SALES TAX UPDATECITY OF ENCINITAS TOP NON-CONFIDENTIAL BUSINESS TYPES 3Q 2020 STATEWIDE RESULTS The local one-cent sales and use tax from sales occurring July through September was 0.9% lower than the same quarter one year ago after factoring for accounting anomalies. The losses were primarily concentrated in coastal regions and communities popular with tourists while much of inland California including the San Joaquin Valley, Sacramento region and Inland Empire exhibited gains. Generally, declining receipts from fuel sales, brick and mortar retail and restaurants were the primary factors leading to this quarter’s overall decrease. The losses were largely offset by a continuing acceleration in online shopping that produced huge gains in the county use tax pools where tax revenues from purchases shipped from out-of- state are allocated and in revenues allocated to jurisdictions with in-state fulfillment centers and order desks. Additional gains came from a generally solid quarter for autos, RV’s, food-drugs, sporting goods, discount warehouses, building material suppliers and home improvement purchases. Some categories of agricultural and medical supplies/equipment also did well. Although the slight decline in comparable third quarter receipts reflected a significant recovery from the immediate previous period’s deep decline, new coronavirus surges and reinstated restrictions from 2020’s Thanksgiving and Christmas gatherings compounded by smaller federal stimulus programs suggest more significant drops in forthcoming revenues from December through March sales. Additionally, the past few quarter’s gains in county pool receipts that were generated by the shift to online shopping plus last year’s implementation of the Wayfair v. South Dakota Supreme Court decision will level out after the first quarter of 2021. Much of the initial demand for computers and equipment to accommodate home schooling and remote workplaces has been satisfied. Manufacturers are also reporting that absenteeism, sanitation protocols, inventory and imported parts shortages have reduced production capacity that will not be regained until mass vaccines have been completed, probably by the fall of 2021. Significant recovery is not anticipated until 2021-22 with full recovery dependent on the specific character and make up of each jurisdiction’s tax base. Part of the recovery will be a shift back to non-taxable services and activities. Limited to access because of pandemic restrictions, consumers spent 72% less on services during the third quarter and used the savings to buy taxable goods. Full recovery may also look different than before the pandemic. Recent surveys find that 3 out of 4 consumers have discovered new online alternatives and half expect to continue these habits which suggests that the part of the recent shift of revenues allocated through countywide use tax pools and industrial distribution centers rather than stores will become permanent.