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8.A. - Page 19 of 42 the shelter -in-place orders coincides with a new allocation of sales tax by the purchaser's point -of -origin resulting from the U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., which enabled state and local governments to recoup tax revenue formerly lost to remote sellers. This new influx of formerly lost sales tax has offset some of the recent reduction in sales tax revenue, softening the impact of the negative impact from the COVID-19 pandemic. Redwood City sales tax revenue has grown in recent years from a bustling economy and the passage of in November 2018 of the Essential Services Protection Measure RR, which levied a one-half of one percent sales tax in the City, effective on April 1, 2019. Overall, there is a concern in the long-term health of sales tax revenue. Changing consumer preferences and purchasing habits affect City sales tax revenues as well. Digital downloads (software, music, movies) are not taxable transactions. Prior to the pandemic, younger consumers tended to purchase "experiences" (generally not taxable), rather than goods, which had a negative effect on sales tax revenue. In addition, digital devices have emerged as the growth engine for all retail sales, which has led to extreme price awareness and, most importantly, online purchasing. Burgeoning trends toward online purchasing impact the City's sales tax revenue. Goods sold to Redwood City customers from out of state retailers generate use tax revenues, which are remitted to the county pool. In turn, county pool revenues are then distributed to all jurisdictions within the county. Goods sold at physical establishments located in Redwood City generate sales tax revenues, which are remitted directly to the City of Redwood City. Ultimately, increasing online sales will reduce local sales tax revenues. The pandemic has temporarily altered the preferences of consumers from experiences, due to the closure of those businesses, back to goods sold at local establishments and online. This has helped stabilize the City's sales tax revenue over the past year, with only a small decrease. The City's sales tax consultant is meeting with staff on a quarterly basis to ensure the City is up-to-date on current sales tax generators, including providing actual sales data for each business. Projected sales tax revenue is included below. $ so_o $ 4-a $ so_o $ 20.0 $10.0 S- Sales Tax (in millions) e 0 6 Qt O P p �` �iO q` QR 11Qt Q� 4{ Page 19 of 28 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 550