Sales tax allocations to local agencies in Texas increase in June

By Michael Carroll

In another indication that the Texas economy continues to expand, the state sent $782 million in local sales tax funds to cities, counties and special districts in June, an increase of more than 10 percent over what was allocated in June 2018.

These revenues reflect the sales figures from businesses in April, Texas Comptroller Glenn Hegar said in a news release.

In Texas, the state imposes a 6.25 percent sales tax on retail purchases and applicable services, and local government agencies can impose sales levies of not more than 2 percent. So the maximum sales tax in any Texas jurisdiction is 8.25 percent – in a state that has no income tax.

The increase in local allocations of sales tax revenues varied somewhat depending on the district, but all types of local taxing districts saw rising revenues over the same period last year, according to the Comptroller’s Office. City sales tax allocations were up 9.2 percent over June 2018; transit agencies, up 9.7 percent; counties, an 11.4 percent increase; and special-purchase taxing districts, a gain of 18.3 percent.

When compared with other economic indicators, these numbers can help to predict current and future economic fluctuations, the comptroller said.

In certifying the 2020-21 state budget this month, Hegar gave a somewhat mixed assessment of the Texas economy. That budget provides for nearly $251 billion in spending.

“We’ve seen tremendous growth in Texas over the last year and a half, which allowed lawmakers to make historic investments in education and provide much-needed property tax relief,” he said in a prepared statement. “Uncertainty in the global economy, however, as well as increasing unpredictability surrounding international trade policy at the federal level, may have dampening effects on the Texas economy in the coming years.”

Sales tax revenues going to local agencies could even go higher later this year. That’s because Texas’ enforcement of the South Dakota v. Wayfair Supreme Court decision, which allows states to tax many residents’ online purchases, will begin in October. Until then, a grace period is in effect in the state as online retailers get software in place that will allow them to remit sales taxes to Texas.

Large Texas cities getting the largest increases in allocations of sales tax revenues compared to June 2018 include Austin, 14.6 percent; Arlington, 16.3 percent; Midland, 15.2 percent; Lubbock, 17.3 percent; McAllen, 21 percent; and McKinney, 16.1 percent.

Over the past 14 months, however, a number of cities in the state have changed their sales tax rates, according to the Comptroller’s Office. Twenty-six cities have raised their rates over that time period, the comptroller’s numbers show.