“The rate of sales tax revenue growth continues to moderate, with the increase in May – compared with a year ago – representing the lowest annual rate of increase observed in the 26 months since the end of pandemic restrictions.”
Texas Insider Report: AUSTIN, Texas – Texas Comptroller Glenn Hegar today said state sales tax revenue totaled $3.84 billion in May, 4.1% more than in May 2022. The majority of May sales tax revenue is based on sales made in April and remitted to the agency in May.
“The rate of sales tax revenue growth continues to moderate, with the increase in May – compared with a year ago – representing the lowest annual rate of increase observed in the 26 months since the end of pandemic restrictions,” Hegar said.
“This slower growth is expected and in line with the economic outlook we detailed in our Biennial Revenue Estimate, as both the rate of inflation and growth in real economic activity slow as demand cools in the face of higher interest rate policy and reduced fiscal stimulus from the federal government.
“While receipts from the oil and gas mining sector continued their large year-over-year gains, with remittances once again nearly 50% higher than they were the same month last year, growth in receipts from other sectors driven by business spending stalled. Receipts from the construction, manufacturing and wholesale trade sectors barely exceeded year-ago levels.
“Remittances from the retail trade sector were negative in May compared with May last year, making it the second time in three months receipts from retail trade have dipped below year-ago levels. Declines were evident in most subsectors, including building materials and home improvement stores, clothing and accessories stores, electronics and appliance stores, furniture and home goods stores, general merchandisers, and sporting goods and hobby stores.
“Restaurant receipts increased at about the inflation rate for food away from home in April.”
“This slower growth is expected and in line with the economic outlook we detailed in our Biennial Revenue Estimate, as both the rate of inflation and growth in real economic activity slow as demand cools in the face of higher interest rate policy and reduced fiscal stimulus from the federal government.
“While receipts from the oil and gas mining sector continued their large year-over-year gains, with remittances once again nearly 50% higher than they were the same month last year, growth in receipts from other sectors driven by business spending stalled. Receipts from the construction, manufacturing and wholesale trade sectors barely exceeded year-ago levels.
“Remittances from the retail trade sector were negative in May compared with May last year, making it the second time in three months receipts from retail trade have dipped below year-ago levels. Declines were evident in most subsectors, including building materials and home improvement stores, clothing and accessories stores, electronics and appliance stores, furniture and home goods stores, general merchandisers, and sporting goods and hobby stores.
“Restaurant receipts increased at about the inflation rate for food away from home in April.”
Total sales tax revenue for the three months ending in May 2023 was up 5.6% compared with the same period a year ago. Sales tax is the largest source of state funding for the state budget, accounting for 56% of all tax collections.
Texas collected the following revenue from other major taxes:
- motor vehicle sales and rental taxes — $599 million, down 1% from May 2022;
- motor fuel taxes — $340 million, up 6% from May 2022;
- oil production tax — $497 million, down 17% from May 2022;
- natural gas production tax — $199 million, down 52% from May 2022;
- hotel occupancy tax — $71 million, up 4% from May 2022; and
- alcoholic beverage taxes — $156 million, up 2% from May 2022.
Fiscal 2023 franchise tax collections totaled $6.22 billion year-to-date through May. Compared with collections through May 2022, year-to-date franchise tax collections were up 20.7%, an extraordinary increase driven by boom conditions in 2022 following the pandemic as well as pricing dynamics in the high inflation environment driving corporate revenues up faster than costs.
