Hey, welcome to ZacCast. Do not be too excited by the drum line music. We don't have any good news for you Big 10 or Pac-12 fans, unfortunately. Uh, but Patrick and I are here today. Uh, Pat, how you doing?

I'm good, man. How are you?

Good. Hey, so we're doing, uh, what we're calling tentatively Sales Tax Game Day. So hence the, uh, the new intro. Uh, but what we thought we could do is just do a quick hitter on Sales Tax Day and, uh, just kinda cover some high-level things about how different cities performed this month, August, for, uh, sales back in June 2020. So Patrick, high level, how'd we do?

Well, I mean, you know, first things first, cities across the state came in positive 4.96%, 5% rounded up there. Uh, I think that's a bit surprising for me. I'm not sure if it's surprising for you, Chad, but, uh, I think, you know, once again, you know, we talked about pumping the brakes in COVID and, you know, not making any drastic decisions, and I think once again we're seeing exactly what, uh, what we thought we would see, which is a little bit of a recovery, but in a, in a weird, uh, different way. Uh, to be positive year over year on a, a, a month like that, uh, when we were positive year over year in the previous year as well, uh, I think was a bit surprising for many. Uh, but when you really dig into the numbers, if you, if you start looking at the metropolitan areas, I think that's where the information gets real interesting. So let's, let's dig into that a little bit, Chad. Let's talk about kinda where the different regions performed, uh, big cities versus little cities or, or, you know, metropolitan areas versus suburbs, those type of things. Uh, kinda, kinda get us into that.

Yeah. Before I do that, just to answer your question, uh, I also did not expect this. Um-

Yeah

... between the two of us, I'm much more pessimistic. And, uh, you know, even, even the cautious optimism that we had the last time we talked about sales tax was a little bit more than I was comfortable with. Uh, so I'm, uh, honestly kind of blown away that for all cities across Texas, we're talking about 5% growth in June. Um, and of course, I mean, June's when, yeah, things were starting to open back up, but that's also when we started to have cases pick back up again. Now, I think July might be a little bit different 'cause cases got a lot... Uh, they started to grow even faster, um, and attention was brought to it. Uh, and I think actually in July we started to scale back down that reopening. But, um, and I, I still, I still will hold out there, um, as a caveat that the longer this goes on, I think there will be some compounding effects, but, uh, I'm still waiting from, for all the inflation associated with all the quantitative easing. So, um, I, uh, am just... I, I tend to approach these kinds of issues, uh, much more cautiously than, uh, than perhaps you do. But yeah, 5% is, is a really good number. Um, now of course, some cities, like you said, took a hit, and, uh, so let's dig into that. Um, let's start with the Metroplex, DFW Metroplex. Uh, the DFW Metroplex actually makes up about 35% of the city, uh, sales tax across the state in, uh, the month of June. And honestly, I'm looking at this map here, man, it's, it's really pretty good. You got a couple of cities that struggled. Dallas was down 5%. Grapevine took a hit at 14%. You gotta assume that some of that's because of all the events that they have-

Correct, yeah. Absolutely

... um, in the summer. Uh, Coppell's down nine, Grand Prairie's down nine, uh, Garland down about two. Uh, ooh, Highland Park, University Park, uh, 13% and 3% respectively.

Yeah. You know, I think, I think, you know, when we start looking again, I mean, we start looking at the difference between Dallas County and, uh, and Tarrant County, um, you know, I, I, I just think the reaction, uh, from the different communities is, has been a little different. And, and this month shows that more than last month does, for sure.

Well, Dallas down 5%, Fort Worth up 6%. Um-

Congratulations to our friends in Fort Worth, uh, finding a positive number.

Yeah, but I, I'm struggling to find any major to, uh, major city in Tarrant County that, uh, that saw substantial declines. So across the board, Tarrant County appears to have done quite well.

Yeah, I think Tarrant County, uh, they, they, they look very healthy. I mean, you've got some cities that have some double-digit gains as well. Uh, you know, Fort Worth coming in at 6%, uh, kinda as the-

Benbrook at 22. You got White Settlement at 11. Saginaw at 12. Keller at 23%. Roanoke 27.

Yeah. I mean, we saw significant gains. Mansfield at 20. Burleson at 26. So, you know, really interesting the growth that, uh, that Tarrant County saw. Clearly there was some spending power, some elasticity in the spending power in those areas.

Yeah. Jump up to Denton County, you got Denton at 2%. Frisco at 10. Allen at 9. McKinney's at 16. The Col- Colonies at 56%. Uh, interested... I would be interested to see what's going on over there. Uh, Plano's up, uh, up at one. So, uh, Collin County looks, looks pretty good too.

Yeah, I mean, I think, I think we saw pretty positive gains. Outside of Dallas County, the DFW Metroplex looks, uh, really healthy, so, you know, very, very interesting, you know, economically in, in what's happening in DFW, so.

Yeah.

Kinda moving into the Houston market, what are you seeing there?

Okay. Houston market, uh, the Houston Woodlands CSA, uh, combined about 1.7% growth. Uh, but your bigger cities here, uh, much more consistently took, took hits. Uh, Houston's down 4%. Sugar Land's down 12. Uh, Conroe's down one. Uh, but you had some gainers too. Katy did really well at 31%. Let's see. You got Pasadena's up at 13%. League City's at 35%. Dickinson's 52. So you got some, some of those bigger players. Alvin at, uh, 30%. Texas City took a hit here, 14% down. Uh, but even Galveston. I mean, even Galveston was 3% up.

Yeah, it's an interesting number, Galveston being up over last year, right? Normal, uh, June beach season in 2019, they come into a COVID beach season in 2020, and they still show a positive number. That's a, that's a pretty surprising number.

Yeah. I suspect that that Ju- that June being the earlier part of the reopening, people were tired of their quarantine and looking for a place to go. So we'll see-

Absolutely

... how they do, uh, next month for July sales. Uh, jump down to the San Antonio area. San Antonio saw about a 2.7% growth over last year. That's about 8% of the revenue for, uh, cities across the state. San Antonio at 2% up. Uh, New Braunfels at 10% up. Schertz at 4. I don't- I'm not seeing anyone who's down here. Uh-

Yeah, San Antonio-

... how about, how about Cones Heights is about 14% down. That's a, that's a hit.

Yeah. Yeah, San Antonio looks very healthy, um, as a region. So but San Antonio is the bulk of that region when you look at sales tax. I mean, you, you get out there, you've got, you know, Converse and, and Schertz, and a couple of those that are auxiliary towns, but really San Antonio is the bulk of it.

So San Antonio's at 35 million, give or take, in, uh, in allocations. That's compared to about 48 or so, uh, for the CSA, so that's, yeah, it's a big chunk. So if they're doing-

So-

... okay, then that, that region's gonna be, as a whole, doing okay.

Drum roll, please. Let's go to Travis County.

Oh, there you go. 1% up for you in Austin.

Austin.

Ooh, Sunset Valley-

There you go

... the single highest per capita sales tax city. You know why that's the case, right?

There's a bunch of shopping centers there?

Lots of shopping in Sunset Valley. 800 people-

Yeah

... they generated almost $500,000 in revenue. Uh, lots of shopping, and when people are not out and about as much, they're not gonna be coming to Sunset Valley to, uh-

Fun f-

... do their shopping.

Yeah, fun fact about Sunset Valley, there's a lot of retirement communities there as well, so the age and average demographic is a little older.

Yeah. So you got, uh, let's see. Pflugerville's up 34, Round Rock down two, Cedar Park up 13, Georgetown up 23. So you got some really good size cities that have s- really, really solid growth in June.

Absolutely.

How much do you think-

Um-

Uh, I mean, w- we didn't see a m- a massive drop-off outside of really April. Uh, but, you know, May was, was steady. Uh, some cities still had big drops, but w- was there p- was there still, despite that growth in May, still some pent-up demand for, for retail consumer spending?

I, I mean, I think if you lock anybody up for three months in their house, especially when you get into the warmer months, you're gonna have that. I mean, look at places like Marble Falls, right? Marble Falls you were showing, I think it was 22% increase there. I mean, that's a lake community. What's Lakeway showing in that, in that area as well? So getting down to like-

There

... Bee Cave is up 3%.

Bee Cave is 3. 14% for Lakeway.

Lakeway's 14. Yeah, I mean, you, you start to look at kind of those Lake Travis communities, Lago Vista's up 43%, uh, Briarcliff at 50. I mean, those are, those are big increases, uh, for those communities. Like, I mean, y- uh, you... Like, you looked at Jonestown, right? Jonestown basically has like a marina, like a major marina business, and that's really it. So when you look at a 32% increase in Jonestown, you can tell that the lake traffic has increased.

Yeah. Now you're talking, not talking too much money. It's about 20,000 bucks-

Yeah

... in sales tax, but yeah, 32%'s nothing to sneeze at, regardless of how important that sales tax is to your, uh, to your budget. Let's see. Jump up to, uh, heading up north on 35 to, uh, towards Waco. You got Temple at 17, Belton at 20. I feel like a, I feel like a weather caster.

Yeah, that's true. Uh, you need a green screen to be talking behind you. Yeah.

Uh-

So-

... Killeen at 18, Copperas Cove at 20. Yeah, Waco up at 15%, and these are some really big numbers for big cities.

Yeah, Waco, I mean, that Waco number is really surprising, 'cause they have been reeling a little bit, uh, through this process. Um, you know, McLennan County, uh, you know, just in COVID with the university, everything else, they, you know, they've been a little harder impacted than everybody else. So Waco at 15%'s a really good number. I'm sure our friend Bradley Ford is happy with that number for sure.

Yep. So I'm gonna jump over to, uh, your neck of the woods, Bryan-College Station. You got, uh, CSTX, uh, up at 2%.

All right, hold on, hold on. Can we, can we pause for just a minute, and can we get a whoop in there, please, as I, as I go to my homeland?

Yeah.

So yeah, no, Bryan's down, uh, 2%. You know, look, it's, it's incredible that College Station-Bryan has been, uh, as stable as they are. You have to remember that those, those are cities of about 100,000, a little over 100,000, uh, you know, individually, so you're looking at 200,000 plus, and then you lose 70,000 students from the university all at once, right? So to remain stable has been an incredible thing to look at. So the only sad spot in the state, that's what you're zooming in on right now.

Yeah.

Oil and gas folks.

Our, our poor friends in West Texas are struggling.

Yeah.

Odessa down 32%, Midland down 21%. I think that's two months in a row, uh, for Odessa to be down in the 30% range.

Yeah, it's a lot for Odessa. Uh, you know, real sorry for our friends out there. Big Spring saw a 17% drop as well, and then Andrews, Texas, uh, saw a 26% drop. So West Texas, there's no doubt oil and gas dropping, uh, is, is impacting them significantly. But San Angelo, which, you know, is one of those more western towns that we've got out there, they saw a positive of 5%. Really interesting. You know, San Angelo's done a really good job of diversifying their economy, and it shows. Abilene, 9%. I mean, incredible. Uh, positive Abilene numbers, you know, the, to see that. And then you jump up into the Panhandle.

Yeah, some good numbers up here too. Lubbock, 11%. Amarillo at 7% growth. Yeah, not, I mean, really not too many... You've got some declines in these smaller cities, but not too much decline in the, um, in the bigger ones. Way, way out west, El Paso, 5% up.

Home of our friend Justin Bass. El Paso, Texas.

He better be listening to this.

He better be more proud, man.

Uh, El Paso up 5%, but he's out of the industry now-

Yeah

... so yeah, he, he, he probably doesn't have as much interest. So.

That's true. Yeah. He's, he's totally gone against us now. He doesn't even wanna listen.

All right, let's jump down-

So-

... down to the valley and the, uh-

Go to South Padre Island

... South Padre-

South Padre IslandWhoa.

Let's see. 15%.

15%. Ah.

I think we're gonna need-

That's crazy

... to invest in some, like s- like stingers, uh, for these sales tax game day episodes.

That's... Yeah.

Like, womp, womp.

Womp.

Or like a... Yeah, something. McAllen up 1%. Brownsville is up 7. We got Laredo down 3. Corpus Christi up 3%.

So I, I'd love to talk to Laredo to figure that out. I wonder if that's just, uh, you know, the border crossings are less, and so, you know, Laredo has a, a lot of traffic that comes across the International Bridge and shops and then crosses back over the International Bridge. So obviously with COVID, that's probably slowed down a little bit.

Yeah. I'll be interested to see Corpus next month because, uh, I was down there visiting some family at the beginning of July, and, uh, they were starting to, uh... the caseloads were starting to pick up, and the city was starting to react to it. So wonder how, uh, how this will play out next month. But for June, June sales, uh, 3% growth, so that's pretty good.

Yeah, and they had a hurricane, like at the end of June-

Yeah

... early July, right? Yeah. Little Category 1. It's... All my friends in, uh, other states are like, "Category 1?" We're like, "It's just a Category 1. We'll be all right."

All you, you Houstonites down there in South Texas, huh? You're used to it.

South Texas. That, that's my place. C- come on now.

All right, so, uh, let's see. What else we got here? Let's look at, uh, taxpayers by size, like by irrelevant, relative importance to, uh, statewide revenue. Uh, this was a really interesting thing to break down last month in our newsletter, which, uh, the inaugural issue, uh, was sent last month. If you are, uh, interested in it, it was a pretty deep dive into how the marketplace taxpayers, uh, helped or, uh, sort of offset some of the other losses that cities were dealing with with regard to COVID. Um, the next issue will go out here in the next week or so. So if you are interested in, uh, a little bit more of a long form, um, style on not just sales tax, but really all things local government, check that out. Uh, but the top 20 taxpayers, so, uh, we group these by a 12-month moving average. So those top 20 accounted for about 46% of the revenue for August, and they had a decline of about 1%. Um, the next 230, so rounding out the top 250, was about nine, 9.8%, uh, uh, growth, 48% of the total revenue. So between the two of those, something on the order of 95% of revenue across the state, and that was about 4.2% growth, uh, for all those.

Mm-hmm.

Uh, we have not had a chance yet to dig into, uh, like city by city other than the sort of surface level, um, percent changes and things like that. Um, but yeah, it doesn't look like other than a handful of those bigger... like, really bigger sort of central cities, um, outside of those, looks pretty solid for, for August.

I mean, look, it's, it's, it's pretty good growth. It looks like it's spread throughout the state. Obviously, the only area that got hit real hard, uh, is West Texas. The oil and gas business is, is hitting them, you know. It, it just, it's dragging them down right now. So, uh, but West Texas is used to that. They're gonna see that. What, what are we seeing... I know we talked a lot in the last newsletter as well about the marketplace split. So what are we seeing from the marketplace providers? And kind of explain to everybody real quick, Chad, what marketplace means.

Okay. So, uh, this is a, uh, recent change in sales tax law as of the last legislative session. So previously, uh, a, a marketplace, I guess just to start there, a marketplace is a, uh... it's a venue, whether it's digital or physical, where it's like a platform for people to sell things, where the person who or the organization that owns the platform is not actually the seller. Uh, so you could think of, like, Amazon's third-party sales. You can think of Etsy or eBay. Like, eBay doesn't sell things, uh, but they provide you a platform to sell things. And previously, the responsibility for collecting that sales tax would have fallen on the individual vendors. And so as the, uh, the single local tax rate and the, uh, basically as a result of the Wayfair decision, um, uh, that was, I guess, what, two years ago now?

Mm-hmm. Yeah, two years ago.

The Supreme Court said that states could require sales tax to be collected on those types of transactions, provided that they make it easy to, to, uh, to actually implement. Or, you know, as the vendor, uh, it can't be an overdue burden to comply with those laws. So, uh, the single local taxpayer is, or the single local tax rate is one option that, uh, that these companies and organizations have. They can just pay a s- flat s- local sales tax rate no matter where they, uh, ship their items. And then the other option is for these marketplaces to, uh, basically take on the responsibility of collecting sales tax on behalf of the people who sell on those platforms. So, uh, so now you'll see Amazon has a new marketplace. If you, uh, if you use ActTax or if you just look at your confidential files, you'll see Amazon has this, a new marketplace taxpayer. That represents all the third-party sales that happen on Amazon. You'll see Etsy. You'll see, uh, eBay. And so, uh, one thing that we actually did recently is we took the list of all of those marketplace taxpayers and, uh, we just threw that into Zach Tax. So now you can actually see those taxpayers are now tagged as marketplace providers. So it's easy to find them and see how they did.

Yeah, it's important to note that a lot of this, a lot of the marketplace money is new money, so it has been a bit of a buffer for a lot of cities. You know, even, even in larger cities where a marketplace provider may just be, like, you know, 1% to 2% of their revenue, uh, that's still been 1% to 2% of new revenue, uh, for them. So, uh, yeah, kinda, kinda roll through this and, and let's look at obviously the larger cities. Like Houston, marketplace made up 2.12%. That's a, that's a big increase, you know, to... or it's a big buffer for them.

Well, especially considering that Houston dropped by 4%.

Mm-hmm.

So that would've been obviously-A bigger, a super drop. Yeah

Yeah. Correct. Yeah. Uh, looking, you know, same thing for, uh, for Austin. You know, it, it made up 3.2%, uh, for Arlington it made up 2.9. Uh, for Dallas it made up 2.34. So you could see, you know, when you're looking at total numbers here, uh, these marketplace numbers, these, this new revenue that they're seeing is buffering significantly a lot of the losses that we would've expected to see. Now, I wanna point out San Marcos is up like 30 something percent, right? Or was it like 50% over the month? And Marketplace only made up 0.8, 0.86% of their numbers.

Yeah.

So yeah. I, I'm, I'm gonna, I'm gonna really enjoy digging into the data. I, I, I'll, I would be not surprised if I had an email from San Marcos before this is over. That's a huge number, man. I mean, Sugar Land, I mean, 3%.

Yeah. I was, I was thinking maybe they had an audit payment, but mar- marginal.

Yeah. Could be big construction projects. They've got a couple big economic development projects they're finishing up right now.

Yeah.

So yeah. We'll find it out when we get data. That's, that's always the fun part about getting, uh, day to day. Killeen. Look at Killeen's number.

Yeah. Four and a half percent.

4.55. Yeah.

League City 5%. That's, that's a big number.

That's a huge number. Yeah.

5%

Thanks, Siri. Thanks, Siri. Thanks for- ... thanks for chiming in in the middle of the podcast, Siri. We really appreciate that. Friendswood, look at that. A bedroom community like Friendswood, they've got, they've got some commercial, but they're a big bedroom community, 6.2%.

Yeah. I had not had time. Uh, we spent quite a, a good amount of time before that newsletter went out going through these. I haven't had time to do the same kind of correlations and see how things have changed. One thing that we do intend to do, uh, as we kind of get further out is look at how the marketplace revenue as a percent of total revenue shifted, if at all. Um, so data started coming out, I guess, in November for the marketplace providers. So we have, you know, four months or so of pre-COVID, uh, sort of baseline marketplace sales. Of course, that does include the holiday season. Um-

Correct

... but, uh, very interested to see if those percentages shot up, uh, noticeably during the-

Dr-

... the lockdowns.

Yeah. Dr. Kruger would tell you that that's probably not a large enough population.

It probably is not a big enough sample size.

Sample size. Yeah.

Yeah.

Uh, what else we got? Hutto.

Anything else pop out?

Yeah, Hutto was big. Was that 4.9%? Crowley. Look at Crowley, 5.64. Way to go, Robert. It's a big number in marketplace giving you a buffer there.

Cibolo-

Island Village

... seven, almost 8%.

Yeah.

Let's see. Almost.

Cibolo's big, man. I mean, look, at the end of the day, I, I don't think there's any doubt of what we're seeing. This new revenue, this comptroller rule changes, even though not all of them have been implemented at this point, but the comptroller rule changes on, uh, marketplace providers is, has been a significant, uh, saving grace for many of these communities in the state. So obviously we've seen just a huge, uh, you know, month compared to what we were expecting, right? Of being 5% up across the state, uh, seeing the impact of the marketplace providers, looking at this from a region and seeing the health of all the different regions, obviously besides, uh, West Texas. Uh, you know, look, this is, this is a good thing for the state of Texas. We don't know what it looks like down the road. We're not telling everybody to go out and start spending 100% of your budgets. Uh, but we are telling you as we roll into the last couple of months of the fiscal year, uh, this is somewhat good news for COVID. Uh, Texas looks resilient and, uh, that's exciting for everybody. Next month should be fun. Like Chad said, we're gonna see more case increases. We're gonna see numbers change a little bit, we think. Uh, but we'll be right back, uh, with, with our Game Day podcast, uh, to talk about, uh, what happens when we get there. So we appreciate you guys joining us today. Chad, thanks for, thanks for going through the numbers, man, getting nerdy with me.

You bet. Next time I actually, I do think I'm gonna treat this more like a weather forecast. It's kind of fun.

You gonna put the green screen? I think we should do a video of this and have like call in and all that type of stuff. So I think it's gonna be pretty cool to do this month, and we hope people will follow it and, uh, continue the conversation with us.

Hey, so if we do a video, uh, feed, we should, we should do it like early in the morning and we can have people put in their, uh, sort of like Price Is Right bets on how sales tax will be.

We used to do that. Yeah. We used to do that at Hu- we used to do that at Hudson Oaks. You know, I'd do a, like a monthly bet for a free lunch. Whoever won, I would buy lunch. Um, and that was always a lot of fun.

I always lost 'cause I was way too pessimistic.

Yeah. And you know, Doug would always set the bar like really low. Doug was our finance guy, uh, for those that don't know. But we would have our finance guy like set the line and then we'd do over under and yeah, it's... You were always under Chad. You never took the over.

So when w- no. When we, when we did over under, I always took the over because the line was always set so low. But when we did actual Price Is Right, I was always way too low.

$1 Bob, $1.

$1. All right, man. Well, thanks Pat. Thank you guys for listening. If you, uh, enjoyed this, let us know because, uh, we found this kind of fun and kind of to be a cool idea and would definitely like to see where we could take it. Um, especially if something like a live stream, uh, where we can chat and answer questions would be interesting on Sales Tax Day, then definitely reach out to us, uh, and let us know what you think. You gonna say bye?

Uh, all right guys, we'll see you later. See you next month.