IssuesTaxes & SpendingSeptember Sales Tax Collections Down 6.1% from 2019

Texas' economy is still reeling from business closures issued because of the pandemic and continues to struggle even after the turn of the new fiscal year.
October 1, 2020
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The opening month of the new fiscal year brought with it a familiar story: Texas’ commerce remains depressed as September’s sales tax revenues are 6.1 percent below the totals from the same month in 2019.

Texas closed out the 2019-2020 Fiscal Year about 3.4 percent behind the previous year’s collections. Luckily, before the pandemic, the state had outpaced last year. But the shutdowns across the state have been a detriment to its economic health.

Comptroller Glenn Hegar said of the report, “The COVID-19 pandemic and low price of crude oil continue to weigh on the Texas economy and sales tax revenue.”

Crude oil’s price dropped significantly at the pandemic’s outset due to the travel demand depression and a global supply fight — and then plunged to never-before-seen lows back in April — but has recovered back to roughly half of its pre-pandemic price.

Because of the state’s reliance on severance taxes, Hegar altered his biennium estimations, projecting a $4.6 billion budget shortfall.

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The severance tax for oil yielded a 32 percent decrease and for natural gas a 28 percent decrease from the previous year’s level.

“As was the case the last month, state sales tax receipts from all major sectors, other than retail trade, were down compared with the same month last year, with the steepest declines in the oil and gas-related sectors,” Hegar added.

The state’s total tax collections are down 6.6 percent from the same month last year.

Texas’ utility taxes are up 130 percent, which tracks with more people staying home, while cigarette and tobacco taxes are up 125 percent.

The biggest percentage increase comes from franchise tax collections, up 340 percent from the previous year.

“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,” Hegar concluded.

Illustrating some semblance of recovery from the drastic state of affairs early on during the pandemic, sales tax collections in July, August, and September were only down 2.5 percent from the same periods in 2019.

Earlier this month, Governor Abbott announced a new metric and standard for further re-openings of the economy. Hospital regions whose coronavirus patients make up fewer than 15 percent of their total bed counts. Certain businesses in those qualified regions may open to 75 percent capacity.

At the time of the announcement, only three regions — Laredo, the Lower Rio Grande Valley, and Victoria — failed to meet that standard.

Bars remain closed across the board.

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Brad Johnson

Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad watching and quoting Monty Python productions.