Petaluma Sales Tax Demystified
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.
As a revenue source, retail sales tax offers the following benefits:
- Freedom in Spending: Unlike other revenue sources, retail sales tax comes with no legal restrictions about how it is spent.
- Local Control: No other government agency–such as the State or the County–can take sales tax that legally belongs to the City. Sales tax that is generated in Petaluma stays in Petaluma.
- Local Increase: 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.
The Economic Link
Unfortunately, retail sales tax is extremely volatile and dependent on the overall 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.
Making Informed Decisions
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.
These summaries inform our day-to-day decisions and strategic planning processes across the City. The information helps us budget in Finance, develop business attraction programs in Economic Development, prioritize projects in Public Works, and fund programs in the Police and Fire Departments as well as the Parks & Recreation Division.
Sales Tax Reports
The most recent summary shows that gasoline and auto sales generate nearly a third of Petaluma’s sales taxes. Food products and general retail each make up another 25% of the total revenue. The remaining 20% of revenue comes from business-to-business sales and from construction.
“It’s important to understand where we’re generating retail sales tax and then develop a plan to maintain strong sales in the future.”