Sales tax collections plunge again for August

HARLINGEN — One month after July gains buoyed hopes of a sustained state economic recovery from the impact of COVID-19, August sales tax collection numbers are bound to disappoint.

Comptroller Glenn Hegar released figures this week which showed July gains were largely reversed, with August down 5.6 percent from a year ago.

While overall sales tax revenue was $34.10 billion, up 0.2 percent from a year ago, sharp declines in nearly all sectors indicate a reversal from the bump from July, when sales tax collections were 4.3 percent above the previous year.

“ Those July gains, however, were largely reversed in August, bringing actual collections closer to, but still ahead of, our estimate,” Hegar said.

Sales tax numbers always show a lag, and those healthy July numbers are most likely due to the fact Texas Gov. Greg Abbott eased some of the restrictions and shutdowns related to COVID-19 in early June, leading to increased economic activity.

Trends in most economic sectors turned down in August.

Motor vehicle sales and rental tax revenue was $4.8 billion, down 3.9 percent from fiscal 2019.

Franchise tax revenue was $4.42 billion, up 4.8 percent over fiscal 2019.

Oil production tax revenue was $3.23 billion, down 16.9 percent from fiscal 2019.

Natural gas production tax revenue was $925 million, down 45.1 percent from fiscal 2019.

“ State sales tax collections from all major sectors other than retail trade declined significantly from year ago levels, with the largest declines in the oil- and gas-related sectors,” Hegar said.

“ Collections from retail trade were up, as increased consumer spending on home improvements, home entertainment, distance learning and outdoor recreation in response to the COVID-19 pandemic spurred higher remittances from building materials, home furnishing, electronics and appliance and sporting goods retailers,” he added.

Hegar also said July consumer spending was spurred to at least some degree by enhanced federal benefits, which since have been reduced or expired.

“ Consequently, further declines in sales tax revenue may ensue in the coming months,” Hegar said.

Sales tax is the largest source of state funding for the state budget, accounting for 59 percent of all tax collections.