We know plenty of people are ready for spring. Businesses are too; local business owners tell us that harsh winters can decrease sales. To see to what extent this is true, we looked at the amount of sales tax revenue we collected from D.C. businesses each winter from 1986 to 2013 and compared it to winter snow totals. To control for other factors that affect sales over time, like D.C.’s increasing population and the 2008 recession, we used the portion of annual revenue coming from sales in the winter as our revenue measure in the graph below.
A number of factors affect sales, but the data seems to show that snow plays a role, especially for winters with high snow totals. All four winters with more than 30 inches of snow between 1986 and 2013 had sales below what we’d expect, and the winter of 2010 (a.k.a. Snowmageddon) was hit the hardest.
What exactly is this data? The sales tax data is from our office, the D.C. Office of Revenue Analysis. The snow data is from the National Climate Data Center. When we refer to “winter” we mean the months of December, January, and February.
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.
Change in Sales Tax Collections since FY 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.