Ontario auto dealers warn higher sales tax will drive customers out of city

A coalition of auto dealers and related associations told the council that increasing the city’s sales-tax rate risks "tax cannibalization," with customers traveling to neighboring lower-tax cities to buy or service vehicles. John Sykeson, executive director of the Inland Empire Auto Dealers Association, cited a commissioned study and projected long-term dealer revenue losses and decline in transactions; other dealers said consumer choice in nearby cities makes Ontario vulnerable to lost business.

Dealers said even a small per-transaction increase can change buyer behavior. "The study found that 69.7% of consumers said they will avoid making a vehicle purchase in a city that charges a higher sales tax," John Sykeson said, and several speakers urged the council not to put the measure on the ballot because of the potential economic impact on local dealers and service businesses.