Bill Frank, Ventura County Taxpayers Foundation
You’ve probably seen the Amazon warehouse off the 101 in Oxnard, but you’ve never stopped to consider the tax implications. They are substantial. The sales tax revenue generated by Amazon’s distribution warehouse in Oxnard causes a loss of revenue for other cities in Ventura County as those municipalities are not collecting the sales tax. Here’s why.
California passed a law, AB147, because of the ruling in the Wayfair case in the US Supreme Court. Called California’s new online sales tax collection law, AB 147 allows the state to collect sales tax revenue based on the city where the buyer lives. In other words, if you live in Ventura and buy something online, you pay Ventura’s sales tax rate of 7.75%.
The sales tax rate in Ventura County is 7.25%. In some cities, it’s higher because voters have approved extra sales taxes for specific purposes. For most cities, however, the basic 7.25% sales tax is divvied up this way. California’s General Fund receives 3.9375%. Ventura County Realignment receives 1.5625%. County Public Safety gets 0.5%, and the Countywide Transportation Fund receives 0.25%. That leaves 1% for each city’s General Fund, a part of the sales tax known as the Bradley-Burns portion.
Having an Amazon warehouse in Oxnard matters. Under AB 147, if Amazon ships goods from a warehouse outside the state, the 1% Bradley-Burns part of the sales tax goes to the city where the buyer lives. Yet, because Amazon has a warehouse in Oxnard, the 1% Bradley-Burns part of the sales tax goes to Oxnard rather than the city where the buyer lives. As a result, the other nine cities in Ventura County lose out.
Cities are only now realizing the exact effect of the change. For example, the Director of Finance of Ventura estimated what the city would lose. He calculated Ventura would lose between $750,000-$1,200,000 per year from online sales through Amazon. The amount in other cities will differ, but there is no doubt that each city’s General Fund will suffer.
Did city officials in Oxnard know of the sales tax windfall to the city of locating the warehouse there? It’s uncertain. One thing is sure, though. The other nine cities in the county were unaware of how the Amazon warehouse in Oxnard would hurt them.
It’s early, and each city is learning the total sales tax revenue loss it faces. One thing is sure, though. The General Funds of the other cities in Ventura County will lose revenue because of the Oxnard Amazon warehouse.
What that revenue loss will mean for the residents of those cities is this. Cities will cut services, or there will be a scramble to replace the lost revenue through increased user fees or taxes. Unfortunately, none of these prospects is good.
This situation highlights the complexities of sales tax collection in the digital age. Yet, it’s surprising that City Councils throughout Ventura County are not more concerned about the loss of revenue.
The city of Moorpark is the one city in Ventura County that acted. In September 2021, Moorpark joined the League of California Cities to call on California’s legislators to pass legislation to create a more fair and equitable distribution of the Bradley-Burns 1% local sales tax.
At first, you may not have thought about how the Amazon warehouse in Oxnard impacts you. What appeared to be a simple real estate transaction turned into an inequitable sales tax windfall for one city at the expense of nine others. When it comes to distributing sales tax, it takes time for the impact to reach residents. Yet, in this case, the pattern is evident early. Nine cities will suffer unless voters and elected officials take steps to diminish the effect of AB147.