TAX NEWS - JUNE 2009

California tax: California's 2nd Quarter 2008 Taxable Sales Declined 2.3%

San Francisco Bay Area Down 0.8% in 2nd Quarter 2008

California Board of Equalization (BOE), announced today that taxable sales in California declined 2.3 percent in the second quarter of 2008, reflecting impacts of the national recession, which began in December 2007.

California's taxable sales totaled $139.9 billion in the second quarter of 2008, down $3.3 billion from the second quarter of 2007. This is the fourth straight quarter of declines in the state's taxable sales. Taxable sales have not fallen in four consecutive quarters since 2002.

Income growth continued to be much stronger than taxable sales, a trend seen since early 2007. Income and sales were both boosted in the second quarter of 2008 by the federal Economic Stimulus Act of 2008, which provided income tax rebates for most households during this period.

While taxable sales in the nine-county San Francisco Bay Area declined 0.8 percent in the second quarter of 2008, the City of San Francisco's taxable sales increased 6.0 percent, the fastest growth rate of the ten most populous cities in California. Some other Bay Area cities also increased taxable sales in the second quarter 2008, including 6.9 percent in Cupertino, 6.2 percent in Milpitas, and 4.2 percent in Berkeley.

In constant dollar terms, taxable sales decreased by 5.4 percent in the second quarter 2008 over the same quarter a year ago. The California Taxable Sales Deflator measured an inflation rate of 3.3 percent for the second quarter of 2008. In contrast, the California Consumer Price Index (CPI) rose 4.0 percent. (The CPI includes services, whose prices tend to increase faster than those of most taxable goods.)

Taxable Sales in California is a quarterly report on retail sales activity in California, as measured by transactions subject to sales and use tax. It includes data about statewide taxable sales by type of business, as well as data about taxable sales in all California cities and counties from the first quarter of 2000 through the second quarter of 2008 and can be viewed on the BOE website at: www.boe.ca.gov/news/tsalescont.htm.

Notice: In early 2007 the California State Board of Equalization began a process of converting business codes of sales ands use tax permit holders to North American Industry Classification System (NAICS) codes. Over one million permit holders will be converted over time from the previous business coding system to the NAICS codes. As a result of the coding change process, industry data for 2007 and 2008 are not comparable. Therefore, the BOE will not publish percentage changes by industry until the coding process has been substantially completed.