City Council Agenda
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Memo to: |
Manteca City Council |
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From: |
Matthew Boring, Interim Finance Director |
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Date: |
September 16, 2025 |
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Subject: |
Support for Cal Cities City Managers Sales Tax Working Group’s Proposed Recommendations to Change the Allocation of the Bradley-Burns 1% Sales Tax on E-Commerce Transactions |
Recommendation:
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Staff recommends that the City Council provide direction on supporting the City Managers Sales Tax Working Group's proposed recommendations to change the allocation of the Bradley-Burns 1% sales tax on e-commerce transactions, and to direct staff to communicate this support to Cal Cities and relevant legislative bodies.
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Background:
The Bradley-Burns Uniform Local Sales and Use Tax Law (Revenue and Taxation Code §§ 7200 et seq.) allows California cities and counties to receive 1% of the statewide sales and use tax collected on taxable retail sales. Traditionally, this tax has been allocated on a "situs-based" model, meaning the revenue is distributed to the jurisdiction where the sale is deemed to occur — typically where the physical store or warehouse is located.
With the rapid rise in e-commerce, especially post-pandemic, this situs-based model has created significant inequities among local jurisdictions. Sales tax from online purchases is often allocated to large distribution centers, which are disproportionately located in a few cities, rather than to the local jurisdictions where the buyers reside and receive the goods.
This has resulted in:
- Disproportionate concentration of local sales tax revenue in a limited number of jurisdictions.
- Reduced funding capacity for general services in communities without major fulfillment centers.
- Erosion of fiscal sustainability for cities like Manteca that are seeing increased population and service demands but not a proportional share of online sales tax revenue.
In response to these issues, the Cal Cities City Managers Sales Tax Working Group has studied the impacts of e-commerce on the distribution of Bradley-Burns revenue and has proposed recommendations to reform the allocation method for online sales to better reflect consumer-based transactions.
Key aspects of the proposed recommendations include:
- Transitioning the Bradley-Burns 1% tax on e-commerce transactions to a hybrid model where approximately 50% of the tax collected would be allocated using the current distribution method and 50% would be allocated based on the delivery address.
- Ensuring that jurisdictions where goods are delivered (i.e., where the consumers reside) receive a more equitable share of the tax.
- Allowance for plus/minus 10% to the recommended distributions to allow flexibility when drafting the bill.
- A five-year phase-in of the recommended distribution change by the California Department of Tax and Fee Administration (CDTFA).
These recommendations seek to create a fairer and more sustainable fiscal system that aligns with modern purchasing behaviors and supports the financial health of all cities, not just those hosting fulfillment centers.
Supporting these recommendations aligns with Manteca's long-term financial planning goals and recognizes the importance of advocating for equitable revenue distribution, especially as our community continues to grow and service demands increase.
Fiscal Impact:
While this proposal does not have an immediate fiscal impact, adoption of the Working Group's recommendations could result in increased future sales tax revenues for Manteca by ensuring a more equitable share of e-commerce transactions is returned to the city where residents live and consume goods.
Documents Attached:
Attachment 1 – Draft Letter of Support
Attachment 2 – Presentation