80R185 DAK-D

By: Carona S.B. No. 257

A BILL TO BE ENTITLED

AN ACT

relating to limitations on the combined rates of transit and other local sales and use taxes.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 321.101, Tax Code, is amended to read as follows:

Sec. 321.101. TAX AUTHORIZED. (a) A municipality may adopt or repeal a sales and use tax authorized by this chapter, other than the additional municipal sales and use tax, at an election in which a majority of the qualified voters of the municipality approve the adoption or repeal of the tax.

(b) A municipality [that is not disqualified] may, by a majority vote of the qualified voters of the municipality voting at an election held for that purpose, adopt an additional sales and use tax for the benefit of the municipality in accordance with this chapter. [A municipality is disqualified from adopting the additional sales and use tax if the municipality:

[(1) is included within the boundaries of a rapid transit authority created under Chapter 451, Transportation Code;

[(2) is included within the boundaries of a regional transportation authority created under Chapter 452, Transportation Code, by a principal municipality having a population of less than 800,000, unless the municipality has a population of 400,000 or more and is located in more than one county;

[(3) is wholly or partly located in a county that contains territory within the boundaries of a regional transportation authority created under Chapter 452, Transportation Code, by a principal municipality having a population in excess of 800,000, unless:

[(A) the municipality is a contiguous municipality; or

[(B) the municipality is not included within the boundaries of the authority and is located wholly or partly in a county in which fewer than 250 persons are residents of both the county and the authority according to the most recent federal census; or

[(C) the municipality is not and on January 1, 1993, was not included within the boundaries of the authority; or

[(4) imposes a tax authorized by Chapter 453, Transportation Code.]

(c) [For the purposes of Subsection (b), "principal municipality" and "contiguous municipality" have the meanings assigned by Section 452.001, Transportation Code.

[(d)] In any municipality in which an additional sales and use tax has been imposed, in the same manner and by the same procedure the municipality by majority vote of the qualified voters of the municipality voting at an election held for that purpose may reduce, increase, or abolish the additional sales and use tax.

(d) [(e) An authority created under Chapter 451 or 452, Transportation Code, is prohibited from imposing the tax provided for by those chapters if within the boundaries of the authority there is a municipality that has adopted the additional sales and use tax provided for by this section.

[(f)] A municipality may not adopt or increase a sales and use tax or an additional sales and use tax under this section if as a result of the adoption or increase of the tax the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the municipality and other political subdivisions of this state having territory in the municipality would exceed two percent at any location in the municipality.

(e) [(g)] For the purposes of Subsection (d) [(f)], "territory" in a municipality having a population of 5,000 or less and bordering on the Gulf of Mexico does not include any area covered by water and in which no person has a place of business to which a sales tax permit issued under Subchapter F of Chapter 151 applies.

(f) [(i)] A municipality for which the adoption or increase of a sales and use tax approved by the voters in an election held after May 1, 1995, and before December 31, 1995, is invalid because the election combined into a single proposition proposal for adopting an economic development sales and use tax under Section 4B, Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes), and an additional sales and use tax under Subsection (b) may adopt or increase the sales and use tax previously approved by the voters by ordinance or resolution of the governing body of the municipality. If the governing body of the municipality adopts or increases the sales and use tax under this subsection, the municipal secretary shall send to the comptroller by certified or registered mail a certified copy of the ordinance or resolution. The tax takes effect on the first day of the month following the expiration of the calendar quarter occurring after the date on which the comptroller receives the ordinance or resolution.

SECTION 2. Sections 321.102(e) and (g), Tax Code, are amended to read as follows:

(e) If, as a result of the imposition or increase in a sales and use tax by a municipality in which there is located all or part of a local governmental entity that has adopted a sales and use tax or as a result of the annexation by a municipality of all or part of the territory in a local governmental entity that has adopted a sales and use tax, the overlapping local sales and use taxes in the area, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, will exceed two percent, the entity's sales and use tax is automatically reduced in that area to a rate that when added to the combined rate of local sales and use taxes, other than transit sales and use taxes, will equal two percent.

(g) Subsections (e) and (f) do not apply if and during any period in which a local governmental entity has outstanding indebtedness or obligations that are payable wholly or partly from the sales and use tax revenue of the entity. A municipality may not implement the imposition or increase of the sales and use tax as a result of the circumstances described by Subsection (e) if, as a result of the implementation of that imposition or increase, the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the municipality, the local governmental entity, and any other political subdivisions having territory in the district would exceed two percent at any location in the municipality.

SECTION 3. Section 323.101, Tax Code, is amended to read as follows:

Sec. 323.101. TAX AUTHORIZED. (a) A qualified county may adopt or repeal the county sales and use tax authorized by this chapter at an election in which a majority of the qualified voters of the county approve the adoption or repeal of the tax, as applicable.

(b) [A county is qualified to adopt the tax only if no part of the county is located in a rapid transit authority created under Chapter 451, Transportation Code, or a regional transportation authority created under Chapter 452 of that code.

[(c) An authority created under Chapter 451 or 452, Transportation Code, is prohibited from imposing the tax provided for by those chapters in a county in which the county sales and use tax provided for by this section is in effect or is scheduled to take effect. For the purposes of this section, an authority is not considered to be located in any county in which fewer than 250 persons are both residents of the authority and the county.

[(d)] A county may not adopt a sales and use tax under this section if as a result of the adoption of the tax the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the county and other political subdivisions of this state having territory in the county would exceed two percent at any location in the county.

(c) [(e)] If the voters of a county approve the adoption of a sales and use tax at an election held on the same election date on which a municipality having territory in the county adopts a sales and use tax or an additional sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the county and other political subdivisions of this state having territory in the county would exceed two percent at any location in the county, the election to adopt a county sales and use tax has no effect.

(d) [(f)] The provisions of this chapter govern the application, collection, and administration of a sales and use tax imposed under Chapter 285, 775, or 776, Health and Safety Code, to the extent not inconsistent with the provisions of those chapters. [Provided, however, that Subsection (b) shall not apply to a tax authorized under those chapters.]

SECTION 4. Sections 324.021(b) and (c), Tax Code, are amended to read as follows:

(b) A county may not adopt or increase a tax under this chapter if as a result of the adoption of or increase in the tax the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the county and other political subdivisions of this state having territory in the county would exceed two percent at any location in the county.

(c) If the voters of a county approve the adoption of or the increase in the tax at an election held on the same election date on which another political subdivision adopts a sales and use tax or approves the increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the county and other political subdivisions of this state having territory in the county would exceed two percent at any location in the county, the election to adopt a sales and use tax under this chapter or increase the tax has no effect.

SECTION 5. Sections 325.021(b) and (c), Tax Code, are amended to read as follows:

(b) A county may not adopt a tax under this chapter if as a result of the adoption of the tax the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the county and other political subdivisions of this state having territory in the county would exceed two percent at any location in the county.

(c) If the voters of a county approve the adoption of the tax at an election held on the same election date on which another political subdivision adopts a sales and use tax or approves the increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the county and other political subdivisions of this state having territory in the county would exceed two percent at any location in the county, the election to adopt a sales and use tax under this chapter has no effect.

SECTION 6. Sections 327.003(b) and (c), Tax Code, are amended to read as follows:

(b) A municipality may not adopt a tax under this chapter or increase the rate of the tax if as a result of the adoption of the tax or the increase in the rate of the tax the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the municipality and other political subdivisions of this state having territory in the municipality would exceed two percent at any location in the municipality.

(c) If the voters of a municipality approve the adoption of the tax or the increase in the rate of the tax at an election held on the same election date on which another political subdivision adopts a sales and use tax or approves the increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the municipality and other political subdivisions of this state having territory in the municipality would exceed two percent at any location in the municipality, the election to adopt a sales and use tax under this chapter has no effect.

SECTION 7. Section 370.363, Transportation Code, is amended to read as follows:

Sec. 370.363. MAXIMUM TAX RATE. (a) An authority may not adopt a sales and use tax rate, including a rate increase, that when combined with the rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by all political subdivisions of this state having territory in the service area of the transferred transit system exceeds one [two] percent in any location in the service area.

(b) An election to approve a sales and use tax or increase the rate of an authority's sales and use tax has no effect if as a result of the election[:

[(1) the voters in the service area approve the authority's sales and use tax rate or rate increase at an election held on the same day on which a municipality or county having territory in the jurisdiction of the service area adopts a sales and use tax or an additional sales and use tax; and

[(2)] the combined rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by the authority and all political subdivisions of this state would exceed one [two] percent in any part of the territory in the service area.

SECTION 8. Section 451.405, Transportation Code, is amended to read as follows:

Sec. 451.405. MAXIMUM TAX RATE IN AUTHORITY AREA. (a) An authority may not adopt a sales and use tax rate, including a rate increase, that when combined with the rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by other political subdivisions of the state having territory in the authority exceeds one [two] percent in any location in the authority.

(b) An election by an authority to adopt a sales and use tax or to increase the rate of the authority's sales and use tax has no effect if as a result of the election[:

[(1) the voters of the authority approve the authority's sales and use tax rate or rate increase at an election held on the same day on which a municipality or county having territory within the authority adopts a sales and use tax or an additional sales and use tax; and

[(2)] the combined rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by the authority and other political subdivisions of the state would exceed one [two] percent in any location in the authority.

SECTION 9. Section 451.706(a), Transportation Code, is amended to read as follows:

(a) The combined rate of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by the district and all other political subdivisions of this state may not exceed one [two] percent in any location in the district.

SECTION 10. Section 452.403, Transportation Code, is amended to read as follows:

Sec. 452.403. MAXIMUM TAX RATE IN AUTHORITY AREA. (a) An authority may not adopt a sales and use tax rate, including a rate increase, that when combined with the rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by other political subdivisions of the state having territory in the authority exceeds one [two] percent in any location in the authority.

(b) An election by an authority to adopt a sales and use tax or increase the rate of the authority's sales and use tax has no effect if as a result of the election[:

[(1) the voters of the authority approve the authority's sales and use tax rate or rate increase at an election held on the same day on which a municipality or county having territory within the authority adopts a sales and use tax or an additional sales and use tax; and

[(2)] the combined rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by the authority and other political subdivisions of this state would exceed one [two] percent in any location in the authority.

[(c) If an authority consisting of one subregion governed by a subregional board created under Subchapter O adds territory that is a municipality, any additional sales and use tax under Chapter 321, Tax Code, imposed by that municipality is repealed as provided by Section 321.1025, Tax Code. The effective date of the repeal and for the imposition of the tax authorized to be collected under Section 452.401 in the added territory is the date that, under Section 321.102(b), Tax Code, the repeal of the additional sales and use tax is effective in the territory.]

SECTION 11. Section 453.402, Transportation Code, is amended to read as follows:

Sec. 453.402. MAXIMUM TAX RATE. (a) A board may not adopt a sales and use tax rate, including a rate increase, that when combined with the rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by other political subdivisions of this state having territory in the municipality exceeds one [two] percent in any location in the municipality.

(b) An election by a transit department to approve a sales and use tax or increase the rate of the transit department's sales and use tax has no effect if as a result of the election[:

[(1) the voters of the transit department approve the department's sales and use tax rate or rate increase at an election held on the same day on which the municipality or county having territory in the jurisdiction of the transit department adopts a sales and use tax or an additional sales and use tax; and

[(2)] the combined rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by the transit department and other political subdivisions of this state would exceed one [two] percent in any part of the territory in the jurisdiction of the transit department.

SECTION 12. Section 457.302, Transportation Code, is amended to read as follows:

Sec. 457.302. MAXIMUM TAX RATE. (a) A board may not adopt a sales and use tax rate, including a rate increase, that when combined with the rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by all political subdivisions of this state having territory in the county exceeds one [two] percent in any location in the county.

(b) An election by an authority to approve a sales and use tax or increase the rate of the authority's sales and use tax has no effect if as a result of the election[:

[(1) the voters of the authority approve the authority's sales and use tax rate or rate increase at an election held on the same day on which the municipality or county having territory in the jurisdiction of the authority adopts a sales and use tax or an additional sales and use tax; and

[(2)] the combined rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by the authority and all political subdivisions of this state would exceed one [two] percent in any part of the territory in the jurisdiction of the authority.

SECTION 13. Section 460.551(c), Transportation Code, is amended to read as follows:

(c) A sales and use tax may be imposed, as prescribed by this section, by a municipality that participates in a transportation or transit authority other than an authority created under this chapter if:

(1) the combined rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed in the municipality does not exceed one [two] percent in any location; and

(2) the ballot of the authorization vote for the sales and use tax reads:

"(Name of city) already imposes a sales and use tax for participation in the transportation authority. The proposed sales and use tax is solely for the benefit of, and will be dedicated to, the county transportation authority."

SECTION 14. Section 460.552(a), Transportation Code, is amended to read as follows:

(a) An authority may not adopt a sales and use tax rate, including a rate increase, that when combined with the rates of all transit sales and use taxes primarily for the support of transportation services authorized under this code and imposed by other political subdivisions having territory in the authority exceeds one [two] percent in any location in the authority.

SECTION 15. Sections 285.061(c) and (d), Health and Safety Code, are amended to read as follows:

(c) A district may not adopt a tax under this subchapter or increase the rate of the tax if as a result of the adoption of the tax or the tax increase the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district.

(d) If the voters of a district approve the adoption of the tax or an increase in the tax rate at an election held on the same election date on which another political subdivision of this state adopts a sales and use tax or approves the increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district, the election to adopt a sales and use tax or to increase the rate of the sales and use tax in the district under this subchapter has no effect.

SECTION 16. Section 285.161(b), Health and Safety Code, is amended to read as follows:

(b) A district may not adopt a tax under this subchapter or increase the rate of the tax if as a result of the adoption or increase the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district.

SECTION 17. Section 286.172, Health and Safety Code, is amended to read as follows:

Sec. 286.172. LIMITATION ON COMBINED TAX RATE; EFFECT ON ELECTIONS. An election to create a hospital district and to authorize the imposition of a sales and use tax under this subchapter, or an election to change the tax rate under Section 286.174, has no effect if as a result of the adoption of the sales and use tax or the change in the rate the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district.

SECTION 18. Sections 775.0751(c) and (d), Health and Safety Code, are amended to read as follows:

(c) A district may not adopt a tax under this section or increase the rate of the tax if as a result of the adoption of the tax or the tax increase the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district.

(d) If the voters of a district approve the adoption of the tax or an increase in the tax rate at an election held on the same election date on which another political subdivision of this state adopts a sales and use tax or approves the increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district, the election to adopt a sales and use tax or to increase the rate of the sales and use tax in the district under this subchapter has no effect.

SECTION 19. Sections 776.0751(c) and (d), Health and Safety Code, are amended to read as follows:

(c) A district may not adopt a tax under this section or increase the rate of the tax if as a result of the adoption of the tax or the tax increase the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district.

(d) If the voters of a district approve the adoption of the tax or an increase in the tax rate at an election held on the same election date on which another political subdivision of this state adopts a sales and use tax or approves the increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district, the election to adopt a sales and use tax or to increase the rate of the sales and use tax in the district under this subchapter has no effect.

SECTION 20. Section 326.096, Local Government Code, is amended to read as follows:

Sec. 326.096. LIMITATION ON ADOPTION OF TAX. A district may adopt a tax under this subchapter only if as a result of adoption of the tax the combined rate of all local sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by political subdivisions having territory in the district will not exceed two percent.

SECTION 21. Section 375.311(d), Local Government Code, is amended to read as follows:

(d) If any territory in the authority is annexed by the municipality, the municipality's sales and use tax applies in the annexed area. If the authority's sales and use tax rate, when combined with any other local sales and use tax applicable in the authority, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, exceeds two percent, the authority's sales and use tax is abolished upon annexation.

SECTION 22. Sections 334.085(a) and (b), Local Government Code, are amended to read as follows:

(a) In this section, "taxing authority" means:

(1) [a rapid transit authority created under Chapter 451, Transportation Code;

[(2) a regional transportation authority created under Chapter 452, Transportation Code;

[(3)] a crime control district created under the Crime Control and Prevention District Act (Article 2370c-4, Vernon's Texas Civil Statutes); or

(2) [(4)] an industrial development corporation created under Section 4A or 4B, Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes).

(b) If [Except as provided by Section 334.0855, if] a municipality or county is included within the boundaries of another taxing authority and the adoption or increase of the tax under this subchapter would result in a combined tax rate of more than two percent in any location in the municipality or county, the election to approve or increase the tax under this chapter is to be treated for all purposes as an election to reduce the tax rate of the other taxing authority [(except a rapid transit authority created under Chapter 451, Transportation Code)] to the highest rate that will not result in a combined tax rate of more than two percent in any location in the municipality or county. If the municipality or county is located within the boundaries of only one taxing authority, and the adoption or increase of the tax under this subchapter will result in a decrease of the tax rate of the taxing authority, the ballot at an election to impose or increase the tax must clearly state that the adoption or increase of the tax will result in a reduction of the tax rate of the taxing authority. If the municipality or county is included within the boundaries of more than one taxing authority, the election to impose or increase the tax under this subchapter must allow the voters to choose which taxing authority's tax will be reduced.

SECTION 23. Sections 383.106(a) and (b), Local Government Code, are amended to read as follows:

(a) A district may adopt a tax under this subchapter only if as a result of adoption of the tax the combined rate of all local sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by political subdivisions having territory in the district will not exceed two percent at any location in the district.

(b) If, as a result of the imposition or increase in a sales and use tax by a municipality in which there is located a district with an existing sales and use tax or as a result of the annexation by a municipality of the territory in a district with an existing sales and use tax, the overlapping local sales and use taxes in the area, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, in the district will exceed two percent at any location, the district's sales and use tax rate is automatically reduced to a rate that when added to the combined rate of local sales and use taxes will equal two percent.

SECTION 24. Sections 385.111(f) and (h), Local Government Code, are amended to read as follows:

(f) On adoption of the tax authorized by this section, there is imposed a tax of two percent, or the maximum rate at which the combined tax rate of all local sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, in any location in the district does not exceed two percent, on the receipts from the sale at retail of taxable items within the district, and an excise tax on the use, storage, or other consumption within the district of taxable items purchased, leased, or rented from a retailer within the district during the period that the tax is in effect. The rate of the excise tax is the same as the rate of the sales tax portion of the tax and is applied to the sales price of the taxable item. With respect to a taxable service, "use" means the derivation in the district of direct or indirect benefit from the service.

(h) If all or part of the territory of the district is annexed by a municipality that has adopted and is imposing a sales and use tax, the sales and use tax imposed by the district in the annexed territory shall be reduced, if required, in even multiples of one-eighth percent, and without the necessity for an election, so that the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the county, the annexing municipality, and all other political subdivisions within the annexed territory of the district will not exceed two percent at any location, provided that a sales and use tax previously adopted by the district for the annexed territory shall not be reduced to less than one-half percent, and provided further that no reduction of the district's sales and use tax in the portions of the district not so annexed shall be required.

SECTION 25. Sections 3817.154(b) and (c), Special District Local Laws Code, are amended to read as follows:

(b) The district may not adopt a sales and use tax if as a result of the adoption of the tax the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district.

(c) If the voters of the district approve the adoption of the tax at an election held on the same election date on which another political subdivision adopts a sales and use tax or approves an increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district, the election to adopt a sales and use tax under this chapter has no effect.

SECTION 26. Section 3828.205(a), Special District Local Laws Code, is amended to read as follows:

(a) On adoption of the tax authorized by this subchapter, there is imposed a tax of two percent, or the maximum rate at which the combined tax rate of all local sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, in any location in the district does not exceed two percent, on the receipts from the sale at retail of taxable items within the district, and an excise tax on the use, storage, or other consumption within the district of taxable items purchased, leased, or rented from a retailer within the district during the period that the tax is in effect.

SECTION 27. Section 3828.206(a), Special District Local Laws Code, is amended to read as follows:

(a) If all or part of the district territory is annexed by a municipality that has adopted and is imposing a sales and use tax, the sales and use tax imposed by the district in the annexed territory shall be reduced, if required, in even multiples of one-eighth percent, and without the necessity of an election, so that the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by Henderson County, the annexing municipality, and all other political subdivisions within the annexed territory of the district will not exceed two percent at any location, except that:

(1) a sales and use tax previously adopted by the district for the annexed territory may not be reduced to less than one-half percent; and

(2) a reduction of the district's sales and use tax in the portions of the district that are not annexed is not required.

SECTION 28. Sections 3847.154(b) and (c), Special District Local Laws Code, are amended to read as follows:

(b) The district may not adopt a sales and use tax if as a result of the adoption of the tax the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district.

(c) If the voters of the district approve the adoption of the tax at an election held on the same election date on which another political subdivision adopts a sales and use tax or approves an increase in the rate of its sales and use tax and as a result the combined rate of all sales and use taxes, other than transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent at any location in the district, the election to adopt a sales and use tax under this chapter has no effect.

SECTION 29. Section 4A(d), Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas Civil Statutes), is amended to read as follows:

(d) The city may levy a sales and use tax for the benefit of a corporation under this section if the tax is authorized by a majority of the qualified voters of the city voting at an election called and held for that purpose. If the city adopts the tax, there is imposed a tax on the receipts from the sale at retail of taxable items within the city at the rate approved by the voters. The rate must be equal to one-eighth, one-fourth, three-eighths, or one-half of one percent. The city may not adopt a rate that would result in a combined rate of all sales and use taxes, including the tax under this section but not including transit sales and use taxes primarily for the support of transportation services authorized under the Transportation Code, imposed by the city and other political subdivisions of this state having territory in the city that exceeds two percent at any location. An election adopting a rate that exceeds the limit on the combined rate has no effect. There is also imposed an excise tax on the use, storage, or other consumption within the city of taxable items purchased, leased, or rented from a retailer during the period that the tax is effective within the city. The rate of the excise tax is the same as the rate of the sales tax portion of the tax and is applied to the sales price of the taxable items.

SECTION 30. The following statutes are repealed:

(1) Section 321.1025, Tax Code;

(2) Section 334.085(b-1), Local Government Code; and

(3) Section 334.0855, Local Government Code.

SECTION 31. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2007.