HomeMy WebLinkAboutStaff Report 2412-3861CITY OF PALO ALTO
CITY COUNCIL
Monday, May 12, 2025
Council Chambers & Hybrid
5:30 PM
Agenda Item
11.Sales Tax Digest Q4 (Oct-Dec) 2024
City Council
Staff Report
Report Type: INFORMATION REPORTS
Lead Department: Administrative Services
Meeting Date: May 12, 2025
Report #:2412-3861
TITLE
Sales Tax Digest Q4 (Oct-Dec) 2024
ANALYSIS
This report transmits information regarding the City of Palo Alto’s sales tax receipts for the
fourth quarter (October to December) of 2024. Listed below are highlights from the report.
Detailed discussion and data can be found in the attached City of Palo Alto Sales Tax Digest
(Attachment A)
Regional and statewide sales tax, adjusted economic benchmark year (Attachment A, p. 2):
•Palo Alto: decreased by 3.4%
•San Francisco Bay Area: decreased by 2.2%
•California statewide: decreased by 2.2%
City’s most significant activity for this period (Attachment A, p. 1):
•Leasing segment, 12.6% decrease (year-ending Q4)
•New auto sales, 18% decrease (year-ending Q4)
•Office equipment, 6.9% decrease (from Q4 2023 to Q4 2024)
•Business services, 2.1% decrease (from Q4 2023 to Q4 2024)
County Pool (Attachment A, p. 4)
•The City’s share of the county pool for this quarter is 5.9%; lower from Q4 2024
•Sales tax receipts from the County pool totaled $1.8 million.
ATTACHMENTS
Attachment A: 2024 Q4 Sales Tax Digest Summary
APPROVED BY:
Lauren Lai, Administrative Services Director
City of Palo Alto
Collections through February 2025
Sales October through December 2024 (2024Q4)
www.avenuinsights.com (800) 800-8181 Page 1
California Overview
For the year ending in the fourth quarter of 2024, cash receipts decreased by 0.7% statewide and
decreased by 2.4% in S.F. Bay Area. However, when adjusted for non-period-related payments, the
overall economic sales tax activity for the year ending in the fourth quarter of 2024 decreased by 2.2%
statewide and decreased by 2.2% in S.F. Bay Area.
For the year ending in the fourth quarter of 2024, sales tax cash receipts for the city decreased by 6.5%
from the prior year. However, when adjusted for non-period related payments, the overall economic sales
tax activity in Palo Alto for the year ending in the fourth quarter of 2024 decreased by 3.4%. The primary
drivers of Palo Alto's sales tax decrease were the leasing and new auto sales sectors. Leasing sales tax
revenue decreased by 12.6%, representing 19.6% of the city's total sales tax. New auto sales decreased
by 18.0% over the same period, contributing 13.2% to the total sales tax revenue.
Same quarter sales tax cash receipts increased by 2.3% in California from Q4 2023 to Q4 2024. Palo Alto
citywide sales tax cash receipts decreased by 4.7% over the Q4 2023 to Q4 2024 period. Key reasons for
the Palo Alto decrease during this period were: 1) Decrease in the leasing segment of 12.6% which
comprises 19.6% of the total sales tax for the city, 2) Decrease in Office Equipment segment from Q4 2023
to Q4 2024 by 6.9%, and 3) Decrease in the business services segment from Q4 2023 to Q4 2024 by 2.1%.
According to the California New Car Dealers Association (CNCDA), California’s new light vehicle
registrations increased by 4.8% in 2024Q4. Tesla’s sales have been on the decline in California with
registrations down a significant 7.6% YTD for 2024Q4.
City of Palo Alto
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Regional Overview
The first chart on page two shows adjusted economic benchmark year amounts, which shows the year
ended fourth quarter of 2024 compared to the year ended fourth quarter of 2023 (benchmark years are
rolling annual comparisons through the current quarter). The growth rates are different between the state
and Palo Alto because the sales tax from businesses in Palo Alto performed better overall than the
statewide average.
BENCHMARK YEAR 2024Q4 COMPARED TO BENCHMARK YEAR 2023Q4
City of Palo Alto
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Leasing
19.6%
Restaurants
17.2%
Auto Sales -New
13.2%
Office Equipment
7.3%Apparel Stores
7.2%
All Other
35.5%
Net Pools & Adjustments
18.9%
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Gross Historical Sales Tax Cash Receipts by Benchmark Year and Quarter (Before Adjustments)
*Benchmark year (BMY) is the sum of the current and 3 previous quarters (2024Q4 BMY is sum of 2024 Q4, 2024 Q3, 2024 Q2, 2024 Q1)
City of Palo Alto
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County Pool Results
The California sales tax system is referred to as a ‘sales and use tax’ system which covers both sales tax
and ‘use tax’. The County Pool revenues largely reflect use tax from qualifying transactions that do not
involve a California based point of sale. Businesses report their use tax quarterly based on business activity
conducted throughout the county. The County Pool is distributed each quarter based upon a formula
where the jurisdiction’s quarterly percentage is based upon its total sales tax receipts for the quarter as a
percentage of all sales tax receipts for all jurisdictions within the county. Thus, if local business activity
(sales tax receipts) within Palo Alto increases in the quarter relative to the rest of the county, then the
Palo Alto County pool percentage also will increase for the quarter compared to the rest of the county.
The total county pool is multiplied by the city’s quarterly percentage to determine the jurisdiction share
each quarter.
In the fourth quarter of 2024, cash receipts for the overall County Pool increased by 28.2% from the same
quarter in the prior year. A significant reason for the increase in the County Pool this quarter was due to
a large misallocation adjustment in 2023Q4, so most of the growth in 2024Q4 was the result of comparing
back to an unusually low quarter in the year prior. The City’s share of the County Pool decreased to 11.9%.
The City’s revenues from the County Pool increased from $1,638,965 in 2023Q4 to $1,834,044 in 2024Q4.
TOP 25 SALES/USE TAX CONTRIBUTORS
The following list identifies Palo Alto’s Top 25 Sales/Use Tax contributors. The list is in alphabetical order
and represents the year ended fourth quarter of 2024. The Top 25 Sales/Use Tax contributors generate
58.7% of Palo Alto’s total sales and use tax revenue.
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 5
B B
Sales Tax from Largest Non-Confidential Sales Tax Segments (Economic)
City of Palo Alto
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Historical Analysis by Calendar Quarter
The chart above shows the categories and segments in quarterly economic basis amounts. The total amount is the net cash receipts, and it was obtained by
adding up the categories/segments with the “Net Pools & Adjustments” amount.
City of Palo Alto
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Historical Analysis by Calendar BMY from 2015Q4 to 2024Q4
The chart above shows the categories and segments in benchmark year economic basis amounts. The total amount is the net cash receipts, and it was obtained
by adding up the categories/segments with the “Net Pools & Adjustments” amount. Benchmark year (BMY) is the sum of the current and 3 previous quarters
(2024Q4 BMY is sum of 2024 Q4, 2024 Q3, 2024 Q2, 2024 Q1).
City of Palo Alto
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Quarterly Analysis by Sales Tax Category: Change from 2023Q4 to 2024Q4 (Economic)
Unlike the chart on page one which showed a ‘benchmark year’ through the fourth quarter of 2024, the chart above shows a comparison of one quarter only –
fourth quarter of 2024 to fourth quarter of 2023. This chart is for local ‘brick and mortar’ businesses, and it excludes county pools and adjustments.
City of Palo Alto
www.avenuinsights.com (800) 800-8181 Page 9
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City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2023Q4 to 2024Q4 (Economic)
City of Palo Alto
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City of Palo Alto Geo Areas & Citywide Chart Data: Change from 2023Q4 to 2024Q4 (Economic) Cont.
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www.avenuinsights.com (800) 800-8181 Page 13
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www.avenuinsights.com (800) 800-8181 Page 14
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