With economy booming, Texas sales tax receipts hit record for June

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DALLAS – A booming Texas economy produced record sales tax revenue for the month of June with collections of $2.77 billion representing a 13.7% increase.

On a percentage basis, June revenues increased at the highest rate in at least five years. The June total was the highest so far this year and just slightly behind the all-time record of $2.78 billion last November.

Texas Comptroller Glenn Hegar said revenue collections were strong across the board, including a 69% increase in oil and gas production taxes. Oil prices have steadily increased this year.

“Sales tax revenue increased for almost all major economic sectors,” Hegar said. “The strong revenue growth was led by collections from the mining and manufacturing sectors. The construction, wholesale and retail trade sectors also saw strong gains.”

Total sales tax revenue for the three months ending in June 2018 was up 12.4% compared to the same period a year ago. For the first six months of the year, sales tax revenue is up 10.2% and on pace to set a record. Monthly records have been set in every month this year so far.

With no state income tax, Texas relies on sales tax revenue for 58% of all tax collections.

Revenue from other major taxes on motor vehicle sales and rentals, motor fuel and oil and natural gas production also rose in June, Hegar said.

Motor vehicle sales and rental taxes increased 4.5% to $433 million. State taxes on motor fuel produced $325.4 million, a 4.2% increase from June 2017. The 69% increase in oil and natural gas production taxes provided $456.5 million, Hegar said.

Hegar said that a recent U.S. Supreme Court decision allowing states to collect sales taxes from out-of-state merchants may not represent a major windfall.

The comptroller anticipates that the state and local governments will see tax collections increase, but the amount depends on the implementation and resolution of several significant issues raised by the Supreme Court's ruling, Hegar said.

The U.S. Supreme Court decision in Wayfair v. South Dakota, is commonly referred to as Wayfair.

"As is often the case with Supreme Court decisions, the principles can be applied broadly on a nationwide basis, including here in Texas," Hegar said. "But it's up to my office to implement those principles in the way that best serves the state of Texas, our citizens and the businesses operating here. We're going to make sure we do this carefully, deliberately and with ample input from the public, the Legislature and the business community."

Under its existing legal authority, the Comptroller's office has started reviewing rules that may need updating. Hegar said this would not include any retroactive application of the new law to remote sellers that have no physical presence in Texas.

"We're looking forward to working with those affected businesses to ensure this is a smooth transition and a successful partnership," Hegar said.

Early 2019 is the target effective date for rule amendments, Hegar said. However, that could change pending issues that arise during the rulemaking process.

Gains from the ruling are likely to be lower than previous estimates of taxes uncollected by remote sellers, Hegar said. In the past year, for example, some remote sellers have volunteered to collect in anticipation of the Wayfair decision or for other reasons.

Wayfair already collects Texas sales and use taxes. Also, in order to avoid imposing an undue burden on interstate commerce, the state will likely relieve some out-of-state sellers from collection responsibilities, Hegar said.

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State budgets Sales tax Glenn Hegar State of Texas Texas