Texas’ sales tax haul dips 6.1% in September, with retail trade a rare bright spot

Updated at 4:19 p.m.: to include additional economic data gathered by Hegar’s office. AUSTIN — Texas collected 6.1% less in sales tax in September than a year earlier, Comptroller Glenn Hegar said Thursday. Retail trade was a rare bright spot, he said. The state’s oil and gas sector, though, continued […]

Updated at 4:19 p.m.: to include additional economic data gathered by Hegar’s office.

AUSTIN — Texas collected 6.1% less in sales tax in September than a year earlier, Comptroller Glenn Hegar said Thursday.

Retail trade was a rare bright spot, he said.

The state’s oil and gas sector, though, continued to get hammered. So did all other major sectors except retail.

A pre-pandemic bolstering of sales-tax collections on e-commerce has helped offset what would otherwise be even bigger setbacks to the state’s revenue workhorse, Hegar said.

“The COVID-19 pandemic and low price of crude oil continue to weigh on the Texas economy and sales tax revenue,” he said in a written statement.

In five of six months since the pandemic struck, the state’s sales tax haul is down from 2019. A 4.3% increase in July, based on Gov. Greg Abbott’s full reopening of the economy in June, was the only exception. Otherwise the trend has been down: By 9.3% in April, 13.2% in May, 6.5% in June, 5.6% in August and 6.1% last month.

Texas’ monthly sales-tax haul has slumped again, raising questions about how the state economy is faring amid the coronavirus pandemic. Wrapping up the state fiscal year, Comptroller Glenn Hegar on Tuesday issued revenue numbers that had more down arrows than up arrows.

In July, Hegar announced that what had been expected to be a nearly $3 billion positive end balance in general-purpose revenue for this cycle instead would be at least a $4.6 billion shortfall.

Last week, in his office’s publication “Fiscal Notes,” Hegar explained why prospects for state budget writers when the Legislature meets next year could get better – or even worse.

“COVID-19 is not disappearing,” he said. “We’re going to have to learn how to strike a balance between keeping people safe and allowing the economy to slowly open up. We have to recognize the new norm.”

But “human behavior” is hard to forecast, he said.

“Even when restrictions are lifted or loosened, when will people feel safe going to the movies again? When will they feel comfortable packing into stadiums or attending conferences and conventions? It’s difficult to predict how consumers will respond in the aftermath of such unprecedented events.”

Nationally, movie box office receipts dropped to $13.1 million for the week of Sept. 18-24, down from the $30 million gross in the week of Sept. 4-10, which was buoyed by the opening of Tenet over Labor Day weekend, according to BoxOfficeMojo.com. In January, movie theaters’ weekly average haul was $72.5 million.

In tourism, the pandemic continues to depress – only about one-third of the domestic air travelers there used to be. Since early April, when U.S. hotels’ occupancy rate dropped to 21%, they’ve clawed back some of the lost business. But for the week ending Sept. 19, occupancy was only 48.6%, according to STR.com.

In September, Texas’ receipts from hotel occupancy taxes declined by 36.9% from a year earlier.

Almost as bad were the decreases in revenue from alcoholic beverage taxes, which fell by 33.7% from September 2019; oil production tax, by 31.9%; and natural gas production tax, by 28.1%. Receipts from motor fuels taxes dipped 9.7% from a year earlier.

A change in federal law that took effect in July, which bars the state from collecting sales tax on internet access service, hurt receipts from the state’s 6-1/4-percent sales tax, Hegar said.

The bright spots in sales tax included Texans’ new, pandemic-driven focus on remodeling their homes and getting outdoors for exercise and recreation in places safe from the virus, he said.

A Supreme Court decision removing obstacles from state taxation of internet commerce also helped greatly, the Republican comptroller said.

“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.”

Sales-tax receipt data also show winners and losers during the COVID-19 outbreak, he noted.

The pandemic has altered consumers’ behavior, with “generally increased receipts from big box retailers and declines from department stores, apparel stores and other mall and strip center specialty retailers,” he said. “Receipts from restaurants also remain significantly below pre-pandemic levels.”

In Dallas last Friday, seated diners at restaurants using the Open Table reservations app were down by 28% compared with the Friday of the same week last year. Statewide, the decline was 22%.

Across Texas, hours worked by hourly employees on Sept. 23 decreased by 25.2% from the same day of the week of a week in January, according to Homebase, which sells scheduling software to thousands of retailers, restaurateurs and other employers. For Dallas, for the latest date Homebase has made available – Aug. 28 – hours worked was off by 20% from January.

Texas Comptroller Glenn Hegar says revenue from the state oil-production tax will decline 31% from the previous budget cycle, and from the natural gas-production tax, by 42% — big factors in his decision Monday to decrease his revenue estimate.
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