Texas sales tax revenues plummet, with worse to come

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Texas sales tax collections for April fell 9.3% from the previous year to $2.58 billion, the sharpest drop since January 2010 and the end of 31 straight months of year-over-year growth.

The April figures represent sales in March, a month in which the effects of business shutdowns to slow the sprad of the coronavirus began to show their impact during the final two weeks.

Texas Comptroller Glenn Hegar said the totals in next month’s report are certain to be worse since they will cover the month of April.

“State sales tax collections declined as a result of efforts to stem the spread of COVID-19 through business closures, crowd limits and stay-at-home orders adopted in the state, as well as a precipitous drop in worldwide demand for oil,” Hegar said. “The steepest declines in tax remittances were from businesses most quickly and dramatically affected by social distancing: restaurants, performing arts venues, movie theaters, theme parks and fitness centers, as well as department stores and boutique retail shops.”

In previous years April collections were higher than those in March, but this report reversed that trend with April running 4% below the previous month.

Along with the COVID-19 pandemic that has closed most businesses in the state, oil prices have collapsed in April, falling to nearly negative $38 on one day of futures trading. The plummeting price has brought layoffs and bankruptcies at oil producing regions across the state.

Taxes on oil production of $191 million were down 45%, and natural gas production tax revenues of $67 million fell 48% from April 2019.

Hotel occupancy tax revenues supporting convention centers, sports and entertainment venues fell 63% to $24 million, the deepest drop in data going back to 1990.

Alcoholic beverage taxes generated $57 million, down 55% from April 2019. Declines were driven by mixed beverage gross receipts and sales taxes, both of which were down more than 58%, Hegar said. Excise taxes on beer were up 16% from April 2019, while wine excise taxes were up 9% from April 2019.

Taxes on motor vehicle sales and rentals produced $164 million, a 45% drop from April 2019. It was the largest monthly drop on record in data going back to 1983.

Motor fuel taxes, generally collected at the pump, fell 12%, the steepest drop since 1991.

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