Categories: BusinessNewsTexas

Despite High Unemployment, July State Sales Tax Was Better Than Expected

AUSTIN — Texas Comptroller Glenn Hegar today said state sales tax revenue totaled $2.98 billion in July, 4.3 percent more than in July 2019.

The majority of July sales tax revenue is based on sales made in June and remitted to the agency in July. Widespread social distancing requirements were more relaxed across the state in June than in previous months.

“State sales tax collections in July were better than expected, increasing despite the high unemployment due to the pandemic,” Hegar said. “The increase was due to a surge in collections from the retail trade sector; receipts from other major sectors — including mining, construction, wholesale trade, services, and restaurants — showed significant declines.

According to Hegar, collections from e-commerce were up sharply, as many consumers chose to shop online rather than at brick-and-mortar stores.

Also, more online marketplace and remote vendors are required to collect and remit Texas tax following the Wayfair decision and subsequent legislation passed during the last legislative session.

Increased time spent at home both for teleworking and staycations, in lieu of leisure travel, spurred sharply higher spending on home improvements.

“Collections from food and beverage stores also were up strongly, as consumers replaced purchases of alcohol from restaurants and bars with alcohol purchased for off-premise consumption (alcohol sales at bars and restaurants are subject to mixed beverage taxes, not sales and use tax),” Hegar said. “Collections from sporting goods stores also rose significantly, as consumers turned to home workouts, bicycling, boating, camping and other forms of outdoor recreation consistent with social distancing. With about 1.3 million Texans with continued claims for insured unemployment and another 184,000 receiving benefits under the Pandemic Unemployment Assistance program in June, it’s likely that consumer spending was significantly supported by enhanced benefits provided by the federal CARES Act and related legislation enacted in response to the COVID-19 pandemic. With the expiration of these benefits at the end of July, consumer spending and sales tax collections may decline in the coming months.”

Total sales tax revenue for the three months ending in July 2020 was down 5.3 percent compared to the same period a year ago.

Sales tax is the largest source of state funding for the state budget, accounting for 57 percent of all tax collections.

The effects of the economic slowdown and low oil prices were more evident in other sources of revenue in July 2020, though most were improved compared to previous months.

Texas collected the following revenue from other major taxes:

  • motor vehicle sales and rental taxes — $466 million, down 3.7 percent from July 2019;
  • motor fuel taxes — $304 million, down 2.2 percent from July 2019;
  • oil production tax — $187 million, down 40 percent from July 2019;
  • natural gas production tax — $37 million, down 71 percent from July 2019;
  • hotel occupancy tax — $34 million, down 42 percent from July 2019; and
  • alcoholic beverage taxes — $110 million, down 6.2 percent from July 2019. These collections were inflated by a delay in liquor tax remittances, resulting in the July receipt of four months’ worth of remittances in liquor taxes due to the Texas Alcoholic Beverage Commission. Mixed beverage gross receipts and sales taxes, which typically make up the bulk of monthly alcoholic beverage tax collections, were down 41 percent compared to July 2019.

Fiscal 2020 franchise tax collections, which were deferred to July, totaled $4.17 billion, 4.8 percent more than in fiscal 2019 year-to-date. 

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