Texas sales tax revenues show signs of recovery

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Texas sales tax collections of $2.67 billion for June showed improvement over the previous month but fell 6.5% below revenues collected in June 2019, Texas Comptroller Glenn Hegar reported.

It was the third consecutive monthly decline compared to 2019's levels, reflecting the impact of the COVID-19 pandemic on virtually every category of business. So far, May was by far the worst month for Texas, with sales tax collections down 13.2% compared to the same month last year.

Most of the June sales tax revenue is based on sales made in May and remitted to the agency in June. Widespread social distancing requirements were relaxed across much of the state in May.

“The decline in state sales tax collections was driven principally by steep drops in remittances from oil- and gas-related sectors,” Hegar said. “Collections from the construction and amusement service sectors were also sharply down.

“While collections from restaurants also were depressed, the extent of the decline was checked by increased takeout and delivery sales,” he said. “Retail trade receipts rose significantly, buoyed by increased online shopping and building material purchases, as business premises were modified for COVID-19 precautions.”

Taxes on sales of alcoholic beverages, one measure of social activity in the state, were down 47% in June compared to a 76% decline in May.

“Retail sales likely also were boosted by increased alcoholic beverage sales at package, grocery and convenience stores,” Hegar said. “That’s because this category of spending shifted from restaurant and bar on-premise consumption, subject to mixed beverage taxes, to purchases for at-home consumption subject to sales tax.

"Increased spending by businesses to facilitate teleworking resulted in higher tax collections from vendors of computer hardware and software products,” he added.

Total sales tax revenue for the three months ending in June 2020 was down 9.7% compared to the same period a year ago.

Sales tax provides 57% of funding in a state with no income tax.

The effects of the economic slowdown and low oil prices also were evident in other sources of revenue in June, Hegar said.

Taxes on the sales and rentals of cars and trucks produced $394 million, down 7.6% from June 2019, a substantial improvement from results in April and May.

Taxes on gasoline and diesel fuel were down 24% to $250 million.

Natural gas production tax revenue fell 84% to $20 million while oil production taxes fell 77% to $83 million.

Hotel occupancy tax collections of $23 million were down 61% compared to June 2019.

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