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Texas collected more sales tax revenue last month than any month ever before, at $3.88 billion, up 14.7% from a year ago, according to the comptroller’s office, thanks in part to record collections for oil and natural gas production.
The comptroller’s office collected $532 million in taxes from natural gas production in July, up 185% from the same month last year, the Texas Comptroller’s office said Monday in a news release. The state also set a record for revenue from oil production taxes with $694 million.
“July state sales tax collections showed continued vigorous growth from non-retail sectors,” Comptroller Glenn Hegar said in a statement. “The sharpest increase from a year ago was once again in receipts from oil and gas mining, but receipts from the construction, manufacturing and wholesale trade sectors were also up by double digits for the eighth consecutive month.”
However, much of the tax revenue came from sales made in June. Hegar said tax revenue from retail trade and restaurants increased at a “moderate pace,” and added that “pent-up demand” from the pandemic is weakening. He also said inflation is affecting consumer spending priorities.
Sales tax is the largest source of state funding for the state budget, accounting for 59% of all tax collections.
Ray Perryman, a Waco-based economist, said a number of factors are contributing to growth in state revenue from oil and natural gas production, including the war in Ukraine and an overall increase in demand for natural gas globally.
He said Texas has had record-level production of oil and natural gas recently, and added that both commodities are in a high price environment.
“Simply stated, revenue is price times quantity, and both are up significantly,” Perryman said.
Taxes from motor vehicle sales and rentals rose 5% from July 2021 with $605 million. The state also collected $324 million through motor fuel taxes, a 3% year-over-year increase.
The comptroller noted that receipts from auto dealers, parts and home improvement stores saw double-digit growth, but the state saw a decline in tax revenue from electronics and appliance stores.
In July, Lt. Gov. Dan Patrick said he would support suspending the state fuel tax for the remainder of 2022 after the comptroller’s office forecast a large surplus in the state budget.
Some economists described the potential move as a “terrible idea,” as revenue from motor fuel taxes is used to build and maintain highways and helps fund public education.