Retail spending in Texas improved last month as November’s sales tax collections eclipsed those of October by nearly $260,000. Overall, the Texas Comptroller of Public Accounts collected almost $3 billion in sales taxes during last month — 6.3 percent lower than November 2019.
Comptroller Glenn Hegar said in a release, “Increased collections from retail trade reflected continued heightened spending for home improvements in response to the pandemic.”
Sales taxes amount to 59 percent of the state’s total tax collections. Total tax collections are down 8.6 percent from the same month last year.
Due to federal aid, the state’s net revenues are nearly six percent higher through the first three months of the 2020-2021 fiscal year than last year.
Pointing to the state’s previously booming and now struggling oil and gas industry, Hegar added, “The steepest declines were again in oil- and gas-related sectors because well drilling and well completion remain depressed. Receipts from the information sector were also notably down due to the federal ban on sales taxation of internet access service.”
Oil and gas production taxes were down 42 and 36 percent, respectively, from November 2019.
The service industry is still hurting, but recovering, as Hegar stated, “Receipts from restaurants remained down from last year, but significantly higher than in the early days of the pandemic, as restrictions have eased on in-person dining and consumers continue to embrace pick-up and delivery restaurant service.”
Hegar briefed the Legislative Budget Board (LBB) Monday on the state’s fiscal health. “Despite continuing to show year over year declines most months, revenue collections have exceeded our July expectations,” Hegar told the LBB.
He added, “There remains a great deal of uncertainty for our economic outlook here in Texas.”
Hotel occupancy and alcoholic beverage tax collections continue to show significant declines when compared to 2019, along with oil and natural gas production tax levels.
“The biggest bright spot has been our sales tax collections — by far our largest source of tax revenue.”
Across the country, October consumer spending grew 0.5 percent, indicating some degree of recovery. Hegar added that while other tax categories exhibited double-digit declines in collections in the second half of the 2020 fiscal year, sales tax collections were only down 4.8 percent.
Another contributor to sales tax’s relative stabilization, Hegar added, is that due to the Supreme Court’s South Dakota v. Wayfair decision, this year the state has collected sales taxes from online purchases that it could not a year ago.
Last week, the comptroller’s office remitted $2.27 billion to the Economic Stabilization Fund — the state’s savings account. The deposit, however, was significantly lower than in 2019 due almost entirely to the economic woes wrought by the pandemic and government-mandated shutdowns.
The state began the current biennium with $4.7 billion in general revenue-related funds, but the next biennium’s beginning balance will be far less.
“The outlook for the current two-year budget is not nearly as dire as we feared in July. The budget revenue estimate shortfall for this biennium is likely to be much more manageable. That said, crafting the next biennium budget will still likely be a difficult exercise,” Hegar concluded.
Effects of the pandemic and related shutdowns still linger, but are less prominent than earlier in the year, thus leading to the relative surge in consumer spending.
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