Despite Inflation Concerns, HdL Reports Continued Growth for California Sales Tax Returns in 3Q22

HdL reports an overall 8% spike in sales and use tax from July through September when compared to the same quarter last year.

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BREA, Calif. (January 12, 2023) — The Golden State showed moderate gains in sales tax receipts in the third quarter of 2022, reporting an overall 8% increase in sales and use tax from July through September, compared to the same period in 2021.The returns reflect another period of solid growth for California’s economy. 

“As the Federal Reserve Board continued ramping up interest rates in an effort to curb concerns over inflation, consumers continued purchasing a broad array of goods, especially new automobiles,” stated HdL Companies President/CEO Andy Nickerson. HdL is the leading provider of revenue enhancement technology and consulting services for local governments. Each quarter, it reports on California’s sales tax receipts and impacts on local jurisdictions. 

The automobile sector saw growth of 6% with new car dealers experiencing 10% gains compared to 2021. Limited inventory and demand for higher mileage vehicles, including electric and hybrid models, supported the growth. “Increased costs for used cars have diverted consumers into the new car market, continuing the vehicle industry boom that started during the pandemic. Meanwhile, recreation vehicle sales and auto leasing remained soft,” Nickerson commented. 

For Californians, the summer of 2022 made for the highest gas prices on record, lifting fuel and service station receipts by 21%. Commuters and summer travel remained steady while overall fuel consumption trails pre-pandemic levels by approximately 13%. For the second straight quarter, fuel sales linked to discount department stores propped up general consumer goods results. Otherwise, retailers experienced flat to decreased sales as many apparel categories, home furnishings, and sporting goods struggled to keep pace with the prior year. 

“The restaurant and hotel sector experienced an uptick of 10% due to increased menu prices, a sustained thirst for dining out and strong tourism,” noted Nickerson. Theme parks, leisure-entertainment venues, and hotels showed positive momentum, guiding the sector back to 2019 levels. 

Contractors and plumbing-electrical suppliers boosted the building and construction sector to gains of 8% with solid residential and commercial housing prices persisting despite interest rate hikes. Tenant improvements also supported further spending activity for this segment.  

“Sustained price increases and interest rate hikes have consumers contemplating where to spend their dollars but historically low statewide unemployment rates and the recovery of the national stock markets from recent declines leave modest optimism heading into 2023,” concluded Nickerson.  

View a complete table of sector and regional data.  

 Additional Resources

• Sales Tax Trends and Economic Drivers Report - 3Q22 Data
  
• Webinar: California Consensus Forecast - 3Q22 Data

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