Sales & Use Tax
FY 2023-25 PROPOSED POLICY BUDGET
Sales and Use tax applies to the retail sale or use of “tangible personal property.” The total sales tax percentage in the City of Oakland is 10.25%; meaning on a $1 purchase, tax paid is 10.25 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 or 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 particular 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 were closed, which resulted in significant declines in sales tax revenues. Taxable sales fell dramatically during the pandemic and local sales taxes are projected to return to pre-pandemic levels in FY 2022-23, with the return to economic growth beginning in FY 2021-22.
Two pandemic-related trends are expected to affect 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.
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 $66.2 million in FY 2022-23 to an estimated $67.7 million in FY 2023-24 and $69.7 million in FY 2024-25. This is an average projected annual increase of 6.09% year-over-year.