Collected sales tax for third quarter down in South Lake Tahoe, nominal gain in El Dorado County

SOUTH LAKE TAHOE, Calif. - The third quarter sales tax reports are in for both the City of South Lake Tahoe and El Dorado County's unincorporated area.

South Lake Tahoe’s receipts from July through September were 14 percent below the third sales period in 2020 with declines in all major industry groups. Excluding reporting aberrations, actual sales were down 15.2 percent. The unincorporated El Dorado County area’s receipts from July through September were 7.4 percent above the third sales period in 2020. Excluding reporting aberrations, actual sales were up 3.3 percent (Aberrations include late payments, fund transfers, and audit adjustments).

The two-month-long Caldor Fire, which started in western El Dorado County on August 14, 2021, and soon headed to South Lake Tahoe, hindered various local businesses with temporary closures due to smoke and subsequent area evacuation.

The summer months normally offer the benefits of the region's draw for tourism. This year was different with weeks of smoke from western fires, along with the Caldor Fire. According to the City's sales tax report, retailers experienced plunges in their receipts, particularly food and drug sales at grocery stores, sporting goods, and general consumer goods.

The hospitality industry tried to find its footing again after pandemic-related occupancy restrictions had pinched revenues in hotels and casual dining. The gains the group had seen the previous quarter were diminished with the fire impacts.

El Dorado County saw the same industries impacted by the fire along with the business industry and building construction. In particular, both building materials and plumbing/electrical supplies activity had lower results.

Last year, the retail industry took an economic hit when mandated restrictions impacted businesses with closures. Online sales reached record highs as consumers shifted how they spent discretionary dollars. While consumers continue to value the convenience of e-commerce shopping options with modest gains this quarter, a preference for in-person shopping boosted general consumer goods.

With gasoline at the pumps reaching record levels, there are higher fuel service station receipts.

El Dorado County Auditor-Controller, Joe Harn is concerned with the way California is handling the taxes collected on growing internet sales through the largest online company. Normally local governments split one percent of sales tax, with the rest going to the State. For decades that local share went to the jurisdiction in which the sale occurred, but that has changed with some big online sellers.

That is changing with some big online sellers. According to Cal Matters, the big sellers have been making deals with the communities in which their warehouses are located. The sellers funnel all of the local sales taxes into those communities that house warehouses/distribution centers and then receive rebates of those taxes — as much as 80 percent in some instances.

Last May, Harn told the El Dorado County Board of Supervisors that one of the world’s largest online retailers intended to retroactively report sales tax transactions back to October 1, 2020, to the local jurisdiction of its shipping warehouses. Since then there have been two bills in the state senate that have tried to address this situation, but both have been vetoed.

Harn said South Lake Tahoe won't be affected as much if the distribution centers are in Nevada or other states, but this is hurting mountain communities on the west slope that will never be home to a center and their product comes from in-state.

South Lake Tahoe City Manager Joe Irvin said they are not anticipating this situation to have any negative impacts to the City budget.

Top 25 produces of sales tax in the City of South Lake Tahoe (alphabetical order): Aisle 1, Azul Latin Kitchen, Base Camp Pizza, BevMo, Cannablue, CVS Pharmacy, Do it Yourself Home Center, Jim Bagan Toyota, KB Chevron, McDonald's, McP’s Pub Tahoe, Meeks Building Center, Raleys, Riva Grill on the Lake, Ross, Safeway, Safeway Fuel, Smart & Final, Sports Ltd, Swiss Mart, Tahoe Asphalt, Tahoe Wellness, TJ Maxx, Up Shirt Creek, Western Nevada.

The Top 25 produces of sales tax for unincorporated areas of El Dorado County (alphabetical order): Arco AM PM, Broadridge Output Solutions, Cameron Park 76, Camp Richardson Resort, Crystal View Station, CVS Pharmacy, Daimler Trust, Dawson Oil, El Dorado Truss, Express Fuel, Green Valley Arco, Holiday Quality Foods, Lees Feed & Western Store, Meeks Building Center, Mercedes Benz of El Dorado Hills, My Goods Market, Quik Stop, Safeway, Safeway Fuel, Shell, Shingle Springs Honda, Shingle Springs Subaru, Target, TJ Maxx, Walmart.

Net of aberrations, taxable sales for all of El Dorado County grew 0.2 percent over the comparable time period; the Sacramento region was up 16.6 percent.

At the state level, local one-cent sales and use tax receipts for sales occurring July through September were 18 percent higher than the same quarter one year ago after adjusting for accounting anomalies and back payments from previous quarters. These aberrations had been much greater than normal in the last two years as the Governor’s Executive Orders allowed businesses to defer some sales tax payments as a supportive measure during the pandemic. This program has now expired, and merchant remittances are
more consistent, making cash receipts more reflective of underlying economic activity.

Overall growth is expected to be seen when the fourth quarter sales tax reports are completed for the end of the 2021 calendar year. Possible headwinds into 2022 include: pent up demand for travel and experiences
shifting spending away from taxable goods; higher prices for fuel, merchandise and services displacing more of consumer’s disposable income; and expected interest rate hikes resulting in more costly financing
for automobiles, homes, and consumer loans.