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In Brief

Sales Tax Update

Top 25 producersIn Alphabetical Order

Gross receipts for Fairfield’s April through June sales rose 13.1% compared to the same quarter one year ago. Actual sales increased 11.3% when accounting anomalies were excluded.

Recent additions contributed to the gains from new car dealers, sporting goods and lumber/building materi-als, but receipt of a double-up pay-ment of taxes due in another peri-od inflated proceeds from the latter category. Service station compari-sons were skewed by a temporary closure in the year-ago period and receipt of a double payment in the current quarter.

One time use tax allocations for equipment purchases, combined with a recovery garnered by the city’s on-going point of sale audit program and increased sales activ-ity buoyed returns from the business and industry group. The allocation from the county use tax pool was also a factor for the overall increase in gross receipts.

Sales declined from department stores and consumer electronics. Payment anomalies pared results from home furnishings.

Adjusted for onetime reporting events, taxable sales for all of So-lano County were 8.2% higher over the same time period; Bay Area to-tals were up 8.1%.

Third Quarter Receipts for Second Quarter Sales (April - June 2012)

Q22012

City of Fairfield

Fairfield

Published by HdL Companies in Fall 2012

$0

$200 ,000

$400 ,000

$600 ,000

$800 ,000

$1,000 ,000

$1,200 ,000

SALES TAX BY MAJOR BUSINESS GROUP

2nd Quarter 2011

2nd Quarter 2012

Foodand

Drugs

Buildingand

Construction

Restaurantsand

Hotels

Fuel andServiceStations

Businessand

Industry

Autosand

Transportation

GeneralConsumer

Goods

$(1,091,143)$(964,726)

$4,364,572 $3,858,902

3,911 (2,050)

423,548 371,647

$3,937,113 $3,489,305

2012-132011-12

Point-of-Sale

County Pool

State Pool

Gross Receipts

Less Triple Flip*

*Reimbursed from county compensation fund

REVENUE COMPARISONOne Quarter – Fiscal Year To Date

NOTE

SSales Tax UpdateQ2 2012

Bell Top 15 Business caTegories

City of Fairfield

Q2 '12*

Fairfield

FAIRFIELD TOP 15 BUSINESS TYPES

Business Type Change Change Change

County HdL State

31.8% 8.1%17.1% 63.3 Automotive Supply Stores

-4.8% 1.1%-4.4% 156.5 Department Stores

2.6% 3.7%3.4% 372.8 Discount Dept Stores

-9.0% -2.4%-9.0% 107.1 Electronics/Appliance Stores

8.7% 8.8%6.6% 89.7 Family Apparel

7.4% 4.2%9.3% 88.4 Grocery Stores Liquor

-5.1% 7.1%-30.4% 63.6 Home Furnishings

70.5% -0.7%8.8% 73.0 Light Industrial/Printers

89.4% 20.5%42.8% 188.3 Lumber/Building Materials

18.9% 10.8%-4.8% 339.9 Medical/Biotech — CONFIDENTIAL —

15.2% 22.3%25.9% 592.8 New Motor Vehicle Dealers

na 27.0%na 63.6 Office Equipment — CONFIDENTIAL —

4.4% 11.2%6.4% 95.5 Restaurants Liquor

9.8% 8.1%6.4% 237.9 Restaurants No Alcohol

11.4% 2.3%19.7% 548.4 Service Stations

6.7%8.8%12.8%

15.7%

13.1%

$3,937.1

427.5

$4,364.6

Total All Accounts

County & State Pool Allocation

Gross Receipts *In thousands

$0

$1,000

$2,000

$3,000

$4,000

SALES PER CAPITA

Fairfield

Q2

09

Q2

12

Q2

10

Q2

11

County California

Statewide ResultsNet of payment aberrations, second quarter retail sales were 7.5% higher than the same period one year earlier.

Purchases of new automobiles, spurred by low interest rates, easy credit and manufacturers’ incentives, outpaced first quarter growth and generated 22% of the total increase. Business-to-business sales reflected strength in a number of sectors, no-tably heavy industrial, business ser-vices and equipment for energy re-lated projects. Restaurant and hotel receipts grew by 8.6%, outpacing all other industry groups except autos and transportation. Family apparel sales were strong but weak electron-ics/appliances returns and lackluster results from department stores and big box discounters held general con-sumer group gains to a modest 3.9%. Flattening fuel prices and ongoing weakness in lumber and building ma-terials sales also restrained overall re-sults.

Outlook for the YearThe momentum for the recovery is slowing and has recently prompted another round of “quantitative eas-ing” by the Federal Reserve Board in an effort to reinvigorate the housing market and spur business investment by keeping interest rates low. Retail growth in California, which fell fur-ther than the nation as a whole during the “Great Recession,” may outpace the nation going forward but stubborn unemployment, nearly static income levels, and cautious business spending will keep overall sales at moderate lev-els at least through 2014-15.

Sales Tax from On-line RetailersAB 155, which was passed last year as a compromise with Amazon.com went into effect on September 15. While the bill expanded the state’s ability to require the collection of tax

on out-of-state sales, local agencies expecting immediate revenue gains will be disappointed.

Federal case law continues to provide that remote sellers without nexus in a state are not required to collect that state’s sales tax. Amazon agreed not to contest AB 155’s definition of nex-us which includes remote sellers who have annual sales in California of one million dollars or more and who have an in-state affiliate that provides ser-vices in connection with the remote seller’s sales if those connected sales exceed $10,000 per year.

The Board of Equalization’s initial es-timate was that the legislative change would raise approximately $38.2 mil-lion in one-cent local revenues. How-ever since then, Amazon which was a significant portion of the estimate has decided to build distribution fa-cilities in California which will divert the revenues to the hosting jurisdic-tions. Other remote sellers, such as Overstock.com, have announced that

they will simply drop their in-state af-filiates to avoid collecting the tax.

The Board of Equalization expects to add up to 100 staff positions over the next three years to enforce the new provisions. However, at least initially, local governments should not expect annual revenues of more than $0.25 per capita and the ultimate solution continues to be federal legislation that eliminates the nexus prohibition and levels the playing field for all retailers.