Franchise Tax Collections Ahead Of Projections

Franchise Tax Collections Ahead of Projections; State Sales Tax Revenue Totaled $2.4 Billion in May

(AUSTIN) — Texas Comptroller Glenn Hegar said today that state franchise tax revenue for fiscal 2016 is well above the Certification Revenue Estimate projections made last fall, while state sales tax revenue in May totaled $2.41 billion, down 7.1 percent compared to May 2015.

“The comparison in sales tax revenue to the previous year is unfavorable because May 2015 collections were abnormally strong,” Hegar said. “In fact, May 2015 saw the second-highest monthly collections in Texas history. The decline is largely due to continued drops in collections from oil- and natural gas-related sectors, reflecting the continued contraction in drilling activity.”

Hegar also said that state franchise tax revenue for fiscal 2016 totaled $3.7 billion through May, ahead of earlier projections included in the Certification Revenue Estimate. This amount is lower than franchise tax revenues collected during the same period last fiscal year due to permanent tax rate cuts enacted during the 2015 legislative session.

Total sales tax revenue for the three months ending in May 2016 is down 1.0 percent compared to the same period a year ago. Sales tax revenue is the largest source of state funding for the state budget, accounting for 56 percent of all tax collections. Motor vehicle sales and rental taxes, motor fuel taxes and oil and natural gas production taxes also are large revenue sources for the state.

In May 2016, Texas collected the following revenue from those taxes:

• motor vehicle sales and rental taxes — $383.7 million, up 61.0 percent from May 2015;*
• motor fuel taxes — $287.1 million, down 0.9 percent from May 2015; and
• oil and natural gas production taxes — $148.4 million, down 45.6 percent from May 2015.

For details on all monthly collections, visit the Comptroller’s Monthly State Revenue Watch.

*State motor vehicle sales taxes are remitted to county tax assessor-collectors who in turn remit them to the state. To cover the costs of collecting these taxes, counties are permitted to retain 5 percent of the preceding year’s collections. This tax retention occurs during one month each year and results in lower-than-usual state revenues for the month in which counties retain their 5 percent. Counties retained that amount in April this year, but did so in May last year. This resulted in a sharp drop in April 2016 collections compared to April 2015, and mostly accounts for the large gains in May 2016 as compared to May 2015.