Sales & Use Tax

FY 2021-23 Proposed Policy Budget

Sales and Use tax apply to the retail sale or use of “tangible personal property.” The recent passage of Proposition 30 brings the total sales tax percentage in the City of Oakland to 9.25 percent; meaning on a $1 purchase, tax paid is 9.25 cents. The City receives 1 percent of the total tax, meaning the City receives 1 cent on a $1 purchase.

The table to the right details the general allocation of sales use tax on purchases in the City of Oakland. Some of the tax revenue received by the State of California is redistributed to counties to provide health and public safety services.

Oakland’s diverse Sales Tax base consists of six major business groups: auto and transportation, fuel and service stations, business and industry, general consumer goods, building and construction, and food and drugs. No single group dominates the City’s sales tax revenues.

Sales tax revenue generally coincides with overall strength of the local, regional, and national economies. During the COVID-19 pandemic, however, many types of businesses have been closed, resulting in significant declines in sales tax revenues. Taxable sales fell dramatically during the pandemic and local sales taxes are not projected to return to pre-pandemic levels until FY 2022-23, despite the return to economic growth predicted to begin in FY 2021-22. Two pandemic-related trends are expected to impede the growth of the sales tax base. First, because sales taxes are allocated to jurisdictions based on the point of sale, e-commerce sales typically generate revenues in jurisdictions that are home to e-commerce warehouses. As a result, a pandemic-driven increase in the shift to e-commerce (and away from brick-and-mortar retailers located within the City) will erode Oakland’s sales tax base. Second, to the extent the pandemic permanently alters employment-related travel and commute patterns, fewer shoppers will visit downtown retail establishments and restaurants. Overall, sales tax proceeds in the first three quarters of Calendar Year 2020 were down over 19% year-over-year.

Historically, sales tax revenue has been correlated with personal income. The growth in projected sales tax revenue included in the forecast reflects the expectation that personal income will grow steadily during the forecast period, driven in part by the three rounds of federal stimulus and the increase in savings and reductions in consumer debt that many households experienced during the pandemic. These gains are offset to some extent by an anticipated, ongoing acceleration in the shift to e-commerce.

Sales tax revenue is expected to grow from an estimated $52.6 million in FY 2020-21 to $59.0 million in FY 2021-22 and to $66.2 million in FY 2022-23. This is an average annual increase of 12.33% year-over-year during the forecast period.