Texas’ sales tax haul dips 6.1% in September, with retail trade a rare bright spot

AUSTIN — Texas collected 6.1% less in sales tax in September than a year earlier, Comptroller Glenn Hegar said Thursday.

Retail trade was a rare bright spot, he said.

The state’s oil and gas sector, though, continued to get hammered. So did all other major sectors except retail.

A pre-pandemic bolstering of sales-tax collections on e-commerce has helped offset what would otherwise be even bigger setbacks to the state’s revenue workhorse, Hegar said.

“The COVID-19 pandemic and low price of crude oil continue to weigh on the Texas economy and sales tax revenue,” he said in a written statement.

In five of six months since the pandemic struck, the state’s sales tax haul is down from 2019. A 4.3% increase in July, based on Gov. Greg Abbott’s full reopening of the economy in June, was the only exception. Otherwise the trend has been down: By 9.3% in April, 13.2% in May, 6.5% in June, 5.6% in August and 6.1% last month.

In July, Hegar announced that what had been expected to be a nearly $3 billion positive end balance in general-purpose revenue for this cycle instead would be at least a $4.6 billion shortfall.

Last week, in his office’s publication “Fiscal Notes,” Hegar explained why prospects for state budget writers when the Legislature meets next year could get better – or even worse.

“COVID-19 is not disappearing,” he said. “We’re going to have to learn how to strike a balance between keeping people safe and allowing the economy to slowly open up. We have to recognize the new norm.”

But “human behavior” is hard to forecast, he said.

“Even when restrictions are lifted or loosened, when will people feel safe going to the movies again? When will they feel comfortable packing into stadiums or attending conferences and conventions? It’s difficult to predict how consumers will respond in the aftermath of such unprecedented events.”

Last month, in addition to sales tax, most other state taxes continued to perform poorly.

Hotel occupancy taxes declined by 36.9%; alcoholic beverage taxes, by 33.7%; oil production tax, by 31.9%; natural gas production tax, by 28.1%; and motor fuels taxes, by 9.7%.

A change in federal law that took effect in July, which bars the state from collecting sales tax on internet access service, hurt receipts from the state’s 6-1/4-percent sales tax, Hegar said.

The bright spots in sales tax included Texans’ new, pandemic-driven focus on remodeling their homes and getting outdoors for exercise and recreation in places safe from the virus, he said.

A Supreme Court decision removing obstacles from state taxation of internet commerce also helped greatly, the Republican comptroller said.

“While tax receipts grew from some lines of retail business, especially those related to home improvements and outdoor recreation, most of the increase from retail trade was due to remittances from online out-of-state vendors and marketplace providers who did not collect Texas tax a year ago, but which are now required to collect and remit Texas tax following the Wayfair decision and subsequent legislation passed last session.”

Sales-tax receipt data also show winners and losers during the COVID-19 outbreak, he noted.

The pandemic has altered consumers’ behavior, with “generally increased receipts from big box retailers and declines from department stores, apparel stores and other mall and strip center specialty retailers,” he said. “Receipts from restaurants also remain significantly below pre-pandemic levels.”

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