Oil production, coronavirus drag on Texas sales tax revenue

Texas sales tax revenue of $2.98 billion in November fell 6.3% below the same month last year as falling oil production and the COVID-19 pandemic continued to weaken the economy, Comptroller Glenn Hegar said.

Collections have been lower than last year’s in seven of the calendar year’s 11 months.

The majority of November sales tax revenue is based on sales made in October and remitted to the agency in November.

“November state sales tax collections continued the trends of recent months, with receipts down from a year ago in all major economic sectors other than retail trade,” Hegar said.

Increased collections from retail trade reflected continued heightened spending for home improvements in response to the pandemic, according to the comptroller.

Oil production tax revenues of $199 million were down 42% from November 2019 while natural gas production tax revenues of $76 million fell 36% year over year.

“The steepest declines were again in oil- and gas-related sectors because well drilling and well completion remain depressed,” Hegar said. “Receipts from the information sector were also notably down due to the federal ban on sales taxation of internet access service.”

Total sales tax revenue for the three months ending in November 2020 was down 5.3% compared to the same period a year ago. Sales tax is the largest source of state funding for the state budget, accounting for 59% of all tax collections.

While the effects of the COVID-related economic slowdown are less prominent than they were earlier this year, they continued to be evident in some sources of revenue in November, Hegar said.

“With sales tax collection responsibility for online marketplaces and remote sellers now in place for more than a year, increased collections from online vendors reflected the pandemic-accelerated market share shift from in-store to online shopping,” he said.

“Receipts from restaurants remained down from last year, but significantly higher than in the early days of the pandemic, as restrictions have eased on in-person dining and consumers continue to embrace pick-up and delivery restaurant service,” he said.

Hotel occupancy tax revenue, which supports bonds for convention centers, stadiums and other public facilities, was down 46% in November.

Alcoholic beverage tax collections were down 19%.

Taxes on the sales and rentals of motor vehicles sales and rental taxes were down 1.9%, while taxes on motor fuels collected at the pump fell 0.6%.

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