Texas sales tax revenue dips 13.2% in May, the largest year-over-year decline in a decade

Brentwood Social House is one of many businesses that cut hours of operation and closed its dine-in services during the coronavirus pandemic.      Eddie Gaspar/The Texas Tribune
Brentwood Social House is one of many businesses that cut hours of operation and closed its dine-in services during the coronavirus pandemic. Eddie Gaspar/The Texas Tribune

Texas collected about $2.6 billion in state sales tax revenue in May, leading to the steepest year-over-year decline in over a decade, Comptroller Glenn Hegar announced Monday.

The amount is 13.2% less than the roughly $3 billion the state collected in the same month last year.

A majority of the revenue collected last month was from purchases made in April and reflect the state's first full-month look at how the novel coronavirus impacted businesses. That is when Texans lived under a statewide stay-at-home order and Gov. Greg Abbott, like leaders across the globe, ordered businesses across several sectors to close to combat the spread of the virus.

"Significant declines in sales tax receipts were evident in all major economic sectors, with the exception of telecommunications services," Hegar said in a news release. "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."

Monday's announcement is the latest reminder of the economic devastation facing the state — and how recovering from it could last months if not years even as businesses begin reopening their operations, which feed into the sales tax revenue. As social distancing guidelines continue to loosen, Hegar said, the sectors most impacted by 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."

Monday's numbers are also reflective of the lag in data as revenues are collected and then reported by the state. Last month, for example, Hegar announced that the sales tax revenue collections for purchases in March dropped roughly 9% — which at the time was the steepest decline since January 2010.

Other major tax collections were also down in May, Hegar said Monday. Motor fuel taxes, for example, were down 30% from May 2019, marking the steepest drop since 1989. And the hotel occupancy tax was down 86% from May 2019, marking the steepest drop on record in data since 1982.

State leaders are already beginning to offset some of the state’s losses, which will all but certainly be at the forefront of the next regular legislative session in 2021.