Texas Sales Tax Collections See Significant Drop

Texas Comptroller Glenn Hegar reported this week state sales tax revenue totaled $2.61-billion in May, representing a 13.2-percent decline from May 2019 and the steepest year-over-year decline since January 2010.

“Significant declines in sales tax receipts were evident in all major economic sectors, with the exception of telecommunications services,” Hegar said. “The steepest decline was in collections from oil and gas mining, as energy companies cut well drilling and completion spending following the crash in oil prices.

“The business closures and restrictions and stay-at-home orders due to the COVID-19 pandemic spurred deep drops in collections from restaurants, amusement and recreation services, and physical retail stores. These declines were offset in part by increases from big box retailers and grocery stores that remained open as essential businesses, online retailers and restaurants that could readily pivot to takeout and delivery service.

“With the easing of state and local government social distancing orders beginning in May, business activity in the sectors most affected by measures to curb the pandemic should begin to slowly recover, but operations resuming at reduced capacity will result in continued reductions in employment, income and activity subject to sales tax for months to come.”

Sales tax is the largest source of state funding for the state budget, accounting for 57 percent of all tax collections, but the effects of the economic slowdown and low oil prices were evident in other sources of revenue in May 2020. Texas collected the following revenue from other major taxes:

  • motor vehicle sales and rental taxes — $265 million, down 38 percent from May 2019 and a modest improvement over April’s results;
  • motor fuel taxes — $221 million, down 30 percent from May 2019 and the steepest drop since 1989;
  • natural gas production tax — $31 million, down 76 percent from May 2019;
  • oil production tax — $90 million, the lowest monthly amount since July 2010, down 75 percent from May 2019 and the steepest drop since a 77 percent drop in March 1988;
  • hotel occupancy tax — $8 million, down 86 percent from May 2019 and the steepest drop on record in data going back to 1982; and
  • alcoholic beverage taxes — $28 million, down 76 percent from May 2019 and the steepest drop on record in data going back to 1980.

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