Petaluma Retail Sales Tax Demystified

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Sales Tax = Quality of Life

Every time you purchase a taxable item in Petaluma, you help to improve quality of life in our town. That’s because Petaluma retail sales tax revenues help to pay for vital services in the City, like street maintenance, emergency response, and parks.

Here’s why:

  • Flexible Spending: Unlike other revenue sources, retail sales tax comes with no legal restrictions about how it is spent.
  • Unlimited Potential: Also unlike other revenue sources, there are no legal limits as to how much retail sales tax a city can generate.
  • Local Tax: With voter approval, cities can add a local sales tax that does not need to be shared with the State or the County. This increases total sales tax revenue.

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 The Economic Link

There is a downside of retail sales tax. It is extremely volatile and very much connected to the economy.When times are good, people tend to make more purchases, so sales tax numbers climb. When times are bad, people spend less and retail sales tax numbers fall.

We have seen this cycle in action in Petaluma over the past 10 years. At the height of the last economic cycle in 2006, Petaluma’s sales tax revenue reached $10.8 million. At the low in 2011, sales taxes plummeted to $8.8 million. Last year’s new high brought the sales tax figure back up to $12.4 million.

 

Seeing the Sales Tax Picture

Petaluma, like any other city, cannot control the economy. We also cannot control how the State changes retail sales tax law, whether that benefits or hurts us, e.g., by changing which types of items are subject to the tax.

What we can control is how we manage our relationship with retail sales tax. It’s important for us to understand where we’re generating retail sales tax and then develop a plan to maintain strong sales in the future.

To do this, we work with a company that provides us with a quarterly summary of our sales tax numbers and an analysis of how we compare to other California cities.



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