Electronic tax

Stockton Measure A Works During COVID Thanks to Internet Sales Tax

Tough decisions were made to lift Stockton out of bankruptcy and into the solvency the town enjoys today. One was made in 2013 by voters to win through Measure A, and it also helped the city overcome the pandemic.

Measure A is a three-quarters of a cent transaction and use tax — or general sales tax on goods, services mostly not taxable — passed by Stockton voters in 2013 to get out the door. city ​​from bankruptcy and restore municipal services that had been disrupted by paying for law enforcement and crime, residential, commercial and real estate services.

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As of March 1, Kimberly Trammel is the new Chief Financial Officer for the City of Stockton. She has worked her way up the city’s finance ladder since 2003 and has been part of the city’s journey to solvency. She said Measure A played an important role in bringing the city out of bankruptcy and restoring services as planned, but played an unexpected role when the world turned around in March 2020.

“As soon as the pandemic hit, everyone was kind of like, ‘Oh no, all of our income is going to suffer. Everyone is staying home, the economy is down,” Trammel said. “The assumption was that the sales tax, along with many other city revenues, would go down.”

Trammel said the city initially saw revenue decline from March to June 2020 due to business closures and residents locked in their homes during the statewide stay-at-home order.

“People weren’t going to restaurants, which is a taxable activity; they stayed at home without using their car. We saw the fuel going down,” Trammel said, “but as people found ways to cope, we saw other areas start to improve.”

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With residents confined indoors, home improvement projects began to increase. With the drop in travel, residents have started spending locally, but internet sales have also soared. Luckily for the city, Measure A was already in place and was able to capture sales tax revenue from online purchases made by Stocktonians.

“Because Measure A is a transaction tax, online retail companies will direct the transaction tax based on the location of the person making the purchase,” Trammel said. “A lot of us didn’t go out and get our usual services – we didn’t go to the hairdresser, the nail salon or the massage. This money was redirected to things that actually had sales tax dollars. So contrary to what everyone thought before the pandemic, we actually had better than expected sales tax revenue. »

For the fiscal year ending June 30, 2021, Measure A brought in nearly $41 million, eclipsing the city staff projection of about $6 million. Stockton Mayor Kevin Lincoln said the A-record measure has been a big positive for the community during the pandemic.

“That’s what sustained us, it really,” Lincoln said, “the changes that were made a little over a decade ago to diversify how we capture revenue in our city.”

As for what to do with the $6 million in windfall revenue, things get a little complicated. Measure A was adopted with the intention of devoting 65% of revenues to Marshall Plan – a set of strategic initiatives adopted by Stockton City Council in 2012 to reduce crime and increase public safety – and 35% on other bankruptcy collection services and general community services. Trammel said the numbers are in line to meet that goal after 10 years.

But sales revenue is volatile in nature — meaning it’s unreliable — and Trammel said it can be difficult to fund new positions or initiatives on increased sales tax revenue.

“Sales tax goes up and down. We saw huge sales tax cuts around 2008 with the last recession because people didn’t have that much money to spend,” Trammel said. “You have to be very careful with sales tax money to make sure you don’t overcommit them in the long run. Sales tax also tends not to increase in the same way as salary and benefits. »

The collection of internet sales revenue in Stockton is unique to Measure A, which is also deposited into the general fund, allowing flexibility. Special taxes like Measure W – the quarter-cent sales tax passed in 2004 – are limited to specific funding for police and fire departments. The City of Stockton has a 9% sales tax rate:

  • State sales tax: 7.25%
  • K-measurement – San Joaquin County Transportation Infrastructure: 0.50%
  • Measure W – Stockton Police and Fire Department Funding: 0.25%
  • Measures A and B – Stockton law enforcement, crime prevention and essential services: 0.75%
  • Measure M – Stockton Strong Communities: 0.25%

Record reporter Ben Irwin covers Stockton and San Joaquin county government. He can be reached at [email protected] or on Twitter @B1rwin. Support local news, subscribe to The Stockton Record at recordnet.com/subscribenow.