RETAIL REVENUE
Township sales tax collections lagging, but overall collections strong
With the money collected in sales taxes contributing a major source of revenue to The Woodlands, township leaders are keeping a close eye on retail tax collections – which are lagging behind the other types of revenues collected in the community.
So far this year, more money has come in from retail taxes, but as Assistant General Manager for Finance and Administration Monique Sharp told the township board last month, “The news is not great in retail.”
Through the end of September, township figures show the money collected in sales taxes has been better than expected, but the overall number has been helped in part by an audit adjustment – common and frequent ongoing adjustments made by the Texas Comptroller’s Office, which is responsible for collecting and administering sales taxes.
In The Woodlands, the sales and use tax is 8.25 percent, but the township only gets 1 percent, while another 1 percent goes to
The Woodlands Economic Development Zone. The State of Texas gets the rest – 6.25 percent.
The township reports $37,611,989 in sales tax deposits were collected through Sept. 30, an increase of 4.6 percent over the same period last year, and 7.4 percent better than expected for the year. But, the audit adjustments boosted those numbers by $953,138, meaning the actual increase would have been $703,671, or 2 percent.
That tepid increase, as Sharp explains, comes after a growth spurt when The Woodlands was experiencing “tons of activity and new businesses were opening.” During that period of rapid growth – with new retail shops
popping up – the township also was seeing its sales tax receipts climb annually by 7-9 percent.
Sales taxes, along with use taxes, are an important source of revenue for the township, with its 2018 budget report saying the taxes make up 42 percent of its general revenue sources. Sales and use tax revenues are also key in the township’s budget because they reduce the reliance on property taxes to pay for township services. And similar to Sharp’s comments, the budget report notes, “The rate of annual growth has declined in recent years as new development in the community has slowed and due to generally sluggish economic conditions.”
CHANGING BUYING HABITS AFFECT SALES TAX REVENUES
Also apparently contributing to the lagging sales tax collections are changes in how people are buying their merchandise.
“It’s not unique to the township or to the Houston regional area,” said Sharp, referring to The Woodlands sales tax numbers. “It’s just people are not purchasing their merchandise from a big box type of store, and they’re increasing their online purchases.”
The trend by consumers to buy more online, instead of walking into stores, is duly noted by Glenn Mehterian, owner of Cool Kat Party Supplies, a retailer that sells holiday costumes, balloons, party favors and other related items out of a store on Kuykendahl Road in Spring and another location in Cypress.
“We changed our concept to be more competitive,” said Mehterian, noting his increased online marketing efforts.
“Brick and mortar has the nice, little rent you need to pay.”
The trends in The Woodlands reflect those reported in The Houston Chronicle that show while retail sales appear to be on the rise heading into the holidays, online sales are taking a bigger bite of the consumer spending apple.
According to IHS Global Insight, retail sales rose 0.6 percent nationwide in September after falling slightly the previous month. Vehicles, furniture, building material, gasoline and sporting goods were among the sales categories that grew by 1 percent or more. However, several categories saw declines, including electronics, health, general merchandise and department stores.
“The onliners are clearly taking share from the traditional department stores,” Chris Christopher, the firm’s director of consumer economics, said in a statement. “Department stores and general merchandise have been underwater for three months in a row.”
OTHER TAX COLLECTION CATEGORIES DOING WELL
As for The Woodlands, of all its revenue sources, only sale tax collections are lagging, with other areas performing well, according to Sharp.
“Every other category is positive, showing a favorable variance from the previous year,” she said.
Manufacturing, technical services, information services and construction are posting double-digit increases, Sharp said.
Over at The Woodlands Area Chamber of Commerce, President and CEO J.J. Hollie paints a rather rosy picture of the local retail industry, with area businesses hurt, but recovering quickly from Hurricane Harvey’s impact.
“Our observation is while Hurricane Harvey was a devastating event for our entire region and there were businesses affected, by and large those businesses could recover fairly quickly,” Hollie said.
“It’s amazing to see the vitality of the economy here in The Woodlands. We’re just in a fortunate location that people had a lot of foresight to build and plan.”
Meanwhile, an Oct. 11 report from the Texas Comptroller’s Office shows for the month, it’s disbursing $1,905,520 to The Woodlands in sales tax revenues. That’s down by 7.87 percent from the $2,068,373 disbursed in October of last year, but the year-to-date numbers of $22,474,701 are up 5.5 percent compared to a year ago.