Main content
City of Alexandria Homepage
Friday, August 29  •  82°Partly Cloudy Air Quality: Yellow
CloseWeather Forecast
Today: High 80° Low 64°
Partly CloudyAir Quality: Yellow
Sat: High 86° Low 71°
Partly CloudyAir Quality: Green
Sun: High 93° Low 74°
PM ThunderstormsAir Quality: Yellow
Mon: High 90° Low 71°
Scattered ThunderstormsAir Quality: Yellow
Tue: High 94° Low 72°
Mostly SunnyAir Quality: Yellow
Alert

Route 1 is blocked in both directions except for one northbound lane, from Slater's Lane to 1st Street for several fallen electrical poles. The public is urged to use caution in the area and treat all uncontrolled intersections (no power or officer directing traffic) as a four-way stop.

Read More...
City of Alexandria, VA City of Alexandria, VA
Finance
Share Share RSS RSS Print Print Text Size Text Size NormalText Size LargeText Size Extra Large
Page updated Dec 9, 2010 8:51 AM
CloseComments

No Comments Posted Yet

Online Reference 4: Sales Tax Analysis

Return to October Financial Report
Return to The Economy 

Summary

In an October 18 work session on revenues, Council asked for some additional analysis regarding sales tax revenues.  Sales tax collections have been sluggish over the last several years.  The analysis shows that since 2006, the restaurant, lodging, and food and beverage stores sectors have performed relatively well, while the home furnishings, and building and garden store sectors have fared relatively poorly.  Overall, sales in categories we normally think of as retail sales have decreased in Alexandria by approximately 8.7 percent from the first half of 2006 to the first half of 2010.  There are at least four primary reasons for the decline.  Some of the decrease relates to the recession, which has had a major impact on retail sales, particularly in sectors relating to housing and construction.  Some of the decline relates to the fact that until two years ago, the State was annually allocating hundreds of thousands of dollars in sales tax to Alexandria that should have gone to Fairfax County.  The decline may also be caused by the migration of retail sales to the Internet that are not subject to sales tax.  Finally, some of the decrease can be traced to the decline of Landmark Mall. 

Comparing Alexandria’s Sales Tax Collections to National Retail Sales

The graph below shows the City’s retail sales collections in comparison to national retail sales as measured by the Census Bureau.  The graph is included in Attachment 1 of the Monthly Financial Report.  The graph appears to show that Alexandria’s retail sales collections compare unfavorably with national U.S. retail sales.  Since about December 2009, the year-over-year rate of change (on a 3 month trailing average) has been stronger nationally than in Alexandria, although the gap appears to be closing.

Retail Sales -- Oct. 2010

Source:  Census Bureau, Alexandria Finance Department

There are some differences in what the two data series measure.  U.S. retail sales include sales of gasoline and automobiles and online sales, none of which are included in Alexandria’s sales tax collections.  On the other hand, Alexandria’s retail sales tax collections include the sales tax on hotel rooms, which is not included in national retail sales tax figures.  Also, Alexandria’s sales tax data relies on merchants to file their sales tax reports on time with the state.  If merchants do not, then sales tax collections become inconsistent on a month-to-month basis, which is why the City uses a three month trailing average.  The graph below shows the inconsistencies in monthly sales tax collections.  The dotted line in the graph below shows June and July retail sales were well below those of last year, while September’s were far better than last year’s retail sales.  The three month trailing average smooths out some of these inconsistencies.

Alexandria Retail Monthly -- Oct. 2010

The graph below indexes U.S. Retail Sales and Alexandria Retail Sales to 100 as of March 2008, providing a direct comparison and a different perspective on the City’s retail sales tax collections.  It is apparent from the two graphs that one reason why Alexandria’s retail sales collections have not recovered as strongly as the United States’ retail sales is that at least since March, 2008, there was less decline from which Alexandria had to recover.  Alexandria’s retail sales were 12.7 percent higher in the 3 months ending September 2010 than in the 3 months ending March 2008, while national sales were 4.1 percent higher.  (There is a seasonal component to retail sales.) 

Retail Sales U.S. v. Alex -- October 2010

Comparing Alexandria’s Sales Tax Collections to Virginia’s Sales Tax Collections1 

The table and charts below directly compare the City’s sales tax collections to the State’s sales tax collections by overall sector.  The data is organized by North American Industry Classification (NAICS) category which is used by the federal government to classify business establishments.   The table and charts look similar; the differences are the relative importance of accommodation and food services (23 percent of taxable sales in Alexandria compared to 16 percent statewide), and the Wholesale Trade and Manufacturing sectors (4 percent of taxable sales in Alexandria compared to 10 percent statewide)

Taxable Sales by Sector:  Alexandria vs. State

     Alexandria            State         
Retail Sales  

59%

62%

Accomodation & Food             23%

16%

Retail & Leasing Services 

   5%

  2% 

Other Services

   3%

  2% 

Wholesale Trade

   3%

  6% 

No Information

    3% 

  2% 

Other Miscellaneous

    2%

  3% 

Manufacturing

     1% 

  4% 

Professional, Technical, and Scientific Services 

      1% 

  1% 

Construction

     0%

   2% 

Total

 100%

      100%

Source: Virginia Department of Taxation/Weldon Cooper Center for Public Service

Alex. Taxable Sales by Sector -- Oct. 2010

VA Taxable Sales by Sector -- Oct. 2010

Source: Virginia Department of Taxation/Weldon Cooper Center for Public Service

The table and charts below further break down taxable sales in Alexandria by the important retail, lodging, and restaurant sectors, and exclude all other sectors.  They provide a comparison between the pre-recession sales of 2006 and the present.  The lodging and restaurant sectors and food service sectors have increased since 2006.

Retail Sales by Sector (as a share of the total) – Alexandria 

 

  Change in Share  

  2nd Quarter '06  

  2nd Quarter '10  

Miscellaneous Retail

 +4

 4%

 8%

Food Services/Drinking

  +3 

18% 

21% 

Food/Beverage Stores

  +3 

17% 

20% 

Health & Personal Care

 +2 

  2% 

 4%

Accomodation

+1

  6% 

   7% 

Motor Vehicle Parts/Dealers

 +1 

  3% 

  4% 

Gasoline Stations

  0

  0% 

  1% 

Clothing

  0

  7% 

  7% 

Sporting Goods/Hobby

  0

  2% 

 2%

ABC Stores

  0

  1% 

  1% 

Electronic & Appliance

-1

  4% 

  3% 

Furniture & Home Furnishings

 -2 

   4% 

  2% 

Building/Equipment/Supplies

 -2 

  12% 

10% 

General Merchandise

 -4 

 14% 

10% 

Non-Store Retail

 -6 

   6% 

  0% 

Total

--

          100% 

         100%

 Source: Virginia Department of Taxation/Weldon Cooper Center for Public Service

2010 Retail Sales -- Oct. 2010

2006 Retail Sales -- Oct. 2010

Source: Virginia Department of Taxation/Weldon Cooper Center for Public Service

The chart and graphs show a modest increase in the share of the importance of both restaurants and grocery stores in the City from 2006 to 2010.   Food and Beverage Store sales and Food Service and Drinking Places increased their share of the total from 35 percent to 41 percent. 

Some of the negative changes clearly are related to the housing bust; the share of building materials and garden supplies decreased from 12 percent to 10 percent, and the share of furniture and home furnishings decreased from 4 percent to 2 percent. 

The decrease in General Merchandise stores from 14 percent to 10 percent is probably partially attributable to the fact that Virginia was erroneously assigning sales tax from a Fairfax County department store to Alexandria and also to the departure of Lord and Taylor from Landmark Mall.

Changes in technology have also impacted the retail mix.  The biggest category decrease is attributable to Non-store Retailers; from 6 percent to 0 percent.  The NAICS category “Non-store Retail” includes mail order catalog shopping, door-to-door sales, electronic (internet) shopping, and newspaper delivery service providers, among other establishments.    It is likely that the accelerating shift to the internet favors non-taxable electronic shopping at the expense of other forms of retail.  The Census Bureau reports that the national share of electronic shopping and mail order houses increased from around 3.8 percent of all retail sales in 2006 to 5.8 percent in 2010.  That increase has been driven by an increase in internet sales, which by federal law are not subject to sales tax.  However, the data do not include information on specific businesses that fit into this category, so it is not definitively possible to explain the decrease.

Comparing retail sales by sector pre-recession to post-recession

The chart below shows the percentage change in taxable sales within the retail sector from the first six months of 2006 to the first six months of 2010.

Change in Taxable Sales -- Oct. 2010

Source: Virginia Department of Taxation/Weldon Cooper Center for Public Service

It is worth noting again the effect of the Internet on the “Electronics and Appliance” and “Sporting Goods, Hobby, Book, and Music Stores” sectors.  The “Motor Vehicles” category does not include automobiles, which by Virginia law are not subject to sales tax; it includes auto parts.

Comparing the Number of Sales Tax Generating Businesses by Sector - Pre-recession vs. Post-recession

The chart below shows the change in the number of businesses in Alexandria by sector from the 2nd quarter 2006 compared to the 2nd quarter 2010.  They are presented in the same order as the sectors shown in the table above for taxable sales by sector.

Number of Businesses by Sector -- Oct. 2010

Source: Virginia Department of Taxation/Weldon Cooper Center for Public Service

According to the Quarterly Census of Employment and Wages, the number of retail positions in the City decreased 10.1 percent from 8,165 in the first quarter of 2006 to 7,336 in the first quarter of 2010. 


1. Much of the data in this analysis is taken from the Virginia Department of Taxation and can be found on the Weldon Cooper Center for Public Service’s website.  There are some major limitations to the data.  The data was sorted differently before 2005, so only comparisons from 2006 forward are useful.  Also, over time, the State has gradually refined its method of collecting sales data and the categories to which business establishments have been assigned, which may account for some of the change in retail mix from 2006 to the present.  The data are not configured to allow users to allocate taxable sales geographically within the City, nor is it possible to see which specific businesses fall into each category.


 

301 King St.
Alexandria, VA 22314
703.746.3900
Fax: 703.838.4987
E-mail

Office Hours:
Monday - Friday
8 a.m. - 5 p.m.