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Sales and Use Tax Collections

Sales and use tax collections for the 12 most populous Houston-area cities[1] totaled $1.1 billion in the 12 months ending February ’22, up 20.6 percent from $952.3 million for the same period a year ago. Col-lections for the month of February totaled $85.6 million, up 24.5 percent from $68.8 million in February ’21. 

February collections statewide continued to exceed pre-COVID collections, according to the Texas Comptroller’s Office of Public Accounts. “State sales tax collections reached a new high for the month of March, with exceptionally strong growth evident across all major economic sectors,” said Texas Comptroller Glenn Hegar in a recent press release. “Surging consumer spending as the omicron wave recedes — supported by strong employment and wage growth and savings accumulated during the pandemic — spurred double-digit growth in receipts from almost all retail segments.”
 

Collections for the City of Houston rose 25.4 percent from February ’21 to February ’22. All of the cities recorded double-digit gains in sales tax collections since February ’21. 

“Growth in receipts from sectors driven by business spending, including oil and gas mining, construction, manufacturing and wholesale trade, also continues to be robust, though receipts from oil and gas mining still remain well below pre-pandemic levels despite the elevated energy prices of recent months,” said Hegar. 

Sales tax collections mirror trends in the overall Houston economy. During the fracking boom, collections grew at double-digit rates. Growth peaked at 11.1 percent in October ’12, then trended down. During the fracking bust of ’15 and ’16, collections fell below the levels of ’13 and ’14. By March ’17, collections were 4.2 percent below their previous peak. As the region recovered in ’17, collections grew again as Houstonians rebuilt their homes and replaced goods damaged by Hurricane Harvey. Economic growth slowed again in ’18, which also slowed tax collections. The regional economy showed signs of improvement in early ’20, which ended once the pandemic caused business closures. Pent-up demand and savings accumulated throughout the pandemic led to increased spending in ’21 and, consequently, higher tax collections. 

About the Sales and Use Tax

Texas levies a 6.25 percent state sales and use tax on all retail sales, leases and rentals of most goods, as well as taxable services. Local taxing jurisdictions may also impose up to a 2.0 percent sales and use tax for a maximum overall rate of 8.25 percent. The City of Houston has a 1.0 percent rate, and the Metropolitan Transit Authority of Harris County has a 1.0 percent rate, leading to an overall rate of 8.25 percent for the city. Cities with less than a 2.0 percent rate, like Houston, may have additional sales and use tax rates that may be related to transit, crime control, emergency services and more. For the sales and use tax rates for the most populous 12 cities in the Houston region, visit https://www.houston.org/houston-data/sales-and-use-tax-rates. 

The Texas Comptroller of Public Accounts releases allocated payments from the sales and use tax monthly. There is a two-month delay between when the tax is collected and when it is allocated. March sales data will be available in May. 

[1] The 12 most populous cities in the region are Houston, Pasadena, Pearland, League City, Sugar Land, Conroe, Baytown, Missouri City, Galveston, Texas City, Friendswood and La Porte. As a group, they represent 80.0 percent of all sales tax collections in the region. The other 102 smaller cities account for the remaining 20 percent.

Prepared by Greater Houston Partnership Research Division

Elizabeth Balderrama
Manager, Research
713-844-3615
ebalderrama@houston.org

Patrick Jankowski
Senior Vice President, Research
713-844-3616
pjankowski@houston.org