Texas Sales Tax Collections Plummet 13 Percent - Texas Scorecard

Texas Comptroller Glenn Hegar announced today the state collected $2.61 billion in tax revenue last month, a decrease of more than 13 percent compared to last year’s collections and the steepest year-over-year decline since 2010.

In a press release, Hegar said losses were largely across the board and many were spurred by government shutdowns.

“Significant declines in sales tax receipts were evident in all major economic sectors, with the exception of telecommunications services. The steepest decline was in collections from oil and gas mining, as energy companies cut well drilling and completion spending following the crash in oil prices.

 

“The business closures and restrictions and stay-at-home orders due to the COVID-19 pandemic spurred deep drops in collections from restaurants, amusement and recreation services, and physical retail stores. These declines were offset in part by increases from big box retailers and grocery stores that remained open as essential businesses, online retailers and restaurants that could readily pivot to takeout and delivery service.

 

“With the easing of state and local government social distancing orders beginning in May, business activity in the sectors most affected by measures to curb the pandemic should begin to slowly recover, but operations resuming at reduced capacity will result in continued reductions in employment, income and activity subject to sales tax for months to come.”

The state’s sales tax is the biggest source of revenue for the state government—accounting for more than 57 percent of Texas’ total tax collections. However, the state’s other taxes—including the motor vehicle sales tax, motor fuel tax, hotel occupancy tax—were all down significantly as well, leading many to conclude the state will have a massive budget deficit.

All of these will factor into an updated budget projection Hegar will issue in July, in which he’s expected to announce the state will likely not collect enough tax revenue needed to pay for the budget passed by legislators last year.

That could mean a special session of the Texas Legislature would be required in order to make serious cuts, unless lawmakers believe there will be sufficient revenue inflows to hold off on meeting until the next legislature convenes in January. However, waiting that long to enact spending cuts reduces their efficacy considerably.

Grassroots leaders have called for Gov. Greg Abbott and other state leaders to get ahead of this by moving to reduce spending and prioritize tax relief immediately, but no significant action has been taken.