Texas Comptroller Glenn Hegar reported this week state sales tax revenue totaled $3.4 billion in May, the highest-ever monthly total and 30.1 percent more than in May 2020.
As with April’s results, year-over-year increases for most tax revenues this month and in the coming months are projected to be among the highest in the history of the data series. According to Hegar, this is due to base effects: year-ago revenue collections to which this year’s collections are compared were severely suppressed by the pandemic. Compared to May 2019, sales tax collections were up 12.9 percent.
The majority of May sales tax revenue is based on sales made in April and remitted to the agency in May.
“Resurgent consumer spending drove monthly state sales tax collections to a new high,” Hegar said. “Supported by the end of pandemic restrictions, further vaccination progress and declines in COVID-19 cases and hospitalizations, continued recovery in employment, and federal stimulus checks and enhanced unemployment benefits, receipts from all retail sectors other than grocery stores surpassed pre-pandemic levels.”
“Sales at retailers that had benefited from pandemic spending – online and big box general merchandisers, building materials and home furnishings stores, sporting goods and hobby stores – continued at elevated levels, while sales at retailers severely depressed last year, such as clothing stores and electronics and appliance stores, rebounded sharply from last spring.”
As the economic recovery has continued, more and more restaurant owners have struggled with a combination of staffing shortages and rising supply costs, but Hegar’s report does indicate that light may be showing up at the end of the tunnel.
“Spending at restaurants also surpassed pre-pandemic levels, with increased dine-in patronage adding to still elevated take-out and delivery business. While total spending in the sector increased sharply from a year ago, the recovery was uneven, with business at large popular restaurant chains up sharply while many smaller venues continued to languish. Spending at theme parks and live entertainment venues, though remaining below pre-pandemic levels, also was up significantly from a year ago, while business at fitness centers showed little evidence of recovery.”
Some sectors have continued to struggle for consecutive months, most notably the oil and gas industry.
“Receipts from oil and gas-related sectors fell below year-ago levels, as drilling and well development activity remained substantially below pre-pandemic levels despite the rise in crude oil prices in recent months.”
Total sales tax revenue for the three months ending in May 2021 was up 19.4 percent compared to the same period a year ago. Sales tax is the largest source of state funding for the state budget, accounting for 59 percent of all tax collections.
