The retail landscape has changed dramatically since the advent of the internet era with round-the-clock one-click shopping that is replacing the trip to the mall as a past time. While one-click shopping has been embraced by all segments of the population, for the 20-30 year old crowd that has grown up with apps and downloadable music, this way of shopping is the norm.
In addition, instant comparison shopping made possible by online access has helped keep prices for many retail items such as apparel and electronics in check. Savvy shoppers can also purchase items from remote retailers that have not collected sales taxes on the part of the District.
These changes in shopping patterns and demographics have had a noticeable impact on the District’s sales tax base. Since 2006, tax collections from general retail sales items such as apparel and electronics have grown only moderately by 11.4 percent. This pales in comparison to the growth in sales tax collections from restaurant and bars which have surged by more than 38 percent, as younger consumers tend to spend more eating away from home, fueled in part perhaps by the savings generated from purchasing from the likes of Amazon. Interestingly, the growth in retail sales is even lower than the growth in the District’s overall population of 13 percent, suggesting that taxable sales per capita have declined since 2006.
The changes that have occurred in the District’s sales tax base will likely continue to amplify with the likes of Airbnb and Kickstarter only recently starting to impact sales in the District.
Sharain Ward co-authored this post.