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Sales Losses in the First Quarter of the COVID-19 Pandemic: Evidence from California Administrative Data

Jan 2021
Working Paper
By  Robert Fairlie, Frank M. Fossen

COVID-19 led to a massive shutdown of businesses in the second quarter of 2020. Estimates from the CPS, for example, indicate that the number of active business owners dropped by 22 percent from February to April 2020. In this descriptive research note, we provide the first analysis of losses in sales and revenues among the universe of businesses in California using administrative data from the California Department of Tax and Fee Administration. The losses in sales average 17 percent in the second quarter of 2020 relative to the second quarter of 2019 even though year-over-year sales typically grow by 3-4 percent. We find that sales losses were largest in businesses affected by mandatory lockdowns such as Accommodations, which lost 91 percent, whereas online sales grew by 180 percent. Losses also differed substantially across counties with large losses in San Francisco (50 percent) and Los Angeles (24 percent) whereas some counties experienced small gains in sales. Placing business types into different categories based on whether they were essential or non-essential (and thus subject to early lockdowns) and whether they have a moderate or high level of person-to-person contact, we find interesting correlations between sales losses and COVID-19 cases per capita across counties in California. The results suggest that local implementation and enforcement of lockdown restrictions and voluntary behavioral responses as reactions to the perceived local COVID-19 spread both played a role, but enforcement of mandatory restrictions may have had a larger impact on sales losses.

Publication Keywords: 
shelter in place restrictions
social distancing restrictions
sales tax