In FY 2025, the District collected more than $2.0 billion in general sales and use tax revenue across eight categories, each with different tax rates (Table 1). The main sources of sales tax revenue were the General Retail, Food & Drink (Restaurant), and Hotel subcategories, which together accounted for 93 percent of the total sales tax revenue. When adjusted for inflation, this analysis shows that the city’s restaurant sector experienced the steepest decline, with real activity in 2025 falling 15.1 percent compared to 2019.
Table 1 General Sales & Use Tax Revenue By Sales Tax Type for FYs 2019 & 2025
|
Subcategory |
Tax Rate |
FY 2019 ($ in thousands) |
FY 2025 ($ in thousands) |
% Chg. |
|
|
|
|
|
|
|
General Rate (Retail) |
6.00% |
$692,300 |
$961,531 |
38.9% |
|
Medical Marijuana |
6.00% |
$1,200 |
$2,084 |
73.7% |
|
Soft Drinks Not for Immediate Consumption |
8.00% |
NA |
$9,337 |
- |
|
Food & Drink for Immediate Consumption* |
10.00% |
$446,800 |
$567,871 |
27.1% |
|
Liquor |
10.25% |
$42,900 |
$41,856 |
-2.4% |
|
Rental Vehicles |
10.25% |
$15,700 |
$17,374 |
10.7% |
|
Hotels & Short Term Lodging** |
15.95% |
$319,200 |
$408,046 |
27.8% |
|
Parking |
18.00% |
$79,800 |
$82,647 |
3.6% |
|
|
|
|
|
|
|
Total |
|
$1,597,800 |
$2,090,748 |
30.9% |
Source: Office of the Chief Financial Officer
Hotel Sales Tax Collections
Following a sharp 72.6 percent decline in total hotel activity in 2020 and 2021 compared to 2019, District hotel sales tax revenues fully recovered by FY 2025. Last fiscal year, hotel sales tax brought in $408 million, making up 19.5 percent of all sales tax collections and exceeding 2019 nominal levels by 27.8 percent. Inflation accounted for about 12 percent of the revenue growth between 2019 and 2025, leaving real hotel activity 12.6 percent higher in 2025 than before the pandemic.
General Rate (Retail) Sales Tax Collections
In 2025, general retail sales tax revenue totaled $962 million, accounting for 46 percent of total sales tax revenue (Figure 2). This amount was 38.9 percent higher than the FY 2019 level in nominal terms. After adjusting for inflation, we find that only 21.6 percent of the retail tax growth from 2019 to 2025 was due to price increases. As a result, the District’s retail sales tax base grew by 8.9 percent over this period, including an 11.5 percent surge in 2022, driven by pent-up demand during the first two years of the pandemic. Since 2019, the city's real retail activity has grown steadily by an average of 1.4 percent annually.
Restaurant Sales Tax Collections
According to Figure 3, nominal restaurant sales tax revenue grew by 27.1 percent from 2019 to 2025. During the same period, average restaurant prices across the District increased by 33.2 percent. After accounting for price increases, we find that restaurant sales volume declined 15 percent. The observed growth in restaurant sales tax revenue over this period was driven solely by rising prices, not by increased sales.
During this period, the District's minimum wage increased from $14.00 in 2019 to $17.95 in 2025, a 28.2 percent rise, while the tipped minimum wage more than doubled from $4.45 to $10.00. However, the increase in the minimum wage was just one of many factors driving higher restaurant prices. Data from the national restaurant and food service industry reveal similar trends amid rising food input costs, higher rents, and increased operating expenses since the pandemic.
Figure 3 also shows that recent restaurant sales volume peaked in 2023, dropped by 7.4 percent in 2024, and fell an additional 4.1 percent in 2025. This decline in restaurant sales volume over the past two years, combined with ongoing high price inflation, underscores the challenges the sector faces in returning to pre-pandemic levels of real activity.
What is this Data?
Sales tax figures for this analysis come from the District’s Budget and Financial Plan (Chapter 3: Revenue) for FY 2019 to 2026. For hotel sales taxes, we used the U.S. city average consumer price index data for hotels obtained from the U.S. Bureau of Labor Statistics. For the General Rate (Retail) sales taxes, we used the all-items consumer price index for the Washington area. For the restaurant sales taxes, we used the consumer price index data for the “Food away from home” sector in the Washington area.
|
* Prepaid phone cards are also taxed at the 10% rate. |
|
** On April 1, 2023, the hotel tax rate increased from 14.95 to 15.95 |