Texas set an all-time high in sales tax collections for April, marking a dramatic reversal from the same month in 2020 when the pandemic began shutting down the economy.
Texas Comptroller Glenn Hegar said state sales tax revenue totaled a record $3.4 billion in April, 31.4% higher than a year ago.
Hegar said year-over-year increases for most tax revenues are expected to continue at high levels for a few months, since they are being compared to last year's pandemic-reduced levels.
Notwithstanding the pandemic, April’s sales tax collections were notably strong, Hegar said. Compared to April 2019 when the economic boom was in progress, sales tax collections were up 19.2%.
The majority of April sales tax revenue is based on sales made in March and remitted to the agency in April.
Because of changes in estimated revenue collections and updated Legislative Budget Board estimates of the state obligation for Foundation School Program funding, Hegar announced a revised Biennial Revenue Estimate Monday.
The revised BRE projects 2020-21 revenue available for general-purpose spending to be $113.88 billion and the ending balance in general revenue-related funds to be $725 million, an increase of $1.67 billion from the negative balance projected in the January 2021 BRE.
The increased ending balance, combined with upwardly revised projections of revenue collections for the 2022-23 biennium, results in an estimate of $115.65 billion available for general-purpose spending in 2022-23, an increase of $3.12 billion from the January BRE.
“When we finalized our economic forecast for the January BRE, COVID case counts and hospitalizations were on the rise, and the rollout of vaccines had just begun,” Hegar said. “Those conditions warranted caution about the near-term economic outlook.”
Hegar attributed a large share of the recovery to federal stimulus efforts.
“Spurred by a number of factors, April state sales tax collections increased sharply from a year ago,” Hegar said. “Collections from all major sectors other than mining and construction rose significantly, led by receipts from restaurants and retailers."
Spending this March, which showed up in April tax collections, was supported by widespread business reopenings and the lifting of capacity restrictions, greater consumer confidence in going out as the vaccine rollout progressed, federal stimulus checks and spending delayed from February into March due to the winter storm and power outage.
“Retail sector remittances were up across the board, with especially notable increases from clothing stores, online retailers, general merchandisers, sporting goods stores and building materials and home furnishings stores,” Hegar said.
Clothing stores were especially hard hit by the closure orders early in the pandemic and continued soft consumer demand as much of the workforce worked from home, but now appear to be rebounding strongly as consumers return to stores and those resuming office work buy clothes again, Hegar noted.
Despite reopenings and the lifting of all capacity restrictions in March, stay-at-home behavioral trends established during the pandemic continue to support rapid growth in online shopping and elevated spending for home improvements and sporting goods.
“Tax receipts from restaurants were up significantly over the previous year’s levels, with the growth principally attributable to the restaurants geared to takeout and delivery, but some popular dine-in chains exhibited a vigorous rebound,” Hegar said. “Nonetheless, the dine-in segment continues to languish, with many establishments now permanently closed.”
Total sales tax revenue for the three months ending in April 2021 was up 4.5% 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.
Other types of taxes showed strong growth across the board. Motor vehicle sales and rental taxes were up 27% for the month and motor fuel taxes rose 15%.
Oil production tax soared 75%, and natural gas production tax rocketed 247%.
Hotel occupancy tax, which suffered a deep slump over the year, rose 116% from April 2020 but was still 20% lower for the same month in 2019.
Alcoholic beverage taxes were up 110% from April 2020 and down 7% compared to April 2019.
