By: Lavender H.B. No. 3742

A BILL TO BE ENTITLED

AN ACT

to repeal certain state sales, use, excise, franchise, severance, production, occupations, gross receipts and inheritance taxes, to repeal or limit certain local sales, use, excise and ad valorem property taxes, to enact a statewide and local value added tax, and to reform school finance and administration; providing penalties.

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

ARTICLE 1. REPEAL OF CERTAIN STATE TAXES

SECTION 1.01. Subject to Sections 1.02 and 1.03 of this Article, and effective on and after September 1, 2013 (as used in this Article 1, the "Effective Date"), TAX CODE, TITLE 2, STATE TAXATION, is amended as set forth below.

(A) SUBTITLE E, SALES, EXCISE AND USE TAXES, is amended as set forth below.

(1) Chapter 151, LIMITED SALES, EXCISE AND USE TAX, is repealed in its entirety.

(2) Chapter 152, TAXES ON SALE, RENTAL AND USE OF MOTOR VEHICLES, is repealed in its entirety.

(3) Chapter 154, CIGARETTE TAX, is repealed in its entirety.

(4) Chapter 155, CIGARS AND TOBACCO PRODUCTS TAX, is repealed in its entirety.

(5) Chapter 156, HOTEL OCCUPANCY TAX, is repealed in its entirety.

(6) Chapter 158, MANUFACTURED HOUSING SALES AND USE TAX, is repealed in its entirety.

(7) Chapter 159, CONTROLLED SUBSTANCES TAX, is repealed in its entirety.

(8) Chapter 160, TAXES ON SALES AND USE OF BOATS AND BOAT MOTORS, is repealed in its entirety.

(9) Chapter 161, FIREWORKS TAX, is repealed in its entirety.

(10) Chapter 162, MOTOR FUEL TAXES, is repealed in its entirety.

(B) SUBTITLE F, Chapter 171, FRANCHISE TAX, is repealed in its entirety.

(C) SUBTITLE G, GROSS RECEIPTS TAXES, is amended as set forth below.

(1) Chapter 181, CEMENT PRODUCTION TAX, is repealed in its entirety.

(2) Chapter 182, MISCELLANEOUS GROSS RECEIPTS TAXES, is repealed in its entirety.

(3) Chapter 183, MIXED BEVERAGE TAX, is repealed in its entirety.

(D) SUBTITLE H, BUSINESS PERMIT TAXES, is amended as set forth below.

(1) Chapter 191, SUBCHAPTERS E, F, G AND H are repealed in their entirety.

(E) SUBTITLE I, SEVERANCE TAXES, is amended as set forth below.

(1) Chapter 201, GAS PRODUCTION TAX, is repealed in its entirety.

(2) Chapter 202, OIL PRODUCTION TAX, is repealed in its entirety.

(3) Chapter 203, SULPHUR PRODUCTION TAX, is repealed in its entirety.

(4) Chapter 204, TAX CREDIT FOR NEW FIELD DISCOVERIES, is repealed in its entirety.

(F) SUBTITLE J, INHERITANCE TAX, is amended as s3et forth below.

(1) Chapter 211, INHERITANCE TAXES, is repealed in its entirety.

SECTION 1.02.

(A) Subject to the provisions of Section 1.02(B) of this Article, the repeal of the various Tax Code chapters and sections referenced in this Article shall be prospective in application only and without prejudice to any rights and obligations of taxpayers, or the amounts owed to and the authorities of the comptroller or of this state, accruing or arising with respect to periods prior to the Effective Date, including but not limited to refunds, adjustments and similar items that would otherwise have been payable by or on behalf of the comptroller on or after the Effective Date.

(B) Notwithstanding the foregoing, but without prejudice to any other applicable limitation of actions, expiration or "sunset" provision, no judicial or administrative enforcement action shall be commenced by any authority of this state or any of its political subdivisions under the provisions so repealed on or after the fifth anniversary of the Effective Date.

SECTION 1.03.

(A) Except as otherwise expressly provided in Section 1.03(B) of this Article, the comptroller shall make a determination as to the amounts of revenues that, in the fiscal year of enactment, were allocated to funds and accounts, or to municipalities, counties or other bodies, for which special allocation had been made under the provisions repealed by this Article 1, and shall, with such frequency as would otherwise have been applicable under the provisions so repealed, cause like amounts to be deposited out of the general revenue fund to the credit of such specially allocated funds and accounts, or issue a warrant drawn on the general revenue fund to such municipalities, counties or other bodies, as applicable, during subsequent fiscal periods until entry into effect in each case of any contrary provision by act of the legislature. Any limitations on use by the recipients of such funds under the provisions so repealed shall continue in effect under this section until entry into effect in each case of any contrary provision by act of the legislature.

(B) Notwithstanding the foregoing, the comptroller shall not continue to allocate or pay any amounts allocated under the repealed provisions for the purpose of administration, collection and/or enforcement of any taxes so repealed.

ARTICLE 2.

STATE VALUE ADDED TAX

SECTION 2.01. Subject to Section 2.02 of this Article, and effective on and after September 1, 2013 (as used in this Article 1, the "Effective Date"),TAX CODE, TITLE 2, STATE TAXATION, is amended by adding new Subchapter K to read as follows:

TAX CODE

TITLE 2. STATE TAXATION

SUBTITLE K. STATE VALUE ADDED TAX

CHAPTER 220. VALUE ADDED TAX

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 220.001. SHORT TITLE. This chapter may be cited as the Texas State Value Added Tax Act.

Sec. 220.002. DEFINITIONS. In this chapter:

(1) "Comptroller" means the Comptroller of Public Accounts of the State of Texas.

(2) "In this state" means within the exterior limits of Texas and includes all territory within these limits ceded to or owned by the United States.

(3) "Local taxing unit" means any county, municipality, school district, special district or authority (including but not limited to a junior college district, a hospital district, a district created by or pursuant to the Water Code, a mosquito control district, a fire prevention district, a crime control district, a noxious weed control district, a transportation district or authority) or any other political unit of this state, whether created by or pursuant to the constitution or a local, special, or general law, that is authorized to impose and is imposing value added taxes even if the governing body of another political unit determines the tax rate for the unit or otherwise governs its affairs.

(4) "Municipality" means any incorporated city, town or village, including but not limited to a home-rule city.

(5) "Person" means any individual natural person or any partnership, corporation, limited liability company, trust, or other legal entity.

(6) "Place of business of the taxpayer" means an established outlet, office, or location operated by the taxpayer or the taxpayer's agent or employee for the purpose of receiving orders for supply of services or property and includes any location at which three or more orders are received by the taxpayer during a calendar year. A warehouse, storage yard, or manufacturing plant is not a "place of business of the taxpayer" unless at least three orders are received by the taxpayer during the calendar year at the warehouse, storage yard, or manufacturing plant. An outlet, office, facility, or any location that contracts with a commercial business to process for that business invoices, purchase orders, bills of lading, or other equivalent records onto which value added tax is added, including an office operated for the purpose of buying and selling taxable services or property to the commercial business, is not a "place of business of the taxpayer" if the comptroller determines that the outlet, office, facility, or location functions or exists to avoid the tax imposed by this chapter or to rebate a portion of the tax imposed by this chapter to the contracting business. Notwithstanding any other provision of this subdivision, a kiosk is not a "place of business of the taxpayer." In this subdivision, "kiosk" means a small stand-alone area or structure that:

(A) is used solely to display merchandise or to submit orders for taxable services or property from a data entry device, or both;

(B) is located entirely within a location that is a place of business of another taxpayer, such as a department store or shopping mall; and

(C) at which taxable goods or services are not available for immediate delivery to a customer.

(7) "Place of supply" means:

(A) in the case of goods and other tangible personal property, the location in this state at which the customer or its agent acquires actual custody and control of such goods or other tangible personal property,

(B) in the case of services or intangible personal property, the taxpayer's place of business in this state or, if more than one, (i) the place of business in this state where the order is first placed by the customer, provided that the order is placed in person or, if (i) does not apply, (ii) the place of business in this state most involved in consummating the supply in question or, if neither (i) nor (ii) apply, the location in this state at which the service or intangible personal property is performed or otherwise delivered, and

(C) in the case of real property, including but not limited to all property in the nature of fixtures thereto, the situs of such property in this state.

(8) "Service" includes, without limitation of its more general meaning, any service received by the customer either directly or indirectly through any electronic, digital or telephonic medium or other means of remote access, and, for the avoidance of doubt, includes electronic delivery or transmission of data, software, music, video, photographs, writings or other informational content or interactive service.

(9) "Supply" means to sell, transfer, barter, exchange, license, let, lease, loan, rent or render to any other person any service or property in consideration for payment or other receipt of value.

(10) "Tangible personal property" means personal property that can be seen, weighed, measured, felt, or touched or that is perceptible to the senses in any other manner.

(11) (A) "Taxable receipts" means the aggregate value of payments or other consideration received by a taxpayer on account of its supply in this state of services and property on which the value added tax is imposed under this chapter, without a deduction for the cost of:

(i) the service or property supplied;

(ii) the materials used, labor or service employed, interest, losses, or other expenses; or

(iii) transportation or installation incident to the supply of the service or property.

(B) "Taxable receipts" does not include:

(i) discounts and refunds given by the taxpayer if separately identified to the customer by such means as an invoice, billing, sales slip or ticket, or contract,

(ii) the face value of United States coin or currency in a sale of that coin or currency in which the total consideration given by the customer exceeds the face value of the coin or currency, or

(iii) a voluntary gratuity or a reasonable mandatory charge for the service of a meal or food products, including soft drinks and candy, for immediate human consumption when the service charge is separated from the sales price of the meal or food product and identified as a gratuity or tip and when the total amount of the service charge is disbursed by the employer to employees who customarily and regularly provide the service.

(C) The "taxable receipts" arising from membership in a private club or organization consist of the dues, fees, and other charges and assessments, including initiation fees, required for membership or a special privilege, status, or membership classification in the club or organization.

(10) "Taxpayer" means any person who, but for an exemption established for such person under Subchapter D of this chapter, would be subject to the value added tax under the terms of Section 220.101 or, for purposes of reporting, collections and enforcement, under the terms of the provisions permitting direct payment by direct payment permit holders.

(11) "Value added tax" means any tax so called and imposed by this state, any local taxing unit in this state, and any transit authority in this state having the power to impose such a tax under applicable provisions of the laws of this state.

[Sections 220.008-220.050 reserved for expansion]

SUBCHAPTER B. ADMINISTRATION AND RECORDS

Sec. 220.051. RULES. The comptroller shall adopt and prescribe reasonable rules and forms that are consistent with this chapter for the administration, collection, reporting and enforcement of its provisions, including but not limited to rules related to reporting requirements under this chapter and apportioning supplies of services and property to this state and its political subdivisions.

Sec. 220.052. EMPLOYEES. The comptroller may employ accountants, auditors, investigators, assistants, and clerks for the administration of this chapter and may delegate to employees the authority to conduct hearings, prescribe rules, and perform other duties required by this chapter.

Sec. 220.053. RETROACTIVE EFFECT OF RULES. The comptroller may prescribe the extent to which a rule or ruling shall be applied without retroactive effect.

Sec. 220.054 INVESTIGATIONS AND AUDITS. (a) The comptroller, or another person authorized by the comptroller in writing, may examine, copy, and photograph the books, records, papers, and equipment of a person who engages in a taxable supply of services or property and may investigate the character of the business of the person to verify the accuracy of the person's report or to determine the amount of tax that may be required to be paid if no report has been filed.

(b) For the purpose of determining the amount of tax collected and payable to the state, the amount of tax accruing and due, and whether a tax liability has been incurred under this chapter, the comptroller or a person authorized by the comptroller may:

(1) inspect at any time during business hours any business premises where a taxable event has occurred and examine, copy, and photograph the books, returns, records, papers, and equipment relating to the conduct in question; and

(2) require by delivery of written notice to the taxpayer or to an employee, representative, or agent of the taxpayer that, not later than the 10th working day after the date the notice is delivered, the taxpayer produce to an agent or designated representative of the comptroller for inspection the books, records, papers, and returns relating to the taxable activity stated in the notice.

Sec. 220.055. MANAGED AUDITS. (a) In this section, "managed audit" means a review and analysis of invoices, checks, accounting records, or other documents or information to determine a taxpayer's liability for tax under this chapter.

(b) A managed audit may be limited to certain categories of liability under this chapter, including tax on:

(1) supplies made by the taxpayer of one or more types of services or property;

(2) supplies made to the taxpayer of one or more types of services or property;

(3) supplies made to the taxpayer under a direct payment permit; or

(4) any other category specified in an agreement authorized by this section.

(c) The comptroller may, in a written agreement, authorize a taxpayer to conduct a managed audit under this section. The agreement must:

(1) be signed by an authorized representative of the comptroller and the taxpayer; and

(2) specify the period to be audited and the procedure to be followed.

(d) In determining whether to authorize a managed audit, the comptroller may consider, in addition to other factors the comptroller considers relevant:

(1) the taxpayer's history of tax compliance;

(2) the amount of time and resources the taxpayer has available to dedicate to the audit;

(3) the extent and availability of the taxpayer's records; and

(4) the taxpayer's ability to pay any expected liability.

(e) The decision to authorize or not authorize a managed audit rests solely with the comptroller.

(f) The comptroller may examine records and perform reviews that the comptroller determines are necessary before the audit is finalized to verify the results of the audit.

(g) Unless the audit or information reviewed by the comptroller under Subsection (f) discloses fraud or willful evasion of the tax, the comptroller may not assess a penalty and may waive all or part of the interest that would otherwise accrue on any amount identified to be due in a managed audit. This subsection does not apply to any amount collected by the taxpayer that was a tax or represented to be a tax but that was not reported as such to this state.

(h) Except as provided by Section 111.104(f), the taxpayer is entitled to a refund of any tax overpayment disclosed by a managed audit under this section.

Sec. 220.056. PERSONS WHO MAY BE REGARDED AS SUPPLIERS. If the comptroller determines that it is necessary for the efficient administration of this chapter to regard a salesman, representative, peddler, or canvasser as the agent of a dealer, distributor, supervisor, or employer under whom he operates or from whom he obtains the tangible personal property that he supplies to others, whether or not the supply is made in his own behalf or for the dealer, distributor, supervisor, or employer, the comptroller may so regard the salesman, representative, peddler, or canvasser, and may regard the dealer, distributor, supervisor, or employer as the supplier for the purpose of this chapter.

Sec. 220.057. RECORDS REQUIRED TO BE KEPT. (a) All taxpayers shall keep the following records in the form the comptroller requires:

(1) records of all gross receipts, including documentation in the form of receipts, shipping manifests, invoices, and other pertinent papers, from each taxable supply of services or property made by such taxpayer during each reporting period;

(2) records in the form of receipts, shipping manifests, invoices, and other pertinent papers from each taxable supply of services or property made to such taxpayer from every source during each reporting period;

(3) records in the form of receipts, shipping manifests, invoices, and other pertinent papers that substantiate each claimed deduction, credit, refund or exclusion authorized by law; and

(4) records in the form of sales receipts, invoices, or other equivalent records showing all value added tax, and any money represented to be value added tax, received or collected on each taxable supply of services or property made by such supplier during each reporting period.

(b) A record required by Subsection (a) shall be kept for not less than four years from the date that it is made unless:

(1) the comptroller authorizes in writing its destruction at an earlier date; or

(2) other applicable provisions of law require that the record be kept for a longer period.

Sec. 220.058. OUT-OF-STATE RECORDS. A taxpayer is entitled to keep or store the taxpayer's records outside this state. If the comptroller requests to examine a record kept or stored outside this state, the taxpayer shall bring the record into this state for the examination or permit the comptroller to examine the record at the out-of-state location.

Sec. 220.059. CONFIDENTIALITY OF TAX INFORMATION. (a) Information in or derived from a record, report, or other instrument required to be furnished under this chapter is confidential and not open to public inspection, except for information set forth in a lien filed under this title or a permit issued under this chapter to a supplier and except as provided by Subsection (c) of this section.

(b) Information secured, derived, or obtained during the course of an examination of a taxpayer's books, records, papers, officers, or employees, including the business affairs, operations, profits, losses, and expenditures of the taxpayer, is confidential and not open to public inspection except as provided by Subsection (c) of this section.

(c) This section does not prohibit:

(1) the examination of information, if authorized by the comptroller, by another state officer or law enforcement officer, by a tax official of another state, by a tax official of the United Mexican States, or by an official of the United States if a reciprocal agreement exists;

(2) the delivery to a taxpayer, or a taxpayer's authorized representative, of a copy of a report or other paper filed by the taxpayer under this chapter;

(3) the publication of statistics classified to prevent the identification of a particular report or items in a particular report;

(4) the use of records, reports, or information secured, derived, or obtained by the attorney general or the comptroller in an action under this chapter against the same taxpayer who furnished the information;

(5) the delivery to a successor, receiver, executor, administrator, assignee, or guarantor of a taxpayer of information about items included in the measure and amounts of any unpaid tax or amounts of tax, penalties, and interest required to be collected;

(6) the delivery of information to a municipality, county, or other local governmental entity in accordance with Section 321.3022, 322.2022, or 323.3022; or

(7) the release of information in or derived from a record, report, or other instrument required to be furnished under this chapter by a governmental body, as that term is defined in Section 552.003, Government Code.

Sec. 220.060. REMEDIES NOT EXCLUSIVE. An action taken by the comptroller or the attorney general under this chapter is not an election to pursue one remedy to the exclusion of any other remedy authorized by this chapter.

Sec. 220.061. TAXPAYER'S COLLECTION OF TAX AND ISSUANCE OF RECEIPTS AND RECORDS. (a) Each taxpayer shall collect the value added tax due on each taxable supply of services and property and, upon receiving payment or other value in consideration for such supply, issue a written or printed receipt to the customer clearly and separately stating both the taxable value of the service or property supplied and the percent and amount of each value added tax (state and local) imposed with respect to such transaction.

(b) When the amount of value added tax is added, it becomes a part of the price of the supply, thereby becoming a debt of the customer to the taxpayer until paid and, if unpaid, it is recoverable at law in the same manner as the original supply price.

(c) To the extent so provided by regulations issued by the comptroller, such receipts shall also bear the appropriate code(s) assigned by the comptroller to the place of supply and local taxing unit or units applicable to the transaction in question.

(d) Subject to any requirements as to form and manner prescribed by the comptroller, receipts may be issued in any medium customarily utilized by the taxpayer for this purpose in compliance with applicable laws and regulations, including but not limited to paper, electronic, optical or other storage or display media, provided that they are (i) amenable to retention of copies in the taxpayer's records, as well as the permanent storage and ready access and review of such copies for purposes of audit, and (ii) amenable to being furnished to and retained by the customer.

(e) Taxpayers shall maintain adequate records of all such taxable transactions in the manner, and for the time periods, established by applicable regulations issued by the comptroller, which shall be in such form and detail as shall be sufficient for audit as necessary at all times during the periods over which the comptroller has the right to require audits of the taxpayer's taxable receipts and related transactions.

[Sections 220.062-220.100 reserved for expansion]

SUBCHAPTER C. IMPOSITION OF VALUE ADDED TAX

20.101. VALUE ADDED TAX IMPOSED. A value added tax is imposed on any person who in this state supplies any service or property by in the ordinary course of a trade or business in which the person engages for the purpose of profit.

Sec. 220.102. LIABILITY FOR VALUE ADDED TAX. Value added tax imposed under this chapter is a liability of the taxpayer, which accrues at the time of supply and thereupon becomes payable in accordance with the accounting, reporting, remittance, collection and enforcement provisions of this chapter and regulations issued by the comptroller pursuant to this chapter.

Sec. 220.104. RATE OF TAX. Except in cases where a different rate is deemed to apply by the express provisions of this chapter, the rate of value added tax imposed under this chapter equals seven percent (7%) of the taxpayer's taxable receipts attributable to any applicable tax period.

[Sections 220.105-220.150 reserved for expansion]

SUBCHAPTER D. EXEMPTIONS

Sec. 220.151. EXEMPTION -- SMALL BUSINESSES. A person is exempted from the tax imposed by this chapter for any calendar quarter in which:

(1) the amount of value added tax computed for the person during that calendar quarter is less than $1000; or

(2) the amount of the person's total taxable receipts during the 12-month period preceding the end of the calendar quarter is less than or equal to $100,000.

Sec. 220.152. EXEMPTION -- GOVERNMENTAL ENTITIES. Each of the following governmental entities is exempted from the tax imposed by this chapter on services or property supplied by such entities to other persons:

(1) the United States;

(2) an unincorporated instrumentality of the United States;

(3) a corporation that is an agency or instrumentality of the United States and is wholly owned by the United States or by another corporation wholly owned by the United States;

(4) this state;

(5) a county, municipality, school district, special district, or other political subdivision of this state;

(6) another state, district or territory of the United States, or a governmental unit of such state, district or territory.

Sec. 220.153. EXEMPTION -- RELIGIOUS, EDUCATIONAL, AND PUBLIC SERVICE ORGANIZATIONS. (a) Each of the following types of entities is exempted from the tax imposed by this chapter on services or property supplied by such entities to other persons:

(1) an organization created for religious, educational, or charitable purposes if no part of the net earnings of the organization benefits a private shareholder or individual;

(2) an organization qualifying for an exemption from federal income taxes under Section 501(c)(3), (4), (8), (10) or (19), Internal Revenue Code, if the service or property supplied by the organization relates to its exempt purpose and no part of the proceeds go to benefit a private individual except as a part of the services of a purely public charity;

(3) a nonprofit corporation organized under the laws of this state for the purpose of encouraging agriculture by the maintenance of public fairs and exhibitions of livestock if no individual receives a private benefit; or

(4) a nonprofit organization engaged exclusively in providing athletic competition among persons under 19 years old if no financial benefit goes to an individual or shareholder;

(5) a company, department, or association organized for the purpose of answering fire alarms and extinguishing fires or for the purpose of answering fire alarms, extinguishing fires, and providing emergency medical services, the members of which receive no compensation or only nominal compensation for their services rendered; or

(6) a chamber of commerce or a convention and tourist promotional agency representing at least one Texas city or county if the chamber of commerce or the agency is not organized for profit and no part of its net earnings inures to a private shareholder or other individual.

(b) The sale of, or contracting for the sale of, concessions at an event conducted by an organization exempted under Subsection (a)(4) of this section does not prevent the application of the exemption to that organization.

(c) A nonprofit hospital or hospital system that qualifies for an exemption under Subsection (a)(2) shall provide community benefits that include charity care and government-sponsored indigent health care as set forth in Subchapter D, Chapter 311, Health and Safety Code.

(d) For purposes of obtaining a refund of or claiming a credit for taxes paid under this chapter on the basis of an exemption under this section, an organization is not considered exempted from the taxes imposed by this chapter before the earlier of:

(1) the date the organization applied for the exemption with the comptroller; or

(2) the date of assessment of the organization's tax liability by the comptroller as a result of an audit, as applicable.

[Sections 220.154-220.200 reserved for expansion]

SUBCHAPTER E. EXCLUSIONS

Sec. 220.201. SERVICES AND/OR PROPERTY EXCLUDED FROM THE VALUE ADDED TAX. The services and property specified in this subchapter E are excluded from the application of the tax imposed by this chapter:

Sec. 220.202. MONETARY INSTRUMENTS, FINANCIAL ASSETS AND INVESTMENTS.

(a) The issuance, transfer, assignment or exchange of property in the nature of monetary instruments or financial assets and investments are excluded from the application of the value added tax.

(b) As used in this section, the term "monetary instruments" means currency, coin, checks, drafts and other negotiable instruments, money orders, cash cards or other instruments used generally as an equivalent substitute for cash, as well as wire transfers, money transmissions and similar transactions effected via electronic communication networks.

(c) As used in this section, the term "financial assets and investments" includes:

(1) insurance coverage for which a premium is paid or commissions paid to insurance agents for the sale of insurance or annuities;

(2) corporate shares, partnership interests, beneficial interest in a trust, or other ownership interests in a legal entity, whether certificated or uncertificated;

(3) bonds, debentures, notes, or other evidence of indebtedness or promises to pay value;

(4) investments in any open-end investment company, as defined by the Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.), that is subject to that Act and that is registered under The Texas Securities Act; and

(5) the account value of interests in pension funds, brokerage funds, deposit accounts and distributions therefrom; provided, that the constituent materials and services utilized to produce physical representations of such instruments are not so excluded when sold in bulk or customized for subsequent use.

(d) The exclusion of services and property by this section does not operate to exclude any related service or property, whether or not such related service or property is supplied at the time of, or in connection with, or in the supply of the excluded service or property. For the avoidance of doubt, fees, charges, commissions, premiums, interest or other payments to which the taxpayer is entitled above and beyond the principal or investment value of the financial asset or investment to which payments relate are not excluded from the application of the value added tax.

Sec. 220.203. INTERCOMPANY SERVICES.

(a) Service or property transactions among affiliated entities, at least one of which is a corporation, that report their income to the Internal Revenue Service on a single consolidated return for the tax year in which the transaction occurs, are excluded from the application of the value added tax. For this purpose, "affiliated entity" includes an entity that would be classified as a member of an affiliated group under 26 U.S.C. Section 1504 but for the exclusions provided by that section.

(b) Service or property transactions between a legal entity disregarded by the Internal Revenue Service and any person controlling, controlled by, or under common control with such entity are excluded from the application of the value added tax.

(c) Services rendered to a legal entity by one or more of its directors, officers, managers or other principals in the ordinary course of fulfilling their responsibilities in those roles but outside of an employment relationship are excluded from the application of the value added tax.

Sec. 220.204. EMPLOYMENT SERVICES. The following services are excluded from the application of the value added tax:

(1) services rendered by an employee to his or her employer in the ordinary course of the employment relationship for which the employee is paid his or her regular wages or salary;

(2) a service performed by an employee of a temporary employment service as defined by Section 93.001, Labor Code, for an employer to supplement the employer's existing work force on a temporary basis, when the service is normally performed by the employer's own employees, the employer provides all supplies and equipment necessary, and the help is under the direct or general supervision of the employer to whom the help is furnished; or

(3) a service performed by assigned employees of a staff leasing company, either licensed under Chapter 91, Labor Code, or exempt from the licensing requirements of that chapter, for a client company under a written contract that provides for shared employment responsibilities between the staff leasing company and the client company for the assigned employees, most of whom must have been previously employed by the client company. The comptroller shall prescribe by rule the minimum percentage of assigned employees that must have been previously employed by the client company, the minimum time period the assigned employees must have been employed by the client company prior to the commencement of its contract, and such other criteria as the comptroller may deem necessary to properly implement this section.

Sec. 220.205. INCIDENTAL TRANSACTIONS. The following transactions are excluded from the application of the value added tax:

(1) less than five incidents of supplying services or property during a 12-month period by a person who does not habitually engage, or hold himself out as engaging, in the business of supplying such services or property;

(2) the sale of all or substantially all of the entire operating assets of a business or of a separate division, branch, or identifiable segment of a business;

(3) a transfer of all or substantially all the property used by a person in the course of an activity if after the transfer the real or ultimate ownership of the property is substantially similar to that which existed before the transfer;

(4) the supply of tangible personal property by an individual if:

(A) the property was originally acquired by the individual or a member of the individual's family for the personal use of the individual or the individual's family;

(B) the person who does not habitually engage, or hold himself out as engaging, in the business of supplying such property;

(C) the individual does not employ an auctioneer, broker, or factor, other than an online auction, to supply the property; and

(D) the total receipts from supplying the individual's tangible personal property in a calendar year do not exceed $3,000;

(5) soliciting orders of the services or property in question to be sent outside this state for approval or rejection by the vendor and, if approved, to be filled by the vendor from a point outside this state, although the act of soliciting such orders may itself be considered to constitute a service rendered to the vendor.

Sec. 220.206. TRANSFERS OF COMMON INTERESTS IN PROPERTY. If an interest in property is sold, under the terms of a good faith, bona fide contractual relationship, to another person who either before or after the sale owned or owns a joint or undivided interest in the property with the seller, and if the taxes imposed by this chapter have previously been paid on the property, the sale of such interest in property is excluded from the taxes imposed by this chapter.

Sec. 220.207. EXCLUSIONS REQUIRED BY PREVAILING LAW. Any supply of service or property that this state is prohibited from taxing by the law of the United States, the United States Constitution, or the Constitution of Texas is excluded from the taxes imposed by this chapter.

[Sections 220.208-220.250 reserved for expansion]

SUBCHAPTER F. INPUT TAX AND OUTPUT TAX

Sec. 220.251. "INPUT TAX". "Input tax" means, in relation to a taxpayer, the aggregate value added tax accrued in respect of the services and property supplied to such taxpayer during a given calendar quarter, but only to the extent that such services and property are used or held for use in the first instance by such taxpayer in the ordinary course of its trade or business. The input taxes attributable to any such service or property that is diverted to personal use of an owner, director, officer or other principal of the taxpayer shall be deducted from the input taxes calculated for the calendar quarter during which such diversion took place.

Sec. 220.252. "OUTPUT TAX". "Ouput tax" means, in relation to a taxpayer, the aggregate value added tax accrued in respect of the services and property supplied by such taxpayer during a given calendar quarter.

[Sections 220.253-220.300 reserved for expansion]

SUBCHAPTER G. REPORTS AND PAYMENTS

Sec. 220.301. REPORTS. (a) A person required to pay a tax under this chapter shall report to the comptroller on the last day of January, April, July, and October of each year.

(b) The comptroller may require a taxpayer to file a return or pay the taxes imposed by this chapter for a period other than a monthly period if necessary to ensure the payment or to facilitate the collection of the taxes due.

(c) A requirement under subsection (b) of this section may by rule be made generally applicable to suppliers providing amusement services at locations other than the regular business establishment of the supplier or to suppliers who provide amusement services and who have no regular business establishment in this state.

Sec. 220.302. CONTENTS AND FORM OF REPORT. (a) A tax report required by this chapter must include a statement of:

(1) the taxpayer's aggregate taxable receipts;

(2) the aggregate value of all taxable supplies of services and property made by the taxpayer to its customers,

(3) the aggregate value of taxable supplies of services and property made to the taxpayer by its suppliers, and

(4) the aggregate output taxes and input taxes that accrued during the preceding quarterly period; together with any other information that the comptroller reasonably determines to be necessary for the proper administration of this chapter.

(b) A report must also itemize the individual taxable transaction values and, by reference to the appropriate code(s) assigned by the comptroller, the place of supply and local taxing unit or units applicable to each of the transactions comprising the input and output taxes being reported.

(c) A report must also reflect adjustments to previously reported amounts made as a result of subsequent review or changes in circumstance

(d) The comptroller by rule may determine the manner of reporting taxable proceeds from rentals and leases of tangible personal property.

(e) The report must be in the form as prescribed by the comptroller.

(f) A tax report must be signed by the person required to file it or by the person's authorized agent.

Sec. 220.303. ACCOUNTING BASIS FOR REPORTS. A taxpayer whose regular books are kept on a cash basis, accrual basis, or some other generally recognized accounting basis that accurately reflects the operation of the business may file the tax reports required by this chapter on the same basis that is used for the taxpayer's regular books.

Sec. 220.304. REPORTS AND PAYMENTS: WHERE MADE. A tax report or tax payment shall be delivered to the office of the comptroller.

Sec. 220.305. METHOD OF REPORTING VALUE ADDED TAX: GENERAL RULE. A taxpayer shall compute the value added tax imposed by this chapter by multiplying the cumulative percentage value added tax rates of all applicable taxing entities (i.e., the state and all applicable local taxing units) with respect to each transaction times the taxable receipts attributable to each such transaction.

Sec. 220.306. METHOD OF REPORTING: SUPPLIERS HAVING SALES BELOW TAXABLE AMOUNT. (a) If not less than 50 percent of the total receipts of a person from the supply of non-excluded services and property comes from separate transactions in which the supply price is an amount on which no tax is produced, the supplier may exclude the receipts from those transactions when reporting and paying the value added tax.

(b) A supplier may not exclude any receipts from supplies as permitted under aubsection (a) of this section unless the supplier has received from the comptroller before the filing of the tax report written approval allowing the exclusion, and all receipts from otherwise taxable supplies of services and property are subject to the tax until the approval is granted.

(c) The comptroller shall approve the reporting and computation of the value added tax as permitted under Subsection (a) of this section by a supplier if the supplier qualifies for the exclusion and submits to the comptroller satisfactory evidence that the supplier can and will maintain records adequate to substantiate the authorized exclusion.

Sec. 220.307. DIRECT PAYMENT OF TAX BY CUSTOMER. (a) The holder of a direct payment permit issued by the comptroller may give a blanket exemption certificate to taxpayers who supply services or property to the holder of the direct payment permit. The blanket exemption certificate covers all future taxable supplies of services or property to the permit holder and relieves the supplier of the obligation of collecting the taxes imposed by this chapter from the permit holder.

(b) A blanket exemption certificate given under this section must contain the direct payment permit number and the statement that the direct payment permit holder agrees to accrue and pay to this state all taxes that are or may become due on the taxable items sold under the exemption certificate to the permit holder.

Sec. 220.308. ISSUANCE OF DIRECT PAYMENT PERMIT. (a) The comptroller shall issue a direct payment permit to an applicant for the permit who qualifies as provided by Section 220.309 of this chapter.

(b) The comptroller is the sole judge of an applicant's qualifications, and the comptroller's refusal to issue a permit to an applicant is not appealable.

(c) An applicant for a direct payment permit who has been denied the issuance of a permit may:

(1) request permission from the comptroller to submit an amended application; or

(2) submit a new application for a direct payment permit after a reasonable period after the denial of the original application.

Sec. 220.309. APPLICATION FOR DIRECT PAYMENT PERMITS: QUALIFICATIONS. (a) A person desiring a direct payment permit must file with the comptroller a written application for the permit.

(b) The application must be accompanied with:

(1) an agreement that is signed by the applicant or a responsible officer of an applicant corporation, that is in a form prescribed by the comptroller, and that provides that the applicant agrees to:

(A) accrue and pay all taxes imposed by this chapter on the supply of services and property to the permit holder, excluding those supplies that are are excluded from the taxes imposed by this chapter;

(B) pay the imposed taxes monthly on or before the 20th day of the month following the end of each calendar month; and

(C) waive the discount permitted by Section 220.313 of this code on the payment of all taxes under the direct payment permit only;

(2) a description, in the amount of detail that the comptroller requires, of the accounting method by which the applicant proposes to differentiate between taxable and excluded transactions; and

(3) records establishing that the applicant is a responsible person who annually acquires services and/or property in taxable supply transactions aggregating $1,800,000 or more.

Sec. 220.310. REVOCATION OF DIRECT PAYMENT PERMIT. (a) A person to whom a direct payment permit has been issued holds the permit as a matter of revocable privilege and not as a matter of right. The comptroller on his own initiative may cancel a direct payment permit, and the cancellation is not appealable.

(b) A person whose direct payment permit is canceled by the comptroller is entitled to written notice of the cancellation, which shall be sent by the comptroller by registered mail.

Sec. 220.311. VOLUNTARY RELINQUISHMENT OF DIRECT PAYMENT PERMIT. (a) The holder of a direct payment permit may notify the comptroller that the direct payment permit is to be voluntarily relinquished.

(b) A direct payment permit and the direct payment agreement remain valid and enforceable until the comptroller issues a termination notice.

Sec. 220.312. CANCELLATION OR TERMINATION OF DIRECT PAYMENT PERMIT: DUTY OF PERMIT HOLDER. (a) On the receipt of a notice issued under Section 220.310 of this chapter canceling a direct payment permit or of a notice issued under Section 220.311 of this chapter terminating a direct payment permit, the person who held the permit shall immediately notify each supplier to whom a blanket exemption certificate has been given that the exemption certificate is no longer valid.

(b) The failure of a person to notify a supplier as required by subsection (a) of this section is a failure and refusal to pay the taxes imposed by this chapter by the person required to make the notification.

Sec. 220.313. REIMBURSEMENT TO TAXPAYER FOR TAX COLLECTIONS. A taxpayer may deduct and withhold one-half of one percent of the amount of taxes due from the taxpayer or direct permit holder on a timely return as reimbursement for the cost of collecting the taxes imposed by this chapter. The comptroller shall provide a card with each form distributed for the collection of taxes under this chapter. The card may be inserted by the taxpayer with the tax payment to provide for contribution of all or part of the reimbursement provided by this section for use as grants under Subchapter M, Chapter 56, Education Code. If the taxpayer chooses to contribute the reimbursement for the grants, the taxpayer shall include the amount of the reimbursement contribution with the tax payment. The comptroller shall transfer money contributed under this section for grants under Subchapter M, Chapter 56, Education Code, to the appropriate fund.

Sec. 220.314. DISCOUNT FOR PREPAYMENTS. (a) A taxpayer who prepays the taxpayer's tax liability on the basis of a reasonable estimate of the tax liability for a quarter in which a prepayment is made or for a month in which a prepayment is made may deduct and withhold 1.25 percent of the amount of the prepayment in addition to the amount permitted to be deducted and withheld under Section 220.313 of this chapter. A reasonable estimate of the tax liability must be at least 90 percent of the tax ultimately due or the amount of tax paid in the same quarter, or month, if a monthly prepayer, in the last preceding year. Failure to prepay a reasonable estimate of the tax will result in the loss of the entire prepayment discount.

(b) In order to qualify for the deduction permitted by subsection (a) of this section, the taxpayer must make the tax prepayment:

(1) on or before the 15th day of the second month of the calendar quarter for which the prepayment is made if the taxpayer pays the tax quarterly; or

(2) on or before the 15th day of the month for which the prepayment is made if the taxpayer pays the tax monthly.

(c) A taxpayer who prepays the tax liability as permitted by this section must file a report when due as provided by this chapter. The amount of a prepayment made by a taxpayer under this section shall be credited against the amount of actual tax liability of the taxpayer as shown on the tax report of the taxpayer. If there is a tax liability owed by the taxpayer in excess of the prepayment credit, the taxpayer shall send to the comptroller the remaining tax liability at the time of filing the quarterly or monthly report. The taxpayer is entitled to the deduction permitted under Section 220.313 of this chapter on the amount of the remaining tax liability.

(d) If the amount of a prepayment exceeds the actual tax liability, the excess of the prepayment shall be credited against future tax liability of the taxpayer or refunded to the taxpayer as provided by Subchapter C of Chapter 111 of this code.

Sec. 220.315. FORFEITURE OF DISCOUNT OR REIMBURSEMENT. If a taxpayer fails to file a report required by this chapter when due or to pay the tax when due, the taxpayer forfeits any claim to a deduction or discount allowed under Section 220.313 or Section 220.314 of this code.

Sec. 220.316. CREDITS AND REFUNDS FOR BAD DEBTS, RETURNED MERCHANDISE, AND REPOSSESSIONS. (a) A taxpayer may withhold the payment of the tax on a portion of the taxable receipts associated with the taxpayer's of a service or property that remains unpaid by the customer if:

(1) during the reporting period in which the supply occurred the taxpayer determines that the unpaid portion will remain unpaid;

(2) the taxpayer enters the unpaid portion of the supply price in the taxpayer's books as a bad debt; and

(3) the bad debt is claimed as a deduction for federal tax purposes during the same or a subsequent reporting period.

(b) If the portion of a debt determined to be bad under subsection (a) of this section is paid, the taxpayer shall report and pay the tax on the portion during the reporting period in which the payment is made.

(c) Subject to subsection (e), a supplier or any person who extends credit to a purchaser under a supplier's private label credit agreement, or an assignee or affiliate of either, is entitled to credit or reimbursement for taxes paid on the portion of:

(1) an account determined to be worthless and actually charged off for federal income tax purposes; or

(2) the remaining unpaid sales price of a taxable item when the item is repossessed under a conditional sales contract.

(d) A supplier is entitled to credit for the amount of taxes paid on the amount of a refund or credit made to a customer under a bona fide agreement in which the price of a taxable supply transaction is renegotiated. This credit applies to a refund or credit made under an agreement in settlement of a claim for an alleged breach of warranty on the taxable supply of tangible personal property by the supplier to the person with whom the agreement is made.

(e) A person is entitled to a credit or reimbursement provided by subsection (c) only if:

(1) the supplier remits the tax for which the credit or reimbursement is sought;

(2) all payments on an account are prorated between taxable and nontaxable charges; and

(3) the supplier or person claiming the credit or reimbursement provides detailed records outlining:

(A) the amount the customer contracted to pay;

(B) taxable and nontaxable charges;

(C) the tax collected and remitted;

(D) the unpaid portion of the supply price assigned; and

(E) the taxpayer number of the supplier who collected and remitted the tax.

(f) A person whose volume and character of uncollectible accounts warrants an alternative method of substantiating the reimbursement or credit may:

(1) maintain records other than the records specified in subsection (e) if:

(A) the records fairly and equitably apportion taxable and nontaxable elements of a bad debt and compute the amount of sales tax imposed and remitted with respect to the taxable charges remaining unpaid on the debt; and

(B) the comptroller approves the procedures used; or

(2) implement a system to report its future tax responsibilities based on a historical percentage calculated from a sample of transactions if:

(A) the system utilizes records provided by the person claiming the credit or reimbursement; and

(B) the comptroller approves the procedures used.

(g) The comptroller may revoke the authorization to report under subsection (f)(2) if the comptroller determines that the percentage being used is no longer representative because of:

(1) a change in law, including a change in the interpretation of an existing law or rule; or

(2) a change in the taxpayer's business operations.

(h) A person claiming a credit or reimbursement under this section shall remit tax on any payments received on an account that has been written off and claimed as a bad debt.

(i) For purposes of this section, "affiliate" means any entity or entities that would be classified as a member of an affiliated group under 26 U.S.C. Section 1504.

Sec. 220.316. CREDIT OR REIMBURSEMENT IN RETURN TRANSACTIONS. A supplier is entitled to a credit or reimbursement equal to the amount of sales tax refunded to a customer when the customer receives a full or partial refund of the sales price of a returned taxable item.

Sec. 220.317. DETERMINATION OF OVERPAID AMOUNTS. (a) This section applies to the value added tax paid in error by a person holding a permit under this chapter (1) on supplies of services or property made to such person that are excluded from the value added tax under the terms of this chapter, or (2) to a supplier exempt from the value added tax under the provisions of this chapter.

(b) A person to whom this section applies may compute the amount of overpayment by use of a projection based on a sampling of transactions. The sampling method used must comply with generally accepted sampling methods as approved by the comptroller.

(c) The person may obtain reimbursement for amounts determined to have been overpaid by taking a credit on one or more value added tax returns or by filing a claim for refund with the comptroller within the limitation period specified by Subchapter D, Chapter 111.

(d) The person must record the method by which the projection and computation were performed and must make available on request by the comptroller the records on which the projection and computation were based.

(e) The comptroller may adopt rules specifying additional procedures that must be followed in connection with claiming a credit under this section.

Sec. 220.318. DETERMINATION OF TAX PAYABLE. (a) The amount of value added tax imposed under this chapter and payable by a taxpayer shall equal the excess, if any, of the aggregate state and local output taxes reported by the taxpayer over the aggregate state and local input taxes reported by the taxpayer.

Sec. 220.319. TAX PAYMENTS: DUE DATE. Except as provided in Section 220.321 of this code, the taxes imposed by this chapter are due and payable to the comptroller on the last day of January, April, July, and October of each year, except that a tax due for a business day that falls in two different calendar quarters is allocated to the calendar quarter in which the business day begins.

Sec. 220.320. PAYMENT. The tax due for the preceding calendar quarter shall accompany the return and is payable to the state.

Sec. 220.321. PAYMENT OF TAX FOLLOWING BUSINESS REORGANIZATION. (a) If a person that begins business on or after the first day of the quarter is an incorporation, reincorporation, or survivor of a merger of a person or persons that were previously subject to a tax under this chapter, its report required under this subchapter must show the combined taxable receipts, output tax and input tax, respectively, during the preceding quarterly period of the person or persons that were incorporated, reincorporated, or merged to form the new entity. The value added tax provided for in this chapter must be paid on the reported combined value added required under this subsection.

Sec. 220.322. ADDITIONAL REPORTS. The comptroller may require a person required to report under this chapter to supply additional or supplemental reports containing information necessary to compute the tax due.

Sec. 220.323. DETERMINATION AFTER THE FILING OF A REPORT. If a person has filed a tax report, the comptroller may issue a deficiency determination under Section 111.008 of this code.

Sec. 220.324. DETERMINATION IF NO REPORT FILED. (a) If a person fails to file a report, the comptroller shall estimate the amounts that would have been required to be included in a report filed under this chapter for each period or the total period for which the person failed to report as required by this chapter.

(b) The estimate required by subsection (a) of this section may be made on any information available to the comptroller.

(c) On the basis of the estimate, the comptroller shall compute and determine the amount required to be paid to the state for each period.

(d) The comptroller shall add to the determination an amount equal to 10 percent of the amount computed under subsection (c) of this section as a penalty.

(e) A determination under this section may be issued for one or more periods, and more than one determination may be issued for a single period.

Sec. 220.325. DETERMINATION WHEN A BUSINESS IS DISCONTINUED. If a business is discontinued, the comptroller may make a determination of tax liability under this chapter before the date a report or tax payment is due with respect to the discontinued business.

Sec. 220.326. WHEN DETERMINATION BECOMES FINAL. A determination made under Section 220.324 or Section 220.325 of this chapter becomes final on the expiration of 30 days after the day on which the determination was served by personal service or by mail, unless a petition for a redetermination is filed before the determination becomes final.

Sec. 220.327. LIMITATIONS ON DETERMINATION. (a) A notice of a deficiency determination must be personally served or mailed within the period provided by Subchapter D, Chapter 111 of this code after the last day of the calendar month following the close of the regular reporting period of the taxpayer for which the amount is proposed to be determined or within the period provided by Subchapter D, Chapter 111 of this code after the report is filed, whichever period expires the later.

(b) The limitations provided by subsection (a) of this section do not apply to a determination proposed to be made for the collection of an amount of value added tax on the taxable supply of services or property if a deficiency notice has been given or is given for the collection of the use tax on the same taxable supply.

Sec. 220.328. OFFSETS. In making a determination, the comptroller may offset an overpayment for one or more periods against an underpayment, penalty, and interest accrued on the underpayment for the same period or one or more other periods. Any interest accrued on the overpayment shall be included in the offset.

Sec. 220.329. PETITION FOR REDETERMINATION. A person petitioning for a redetermination of a determination made under Section 111.022 must file, before the determination becomes final, security as the comptroller requires to ensure compliance with this chapter. The security may be sold by the comptroller in the manner provided by Subchapter A, Chapter 111.

Sec. 220.330. HEARING ON REDETERMINATION. (a) If a petition for a redetermination is filed before the determination becomes final, the petitioner is entitled on a request stated in the petition to an oral hearing on the redetermination and to at least 20 days' notice of the time and place of the hearing.

(b) The comptroller may continue the hearing from time to time as is necessary.

Sec. 220.331. REDETERMINATION. (a) The comptroller may decrease the amount of a determination at any time before the determination becomes final.

(b) The comptroller may increase the amount of a determination that is not final if the additional claim is asserted by the comptroller at or before a hearing on a redetermination.

(c) If an additional claim is asserted, the petitioner is entitled to a 30-day continuance of the hearing to permit the petitioner to obtain and present evidence applicable to the items on which the additional claim is based.

Sec. 220.332. INTEREST. Unpaid taxes imposed by this chapter draw interest beginning 60 days after the date on which the tax or the amount of the tax required to be collected became due and payable to the state.

Sec. 220.333. NOTICES. The comptroller shall give notice of a determination made under this subchapter promptly as provided by Sections 111.008(b) and (c) of this code. Any other notice required by this subchapter shall be given in the same manner. Notices under this subchapter are effective as provided by Section 111.008(c) of this code.

[Sections 220.334-220.350 reserved for expansion]

SUBCHAPTER H. REFUNDS AND RELIEF

Sec. 220.351. REFUNDS TO EXEMPT ORGANIZATIONS. Any person meeting the criteria of an organization exempt under subchapter D from the tax imposed under this chapter during any calendar quarter shall be entitled to claim a refund from the comptroller of input taxes accrued by that organization with respect to the calendar quarter in question in accordance with the provisions of this subchapter and regulations issued by the comptroller for this purpose.

Sec. 220.352. FILING OF CLAIMS. (a) The person seeking to claim a refund shall file a report with the comptroller on the last day of the month following the end of the calendar quarter with respect to which such claim relates.

(b) The report must include a statement of the person's aggregate input taxes accrued during such calendar quarter, and a certification to the effect that (i) the services and property on the supply of which such input taxes accrued relate to the exempt purpose of the person and (ii) such services and/or property has not been, is not being and will not be used for the personal benefit of a private individual except as part of the services of a purely public charity.

(c) The report must also include an itemized apportionment of the input taxes reported among the various counties, municipalities, school districts, special districts and other political subdivisions of this state to which such taxes are allocable under the provisions of this chapter and regulations issued by the comptroller for this purpose. The person filing the report shall have discharged its responsibility in this respect if it accurately reports the local taxing unit code assigned to such supply transactions by the supplier(s) in question and reflected on the receipt issued as required by this chapter.

(d) A report shall also reflect adjustments to previously reported amounts made as a result of subsequent review or changes in circumstance, and any credits or deductions resulting from such adjustments shall be included in the determinations made under this subchapter, but separately identified as such.

Sec. 220.353. DETERMINATION AND PAYMENT OF REFUND. The comptroller shall determine the extent to which the person filing the report is entitled to the refund claim and shall issue payment in the amount so determined to the person as soon as practicable following such determination.

[Sections 220.354-220.400 reserved for expansion]

SUBCHAPTER I. APPORTIONMENT AND ALLOCATION OF VALUE ADDED TAX

REVENUES

Sec. 220.401. ANALYSIS AND COMPILATIONS. (a) The comptroller shall conduct such analyses and compilations of reports received under this chapter as shall be necessary to properly apportion among all of the local taxing units the value added taxes collected hereunder on the basis of the place at which the supply of the service or property in question is deemed under this chapter to have taken place.

(b) In performing these calculations, the comptroller shall compute:

(1) the aggregate value added taxes for each local taxing unit that were included in reports of output taxes;

(2) the aggregate input taxes reported by each such taxpayer as having their place of supply in each local taxing unit;

(3) the proportionate attribution to various local taxing entities of each such taxpayer's reported aggregate input taxes, with such attribution being determined for each such taxpayer in proportion to the ratio that the amount determined under subdivision (3) for each local taxing unit bears to the amount determined under subdivision (2);

(4) the aggregate reported input taxes attributed to each local taxing unit for all taxpayers under subdivision (3); and

(5) the extent to which the amount determined under subdivision (1) for each local taxing unit exceeds or falls short of the amount determined under subdivision (5) for each same local taxing unit. The amount so determined under subdivision (5), if an excess, shall be credited as an apportionment to the local taxing unit for the period in question and, if a shortfall, shall be debited against apportionments to the local taxing unit for the period in question.

Sec. 220.402. LOCAL TAXING UNIT CODES. For this purpose, the comptroller shall establish and maintain a system whereby each local taxing unit is assigned a unique alphanumeric code to be utilized by all persons filing reports under this chapter in reporting the place of supply for all taxable receipts. The comptroller shall utilize this coding system in the preparation and distribution of reports concerning apportionment among taxing entities.

Sec. 220.403. AGGREGATION OF TAXES AND REFUNDS. In determining the apportionments appropriate for any given calendar period, the comptroller shall reduce the reported output taxes attributable to each local taxing unit by the amount of refunds, credits, deductions or offsets determined to be issuable to taxpayers or exempted persons with respect to those reported output taxes during that same calendar period on account of exemptions or exclusions provided under this chapter.

Sec. 220.404. COMPTROLLER TO COLLECT AND ADMINISTER LOCAL TAXING UNIT VALUE ADDED TAXES. The comptroller shall administer, collect, and enforce any value added tax imposed by a local taxing unit under Title 3, Local Taxes. The taxes imposed under this chapter and the taxes imposed under Title 3 shall be collected together, if both taxes are imposed.

Sec. 220.405. COMPTROLLER'S REPORTING DUTIES. (a) The comptroller shall make quarterly reports to a local taxing unit that has adopted the value added taxes authorized by Title 3, Local Taxes, if the local taxing unit requests the reports. A report must include the name, address, and account number of each person that has remitted to the comptroller a tax payment or claimed a refund that has been apportioned to the local taxing unit during the quarter covered by the report. The report must also show the results of the comptrollers determinations under Section 220.401 with respect to such local taxing unit.

Sec. 220.406. ALLOCATION OF LOCAL VALUE ADDED TAXES. The comptroller shall remit to each local taxing unit the net value added taxes apportioned to it under this chapter using such procedures and with such frequency as shall be established under applicable rules issued by the comptroller. To the extent that any local taxing unit's apportionment account shows a deficit for a given quarter, the comptroller shall make a reasonable estimate of the likelihood of recovery in future periods and, to the extent that a continuing deficit is projected for the third calendar quarter following the one in question, the local taxing unit shall be obligated to remit to the comptroller an amount equal to such projected continuing deficit within thirty (30) days following notice from the comptroller of such determination.

[Sections 220.407-220.450 reserved for expansion]

SUBCHAPTER J. ENFORCEMENT

Sec. 220.451. VENUE OF SUIT TO ENFORCE CHAPTER. Venue of a civil suit against a person to enforce this chapter is either in a county where the person's principal office is located according to its charter or certificate of authority or in Travis County.

Sec. 220.452. AUTHORITY TO RESTRAIN OR ENJOIN. To enforce this chapter, a court may restrain or enjoin a violation of this chapter.

Sec. 220.453. APPOINTMENT OF RECEIVER. If a court forfeits a person's charter or certificate of authority, the court may appoint a receiver for the person and may administer the receivership under the laws relating to receiverships.

Sec. 220.454. AGENT FOR SERVICE OF PROCESS. Each person on which a tax is imposed by this chapter shall designate a resident of this state as the person's agent for the service of process.

Sec. 220.455. SERVICE OF PROCESS ON SECRETARY OF STATE. (a) Legal process may be served on a domestic corporation by serving it on the secretary of state if the process relates to the forfeiture of the corporation 's charter or to the collection of a tax or penalty imposed by this chapter and:

(1) if the local agent of the corporation or if the officers named in the corporation 's charter or annual report on file with the secretary of state do not reside or cannot be located in the county in which the corporation 's principal office, as stated in the charter, is located; or

(2) if the principal office of the corporation is not maintained or cannot be located in the county in which the charter states that the office is located.

(b) Complete and valid service of process is made on a corporation through the secretary of state by delivering duplicate copies of the process to the secretary of state or the deputy secretary of state.

(c) On receipt of legal process under this section, the secretary of state promptly shall forward to the corporation by registered mail a copy of the process. The copy must be mailed to the address named in the corporation 's charter as its principal place of business or to another place of business of the corporation as shown by the records in the secretary of state 's office.

(d) The failure of the secretary of state to mail a copy of legal process to a corporation does not affect the validity of the service of process. It is competent and sufficient proof of the service of process that the secretary of state certifies under the state seal the receipt of the process.

(e) The secretary of state shall keep a record of each legal process served on the secretary under this section showing the date and time of the receipt of the process and the secretary 's action on the process.

(f) This section is cumulative of other laws relating to service of process.

Sec. 220.456. PENALTY FOR FAILURE TO PAY TAX OR FILE REPORT.

(a) If a person on which a tax is imposed by this chapter fails to pay the tax when it is due and payable or fails to file a report required by this chapter when it is due, the person is liable for a penalty of five percent of the amount of the tax due.

(b) If the tax is not paid or the report is not filed not later than the 30th day after the due date, a penalty of an additional five percent of the tax due is imposed.

(c) The minimum penalty under this section is $1.

Sec. 220.457. WILLFUL AND FRAUDULENT ACTS. (a) A person commits an offense if the person is subject to this chapter and the person willfully:

(1) fails to file a report;

(2) fails to keep books and records as required by this chapter;

(3) files a fraudulent report;

(4) violates any rule of the comptroller for the administration and enforcement of the provisions of this chapter; or

(5) attempts in any other manner to evade or defeat any tax imposed by this chapter or the payment of the tax.

(d) A person commits an offense if the person is an accountant or an agent for or an officer or employee of a person and the person knowingly enters or provides false information on any report, return, or other document filed by the person under this chapter.

(e) A person who commits an offense under this section may also, in addition to the punishment provided by this section, be liable for a penalty under this chapter.

(f) An offense under this section is:

(1) a Class C misdemeanor if the amount of the tax collected and not paid is less than $50;

(2) a Class B misdemeanor if the amount of the tax collected and not paid is $50 or more but less than $500;

(3) a Class A misdemeanor if the amount of the tax collected and not paid is $500 or more but less than $1,500;

(4) a state jail felony if the amount of the tax collected and not paid is $1,500 or more but less than $20,000;

(5) a felony of the third degree if the amount of the tax collected and not paid is $20,000 or more but less than $100,000;

(6) a felony of the second degree if the amount of the tax collected and not paid is $100,000 or more but less than $200,000; and

(7) a felony of the first degree if the amount of the tax collected and not paid is $200,000 or more.

(g) When tax is collected and not paid in violation of Subsection (a) pursuant to one scheme or continuous course of conduct, the conduct may be considered as one offense and the amounts aggregated in determining the grade of the offense.

(e) A person whose commercial domicile or whose residence is in this state may be prosecuted under this section only in the county in which the person's commercial domicile or residence is located unless the person asserts a right to be prosecuted in another county.

(f) A prosecution for a violation of this section must be commenced before the fifth anniversary of the date of the violation.

Sec. 220.458. VENUE FOR CRIMINAL PROSECUTION. Venue for prosecution for an offense under this chapter is in:

(1) the county in which any element of the offense occurs; or

(2) Travis County.

[Sections 220.458-220.500 reserved for expansion]

SUBCHAPTER K. DISPOSITION OF REVENUE

Sec. 220.501. GENERAL REVENUE FUND. Except as and to the extent otherwise expressly provided by the laws of this state, the revenue from a tax, interest, or penalty imposed by this chapter shall be deposited in the state treasury to the credit of the general revenue fund.

[END OF SECTION 2.01]

SECTION 2.02.

(A) Subject to the provisions of Section 2.02(B) of this Article, the amendments effected by this Article shall be prospective in application only and without prejudice to any rights and obligations of taxpayers, or the amounts owed to and the authorities of the comptroller or of this state, accruing or arising with respect to periods prior to the Effective Date, including but not limited to refunds, adjustments and similar items that would otherwise have been payable by or on behalf of the comptroller on or after the Effective Date.

(B) Notwithstanding the foregoing, but without prejudice to any other applicable limitation of actions, expiration or "sunset" provision, no judicial or administrative enforcement action shall be commenced by any authority of this state or any of its political subdivisions under the provisions so repealed on or after the fifth anniversary of the Effective Date.

ARTICLE 3.

CERTAIN CONFORMING REVISIONS

SECTION 3.01. TAX CODE, TITLE 2, STATE TAXATION, is amended by revising SUBTITLE A, GENERAL PROVISIONS, CHAPTER 101, GENERAL PROVISIONS, Sec. 101.009, ALLOCATION AND TRANSFER OF NET REVENUES, to delete subparagraph (b) thereof.

SECTION 3.02. TAX CODE, TITLE 2, STATE TAXATION, SUBTITLE D, COMPACTS AND UNIFORM LAWS, Chapter 142, SIMPLIFIED SALES AND USE ADMINISTRATION ACT, is repealed in its entirety.

ARTICLE 4. REVISIONS TO CERTAIN LOCAL TAXES

SECTION 4.01. Subject to Section 4.03 of this Article 4, and effective on and after September 1, 2013 (as used in this Article, the "Effective Date"), TAX CODE, TITLE 3. LOCAL TAXATION, SUBTITLE C, LOCAL SALES AND USE TAXES, CHAPTERS 321, 322, 323, 324, 325 and 327 are revised to read as follows, and new CHAPTER 328, SCHOOL DISTRICT ENRICHMENT VALUE ADDED TAX is added as set forth below:

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 321.001. SHORT TITLE. This chapter may be cited as the Texas Municipal Sales and Use Value Added Tax Act. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.002. 321.002. DEFINITIONS. (a) In this chapter:

(1) "Additional municipal sales and use tax" means only the additional tax authorized by Section 321.101(b).

(2) "Municipality" includes any incorporated city, town, or village.

(3) "Place of business of the retailer" means an established outlet, office, or location operated by the retailer or the retailer's agent or employee for the purpose of receiving orders for taxable items and includes any location at which three or more orders are received by the retailer during a calendar year. A warehouse, storage yard, or manufacturing plant is not a "place of business of the retailer" unless at last three orders are received by the retailer during the calendar year at the warehouse, storage yard, or manufacturing plant. An outlet, office, facility, or any location that contracts with a retail or commercial business to process for that business invoices, purchase orders, bills of lading, or other equivalent records onto which sales tax is added, including an office operated for the purpose of buying and selling taxable goods to be used or consumed by the retail or commercial business, is not a "place of business of the retailer" if the comptroller determines that the outlet, office, facility, or location functions or exists to avoid the tax imposed by this chapter or to rebate a portion of the tax imposed by this chapter to the contracting business. Notwithstanding any other provision of this subdivision, a kiosk is not a "place of business of the retailer." In this subdivision, "kiosk" means a small stand-alone area or structure that:

(A) is used solely to display merchandise or to submit orders for taxable items from a data entry device, or both;

(B) is located entirely within a location that is a place of business of another retailer, such as a department store or shopping mall; and

(C) at which taxable items are not available for immediate delivery to a customer.

(b) Words words used in this chapter and defined by Chapter 151 220 have the meanings assigned by Chapter 151 220.

Sec. 321.003.

Sec. 321.003. OTHER PORTIONS OF TAX APPLICABLE. Subtitles A and B, Title 2, and Chapters 142 and 151 Chapter 220 apply to the taxes and to the administration and enforcement of the taxes imposed by this chapter in the same manner that those laws apply to state taxes, unless modified by this chapter.

Sec. 321.004. REFERENCES TO SALES OR USE TAX. A reference to a sales tax or a use tax imposed or authorized by this chapter is a reference to both the taxes imposed under Sections 321.101(a) and (b) unless otherwise provided.

SUBCHAPTER B. IMPOSITION OF SALES AND USE VALUE ADDED TAXES BY

MUNICIPALITIES

Sec. 321.101. TAX AUTHORIZED. (a) A municipality may adopt or repeal a sales and use value added tax authorized by this chapter, other than the additional municipal sales and use value added 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.

(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 (b) - (e) RESERVED

(f) A municipality may not adopt or increase a value added tax under this section if as a result of the adoption or increase of the tax the combined rate of all sales and use value added taxes imposed by the municipality and other political subdivisions of this state having territory in the municipality would exceed two three percent at any location in the municipality.

(g) For the purposes of Subsection (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 that serves as a place of supply of services or property that otherwise would be taxable under this chapter.

(h) Expired.

(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 Chapter 505, Local Government Code, 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. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 54, Sec. 1, eff. Oct. 20, 1987; Acts 1989, 71st Leg., ch. 2, Sec. 14.14(a), eff. Aug. 28, 1989; Acts 1989, 71st Leg., ch. 489, Sec. 1, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 184, Sec. 2, eff. May 24, 1991; Acts 1991, 72nd Leg., ch. 223, Sec. 1, eff. May 29, 1991; Acts 1993, 73rd Leg., ch. 320, Sec. 1, eff. May 28, 1993; Acts 1993, 73rd Leg., ch. 1031, Sec. 25, eff. Sept. 1, 1993; Acts 1997, 75th Leg., ch. 65, Sec. 1, eff. May 9, 1997; Acts 1997, 75th Leg., ch. 165, Sec. 30.264, eff. Sept. 1, 1997; Acts 1997, 75th Leg., ch. 705, Sec. 1, eff. Sept. 1, 1997. Amended by:

Acts 2007, 80th Leg., R.S., Ch. , Sec. 3.73, eff. April 1, 2009.

Sec. 321.102.

Sec. 321.102. EFFECTIVE DATES: NEW TAX, TAX REPEAL, BOUNDARY CHANGE. (a) A tax imposed under this chapter or the repeal of a tax abolished under this chapter takes effect on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a notice of the action as required by Section 321.405(b). This subsection does not apply to the additional municipal sales and use value added tax.

(b) The additional municipal sales and use value added tax takes effect or is increased, reduced, or repealed in the municipality on the October 1st after the expiration of the first complete calendar quarter after the date on which the comptroller receives notice from the municipality of the adoption, increase, reduction, or repeal of the additional municipal sales and use value added tax.

(c) If a municipality in which the tax imposed under this chapter is in effect changes its boundaries, the municipal secretary shall send by United States registered or certified mail to the comptroller a certified copy of the ordinance that adds or detaches municipal territory and that shows the effective date of the boundary change. The ordinance must be accompanied by a map clearly showing the added or detached territory. Except as provided by Subsection (d), the tax takes effect in the added territory or is inapplicable to the detached territory on the first day of the first calendar quarter after the comptroller receives the ordinance and map.

(d) If, within 10 days after the receipt of an ordinance and map sent under Subsection (c), the comptroller notifies the secretary of the municipality that more time is required, the effective date of the application of the tax in the added or detached area is the first day of the first calendar quarter after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives the ordinance and map.

(e) If as a result of the imposition or increase in a sales and use value added tax by a municipality in which there is located all or part of a local governmental entity (other than a county or school district) that has adopted a sales and use value added tax or as a result of the annexation by a municipality of all or part of the territory in a local governmental entity (other than a county or school district) that has adopted a sales and use value added tax the overlapping local sales and use value added taxes in the area will exceed two three percent, the entity's sales and use value added tax is automatically reduced in that area to a rate that when added to the combined rate of local sales and use value added taxes will equal two three percent.

(f) If an entity's rate is reduced in accordance with Subsection (e), the comptroller shall withhold from the municipality's monthly sales and use quarterly value added tax allocation an amount equal to the amount that would have been collected by the entity had the municipality not imposed or increased its sales and use value added tax or annexed the area in the entity less amounts that the entity collects following the municipality's levy of or increase in its sales and use value added tax or annexation of the area in the entity. The comptroller shall withhold and pay the amount withheld to the entity under policies or procedures that the comptroller considers reasonable.

(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 value added tax revenue of the entity. A municipality may not implement the imposition or increase of the sales and use value added 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 value added taxes imposed by the municipality, the local governmental entity, and any other political subdivisions having territory in the district would exceed two three percent at any location in the municipality.

(h) A transit authority is not a local governmental entity for the purposes of Subsections (e) and (f).

(i) Subsection (g) does not apply to a local governmental entity or political subdivision created under Chapter 326, Local Government Code. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 256, Sec. 1, eff. Sept. 1, 1989; Acts 1991, 72nd Leg., ch. 184, Sec. 3, eff. May 24, 1991; Acts 1999, 76th Leg., ch. 1467, Sec. 2.67, eff. June 19, 1999; Acts 2001, 77th Leg., ch. 1263, Sec. 74, eff. Sept. 1, 2001.

Sec. 321.1025.

Sec. 321.1025. ANNEXATION TO CERTAIN REGIONAL TRANSPORTATION AUTHORITIES. (a) A municipality that 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 of more than 800,000 and that has adopted an additional sales and use municipal value added tax for the benefit of the municipality may hold an election on the question of whether the municipality shall be annexed to the authority.

(b) The election must be held in the manner required by Chapter 452, Transportation Code.

(c) If the annexation is approved by the voters, the election is to be treated for all purposes as an election to abolish the additional sales and use municipal value added tax in the municipality and the tax is repealed in the manner provided by this chapter. Added by Acts 1991, 72nd Leg., ch. 223, Sec. 2, eff. May 29, 1991. Amended by Acts 1997, 75th Leg., ch. 165, Sec. 30.265, eff. Sept. 1, 1997.

Sec. 321.103. SALES 321.103. VALUE ADDED TAX. (a) In a municipality that has adopted the tax authorized by Section 321.101(a), there is imposed a value added tax on the receipts from the sale at retail of taxable items within the supply in that municipality at the rate of any service or property by any person in the ordinary course of one percent and at the same rate on the receipts from the sale at retail within the municipality of gas and electricity a trade or business in which the person engages for residential use. the purpose of profit.

(b) In a municipality that has adopted the additional municipal sales and use value added tax, the tax is imposed at the rate approved by the voters. The rate, when the tax is adopted, must be equal to either any increment of one-eighth, one-fourth, three-eighths, or one-half of one percentage point from zero to one percent. The rate may be reduced in one or more increments of one-eighth of one percent to a minimum of one-eighth of one percent or increased in one or more increments of one-eighth of one percent to a maximum of one-half of one percent, or the tax may be abolished. The rate that the municipality adopts is on the receipts from the sale at retail of all taxable items within the municipality and at the same rate on the receipts from the sale at retail within the municipality of gas and electricity for residential use unless the residential use of gas and electricity is exempted from the tax imposed under Section 321.101(a), in which case the residential use of gas and electricity is exempted under this subsection also percent, or the tax may be abolished. This rate is then applied to the taxpayer's taxable receipts attributable to any applicable tax period to determine the applicable municipal value added tax. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 184, Sec. 4, eff. May 24, 1991.

Sec. 321.104. USE TAX. (a) In a municipality that has adopted the tax authorized by this chapter, there is imposed an excise tax on the use, storage, or other consumption within the municipality of taxable items purchased, leased, or rented from a retailer during the period that the tax is effective within the municipality. 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.

(b) In a municipality that has adopted the tax authorized by this chapter, there is imposed an excise tax on the use, storage, or other consumption of gas or electricity for residential purposes and purchased from any retailer during the period that the tax is effective within the municipality. The tax is imposed at the same rate as the tax provided by Subsection (a). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 705, Sec. 25, eff. Sept. 1, 1991.

Sec. 321.1045. IMPOSITION OF SALES AND USE TAX IN CERTAIN FEDERAL MILITARY INSTALLATIONS. (a) This section applies only to a municipality with a population of more than 500,000 that borders the United Mexican States.

(b) For purposes of the sales and use tax imposed under this chapter, a reference in this chapter or other law to the municipality as the territory in which the tax or an incident of the tax applies includes the area within the boundaries of a federal military installation that is located in the municipality's extraterritorial jurisdiction.

(c) This section does not affect:

(1) the boundaries of an emergency services district that contains territory within the boundaries of a federal military installation on the effective date of this section;

(2) the authority of that emergency services district to continue to impose a sales and use tax in the entire territory of the district; or

(3) the duty of that emergency services district to provide services in the entire territory of the district. Added by Acts 2011, 82nd Leg., R.S., Ch. , Sec. 1, eff. July 1, 2011.

Sec. 321.105. RESIDENTIAL USE OF GAS AND ELECTRICITY. (a) There are exempted from the taxes imposed by a municipality under this chapter the sale, production, distribution, lease, or rental of, and the use, storage, or other consumption within the municipality of gas and electricity for residential use in any municipality that:

(1) adopted the tax on or after October 1, 1979; or

(2) adopted the tax before that time but:

(A) failed to exempt the residential use of gas and electricity before May 1, 1979; and

(B) has not reimposed the tax as provided by Subsection (c).

(b) A governing body of a municipality that adopted the taxes under this chapter before October 1, 1979, may, by ordinance adopted by a vote of a majority of the membership of the governing body and recorded in the municipal minutes, exempt from the taxes authorized by this chapter the receipts from the sale, production, distribution, lease, or rental of, and the use, storage, or other consumption of gas and electricity for residential use.

(c) A governing body of a municipality that has adopted the taxes authorized by this chapter before May 1, 1979, and in which residential use of gas and electricity is exempted within the municipality, may reimpose the taxes on gas and electricity for residential use by ordinance adopted by a vote of the majority of the membership of the governing body and entered in the municipal minutes.

(d) The municipal secretary shall send to the comptroller by United States certified or registered mail a copy of an ordinance exempting or imposing the taxes on residential use of gas and electricity.

(e) The exemption or reimposition of taxes on residential use of gas and electricity takes effect within the municipality as provided by Section 321.104(a) after receipt of a copy of the ordinance. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.1055. IMPOSITION OF FIRE CONTROL OR CRIME CONTROL DISTRICT TAX ON THE RESIDENTIAL USE OF GAS AND ELECTRICITY. (a) This section applies to a fire control, prevention, and emergency medical services district or crime control and prevention district located in all or part of a municipality that imposes a tax on the residential use of gas and electricity under Section 321.105.

(b) The board of directors of a district to which this section applies may, by order or resolution adopted in a public hearing by a vote of a majority of the membership of the board and recorded in the district's minutes:

(1) impose a tax adopted under Section 321.106 or 321.108, as applicable, on receipts from the sale, production, distribution, lease, or rental of, and the use, storage, or other consumption within the district of, gas and electricity for residential use;

(2) exempt from taxation the items described by Subdivision (1); or

(3) reimpose the tax under Subdivision (1).

(c) A district that adopts an order or resolution under Subsection (b) shall:

(1) send a copy of the order or resolution to the comptroller by United States certified or registered mail;

(2) send a copy of the order or resolution and a copy of the district's boundaries to each gas and electric company whose customers are subject to the tax by United States certified or registered mail; and

(3) publish notice of the order or resolution in a newspaper of general circulation in the district.

(d) If the residential use of gas and electricity ceases to be taxable in the municipality in which a district is located, then the residential use of gas and electricity is not taxable by the district.

(e) The provisions of Sections 321.201 and 321.204 that govern the computation of municipal taxes on gas and electricity for residential use apply to the computation of district taxes on gas and electricity for residential use under this section. Added by Acts 2009, 81st Leg., R.S., Ch. , Sec. 2, eff. January 1, 2010.

Sec. 321.106. FIRE CONTROL DISTRICT TAX. (c) The exemptions and exclusions of Chapter 220, Subchapters D and E apply equally to the determination of taxable receipts for purposes of any municipal value added tax.

Sec. 321.106. FIRE CONTROL DISTRICT TAX. (a) Subject to an election held in accordance with Chapter 344, Local Government Code, a municipality in which a fire control, prevention, and emergency medical services district is established shall adopt a sales and use value added tax in the area of the district for the purpose of financing the operation of the fire control, prevention, and emergency medical services district. The revenue from the tax may be used only for the purpose of financing the operation of the fire control, prevention, and emergency medical services district. The proposition for adopting a tax under this section and the proposition for creation of a fire control, prevention, and emergency medical services district shall be submitted at the same election. For purposes of Section 321.101, a tax under this section is not an additional sales and use tax.

(b) A tax adopted for a district under this section for financing the operation of the district may be decreased in increments of one-eighth of one percent by order of the board of directors of the district.

(c) The rate of a tax adopted for a district under this section may be increased in increments of one-eighth of one percent, not to exceed a total tax rate of one-half quarter percent, for financing the operation of the fire control, prevention, and emergency medical services district by order of the board of directors of the fire control, prevention, and emergency medical services district if approved by a majority of the qualified voters voting at an election called by the board and held in the district on the question of increasing the tax rate. At the election, the ballot shall be printed to provide for voting for or against the proposition: "The increase of the __________ (name of the municipality that created the district) Fire Control, Prevention, and Emergency Medical Services District sales and use value added tax rate to ______ percent." If there is an increase or decrease under this section in the rate of a tax imposed under this section, the new rate takes effect on the first day of the next calendar quarter after the expiration of one calendar quarter after the comptroller receives notice of the increase or decrease. However, if the comptroller notifies the president of the board of directors of the district in writing within 10 days after receipt of the notification that the comptroller requires more time to implement reporting and collection procedures, the comptroller may delay implementation of the rate change for one calendar quarter, and the new rate takes effect on the first day of the calendar quarter that follows the elapsed quarter.

(d) The comptroller shall remit to the municipality amounts collected at the rate imposed under this section as part of the regular allocation of other municipal tax revenue collected by the comptroller. The municipality shall remit that amount to the district. A retailer taxpayer may not be required to use allocation and reporting procedures in the collection of taxes under this section that are different from the procedures that retailers taxpayers use in the collection of other sales and use value added taxes under this chapter. An item, transaction, or A service that or property the supply of which is taxable in a municipality under a sales or use value added tax authorized by another section of this chapter is taxable under this section. An item, transaction, or A service that or property the supply of which is not taxable in a municipality under a sales or use value added tax authorized by another section of this chapter is not taxable under this section.

(e) If, in a municipality where a fire control, prevention, and emergency medical services district is composed of the whole municipality, a municipal sales and use value added tax or a municipal sales and use value added tax rate increase for the purpose of financing a fire control, prevention, and emergency medical services district is approved, the municipality is responsible for distributing to the district that portion of the municipal sales and use value added tax revenue received from the comptroller that is to be used for the purposes of financing the fire control, prevention, and emergency medical services district. Not later than the 10th day after the date the municipality receives money under this section from the comptroller, the municipality shall make the distribution in the proportion that the fire control, prevention, and emergency medical services portion of the tax rate bears to the total sales and use value added tax rate of the municipality. The amounts distributed to a fire control, prevention, and emergency medical services district are not considered to be sales and use value added tax revenue for the purpose of property tax reduction and computation of the municipal tax rate under Section 26.041.

(f) For purposes of the tax imposed under this section, a reference in this chapter to the municipality as the territory in which the tax or an incident of the tax applies means only the territory located in the fire control, prevention, and emergency medical services district, if that district is composed of an area less than an entire municipality.

(g) The comptroller may adopt rules and the municipality's governing body may adopt orders to administer this section. Added by Acts 2001, 77th Leg., ch. 1295, Sec. 2, eff. June 1, 2001.

Sec. 321.107. 321.107. ADMINISTRATION OF LOCAL SALES AND USE VALUE ADDED TAXES IMPOSED BY OTHER GOVERNMENTAL ENTITIES. The imposition, computation, administration, enforcement, and collection of any local sales and use value added tax imposed by any other local governmental entity is governed by this chapter, except as otherwise provided by law. In this section, "other local governmental entity" includes any governmental entity created by the legislature that has a limited purpose or function, that has a defined or restricted geographic territory, and that is authorized by law to impose a local sales and use value added tax. The term does not include a county, county health services district, county landfill and criminal detention center district, metropolitan transportation authority, coordinated county transportation authority, economic development district, crime control district, hospital district, emergency services district, or library district. Added by Acts 2003, 78th Leg., ch. 209, Sec. 54, eff. Oct. 1, 2003. Amended by:

Acts 2007, 80th Leg., R.S., Ch. , Sec. 21, eff. September 1, 2007.

Sec. 321.108.

Sec. 321.108. MUNICIPAL CRIME CONTROL AND PREVENTION DISTRICT TAX. (a) Subject to an election held in accordance with Chapter 363, Local Government Code, a municipality in which a crime control and prevention district is established shall adopt a sales and use value added tax in the area of the district for the purpose of financing the operation of the crime control and prevention district. The revenue from the tax may be used only for the purpose of financing the operation of the crime control and prevention district. The proposition for adopting a tax under this section and the proposition for creation of a crime control and prevention district shall be submitted at the same election.

(b) A tax adopted for a district under this section for financing the operation of the district may be decreased in increments of one-eighth of one percent by order of the board of directors of the district.

(c) The governing body of the municipality that proposed the creation of the crime control and prevention district may call an election in the district on the question of decreasing the tax rate in increments of one-eighth of one percent in the district. At the election, the ballot shall be printed to provide for voting for or against the following proposition: "The decrease of the ____________________ Crime Control and Prevention District sales and use value added tax rate to ____________ percent."

(d) The rate of a tax adopted for a district under this section may be increased in increments of one-eighth of one percent, not to exceed a total tax rate of one-quarter half percent for financing the operation of the crime control and prevention district, by order of the board of directors of the crime control and prevention district if approved by a majority of the voters voting at an election called by the board and held in the district on the question of increasing the tax rate. At the election, the ballot shall be printed to provide for voting for or against the following proposition: "The increase of the ______________ Crime Control and Prevention District sales and use value added tax rate to ____________ percent." If there is an increase or decrease under this subsection in the rate of a tax imposed under this section, the new rate takes effect on the first day of the next calendar quarter after the expiration of one calendar quarter after the comptroller receives notice of the increase or decrease. However, if the comptroller notifies the president of the board of directors of the district in writing within 10 days after receipt of the notification that the comptroller requires more time to implement reporting and collection procedures, the comptroller may delay implementation of the rate change for another calendar quarter, and the new rate takes effect on the first day of the next calendar quarter following the elapsed quarter.

(e) The comptroller shall remit to the municipality amounts collected at the rate imposed under this section as part of the regular allocation of municipal tax revenue collected by the comptroller if the district is composed of the entire municipality. The comptroller shall, if the district is composed of an area less than the entire municipality, remit that amount to the district. Retailers Taxpayers may not be required to use allocation and reporting procedures in the collection of taxes under this section that are different from the procedures that retailers taxpayers use in the collection of other sales and use value added taxes under this chapter. An item, transaction, A supply of services or service property that is taxable in a municipality under a sales or use value added tax authorized by another section of this chapter is taxable under this section. An item, transaction, or service A supply of services or property that is not taxable in a municipality under a sales or use value added tax authorized by another section of this chapter is not taxable under this section.

(f) If, in a municipality in which a crime control and prevention district is composed of the whole municipality, a municipal sales and use value added tax or a municipal sales and use value added tax rate increase for the purpose of financing a crime control and prevention district is approved, the municipality is responsible for distributing to the district that portion of the municipal sales and use value added tax revenue received from the comptroller that is to be used for the purposes of financing the crime control and prevention district. Not later than the 10th day after the date the municipality receives money under this section from the comptroller, the municipality shall make the distribution in the proportion that the crime control and prevention portion of the tax rate bears to the total sales and use value added tax rate of the municipality. The amounts distributed to a crime control and prevention district are not considered to be additional municipal sales and use value added tax revenue for the purpose of property tax reduction and computation of the municipal tax rate under Section 26.041.

(g) For purposes of the tax imposed under this section, a reference in this chapter to the municipality as the territory in which the tax or an incident of the tax applies means only the territory located in the crime control and prevention district, if that district is composed of an area less than an entire municipality.

(h) The comptroller may adopt rules and the governing body of the municipality may adopt orders to administer this section. Added by Acts 2007, 80th Leg., R.S., Ch. , Sec. 5, eff. June 15, 2007.

SUBCHAPTER C. COMPUTATION OF TAXES

Sec. 321.201. COMPUTATION OF SALES VALUE ADDED TAXES. (a) Each retailer taxpayer in a municipality that has adopted a tax authorized by this chapter shall add each sales value added tax imposed by the municipality under this chapter and by Chapter 151 220 to the sales supply price, and the sum of the taxes is a part of the price, a debt of the purchaser customer to the retailer taxpayer until paid, and recoverable at law in the same manner as the purchase supply price. If the municipality imposes the tax on gas and electricity for residential use, only the municipal tax is added to the sales price of sales of gas and electricity for residential use.

(b) The amount of the total tax is computed by multiplying the combined applicable tax rates, or the rate of the municipal tax only for sales of gas and electricity for residential use in a municipality that imposes the tax on gas and electricity for residential use, by the amount of the sales supply price. If the product results in a fraction of a cent less than one-half of one cent, the fraction of a cent is not collected. If the fraction of a cent is one-half of one cent or more, the fraction shall be collected as one cent.

(c) The comptroller may publish schedules and brackets of amounts of taxes based on the formula provided by Subsection (b) for use in municipalities that have adopted the taxes authorized by this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.202. METHOD OF REPORTING: RETAILERS HAVING SALES BELOW TAXABLE AMOUNT. The exclusion provided by Section 151.411 applies to a retailer under this chapter 50 percent of whose receipts from the sales of taxable items comes from individual transactions in which the sales price is an amount on which no tax is produced from the combined state and local taxes. Added by Acts 1987, 70th Leg., ch. 191,

Sec. 321.202. REPEALED

Sec. 321.203. REPEALED Sec. 1, eff. Sept. 1, 1987. For expiration of Subsections (c-2) and (c-3), see Subsection (c-3).

Sec. 321.203. CONSUMMATION OF SALE. (a) A sale of a taxable item occurs within the municipality in which the sale is consummated. A sale is consummated as provided by this section regardless of the place where transfer of title or possession occurs.

(b) If a retailer has only one place of business in this state, all of the retailer's retail sales of taxable items are consummated at that place of business except as provided by Subsection (e).

(c) If a retailer has more than one place of business in this state, each sale of each taxable item by the retailer is consummated at the place of business of the retailer in this state where the retailer first receives the order, provided that the order is placed in person by the purchaser or lessee of the taxable item at the place of business of the retailer in this state where the retailer first receives the order.

(c-1) If the retailer has more than one place of business in this state and Subsection (c) does not apply, the sale is consummated at the place of business of the retailer in this state:

(1) from which the retailer ships or delivers the item, if the retailer ships or delivers the item to a point designated by the purchaser or lessee; or

(2) where the purchaser or lessee takes possession of and removes the item, if the purchaser or lessee takes possession of and removes the item from a place of business of the retailer.

(c-2) Subsection (c) does not apply if:

(1) the taxable item is shipped or delivered from a warehouse:

(A) that is a place of business of the retailer;

(B) in relation to which the retailer has an economic development agreement with:

(i) the municipality in which the warehouse is located that was entered into under Chapter 380, 504, or 505, Local Government Code, or a predecessor statute, before January 1, 2009; or

(ii) the county in which the warehouse is located that was entered into under Chapter 381, Local Government Code, before January 1, 2009; and

(C) in relation to which the municipality provides information relating to the economic development agreement as required by Subsection (c-3) by the deadline prescribed by that subsection, or, if appropriate, the county complies with Section 323.203(c-3) by the deadline prescribed by that section; and

(2) the place of business of the retailer at which the retailer first receives the order in the manner described by Subsection (c) is a retail outlet identified in the information required by Subsection (c-3) or Section 323.203(c-3) as being served by the warehouse on January 1, 2009.

(c-3) Not later than September 1, 2009, a municipality that has entered into an economic development agreement described by Subsection (c-2) shall send to the comptroller information prescribed by the comptroller relating to the agreement that identifies each warehouse subject to the agreement and each retail outlet that, on January 1, 2009, was served by that warehouse. The comptroller shall prescribe the manner in which the information must be provided. The provision of information to the comptroller under this subsection does not affect whether information described by this subsection is confidential or excepted from required public disclosure. This subsection and Subsection (c-2) expire September 1, 2014.

(d) If the retailer has more than one place of business in this state and Subsections (c) and (c-1) do not apply, the sale is consummated at:

(1) the place of business of the retailer in this state where the order is received; or

(2) if the order is not received at a place of business of the retailer, the place of business from which the retailer's agent or employee who took the order operates.

(e) A sale of a taxable item is consummated at the location in this state to which the item is shipped or delivered or at which possession is taken by the customer if transfer of possession of the item occurs at, or shipment or delivery of the item originates from, a location in this state other than a place of business of the retailer and if:

(1) the retailer is an itinerant vendor who has no place of business in this state;

(2) the retailer's place of business where the purchase order is initially received or from which the retailer's agent or employee who took the order operates is outside this state; or

(3) the purchaser places the order directly with the retailer's supplier and the item is shipped or delivered directly to the purchaser by the supplier.

(f) The sale of natural gas and electricity is consummated at the point of delivery to the consumer.

(g) The sale of mobile telecommunications services is consummated in accordance with Section 151.061.

(g-1) The sale of telecommunications services sold based on a price that is measured by individual calls is consummated at the location where the call originates and terminates or the location where the call either originates or terminates and at which the service address is also located.

(g-2) Except as provided by Subsection (g-3), the sale of telecommunications services sold on a basis other than on a call-by-call basis is consummated at the location of the customer's place of primary use.

(g-3) A sale of post-paid calling services is consummated at the location of the origination point of the telecommunications signal as first identified by the seller's telecommunications system or by information received by the seller from the seller's service provider if the system used to transport the signal is not that of the seller.

(h) The sale of an amusement service is consummated in the municipality in which the performance or other delivery of the service takes place.

(i) If a purchaser who has given a resale certificate makes any use of a taxable item that subjects the taxable item to the sales tax under the provisions of Section 151.154, the use or other consumption of the taxable item that subjected the taxable item to the tax is consummated at the place where the taxable item is stored or kept at the time of or just before the use or consumption.

(j) The sale of services delivered through a cable system is consummated at the point of delivery to the consumer.

(k) The sale of garbage or other solid waste collection or removal service is consummated at the location at which the garbage or other solid waste is located when its collection or removal begins.

(l) Except as otherwise provided by this section, the sale of a taxable service, other than a service described by Section 151.330(f), is consummated at the location at which the service is performed or otherwise delivered.

(l) Repealed by Acts 2007, 80th Leg., R.S., Ch. 1266, Sec. 15(4), eff. September 1, 2007.

(m) If there is no place of business of the retailer because the comptroller determines that an outlet, office, facility, or location contracts with a retail or commercial business to process for that business invoices or bills of lading and that the outlet, office, facility, or location functions or exists to avoid the tax imposed by this chapter or to rebate a portion of the tax imposed by this chapter to the contracting business, a sale is consummated at the place of business of the retailer from whom the outlet, office, facility, or location purchased the taxable item for resale to the contracting business.

(n) A sale of a service described by Section 151.0047 to remodel, repair, or restore nonresidential real property is consummated at the location of the job site. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.22(a), eff. Aug. 28, 1989; Acts 1989, 71st Leg., ch. 810, Sec. 1, eff. Oct. 1, 1989; Acts 1991, 72nd Leg., ch. 705, Sec. 26, eff. Sept. 1, 1991; Acts 2001, 77th Leg., ch. 370, Sec. 2, eff. Aug. 1, 2002; Acts 2003, 78th Leg., ch. 209, Sec. 55, eff. Oct. 1, 2003; Acts 2003, 78th Leg., ch. 1155, Sec. 2, 3, eff. Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1310, Sec. 115, eff. July 1, 2004. Amended by:

Acts 2005, 79th Leg., Ch. , Sec. 23.001(83), eff. September 1, 2005.

Acts 2007, 80th Leg., R.S., Ch. , Sec. 11, eff. September 1, 2007.

Acts 2007, 80th Leg., R.S., Ch. , Sec. 15(4), eff. September 1, 2007.

Acts 2009, 81st Leg., R.S., Ch. , Sec. 5, eff. June 19, 2009.

Sec. 321.204. 321.204. COMPUTATION OF USE TAX. (a) In each municipality that has adopted the taxes authorized by this chapter, the taxes imposed by Section 321.104(a) and the tax imposed by Subchapter D, Chapter 151 220, are added together to form a single combined tax rate, except:.

(1) in a municipality that imposes the tax on gas and electricity for residential use only the rate of the municipal tax is used to determine the amount of tax on the use, storage, or other consumption of gas and electricity for residential use; and

(2) only the rate of the municipal tax is used in a situation described by Section 321.205(b).

(b) The formula prescribed by Section 321.201(b) applies to the computation of the amount of use taxes under this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.205. USE TAX: MUNICIPALITY IN WHICH USE OCCURS. (a) In determining the incidence of the use tax authorized by this chapter the name of the municipality adopting the tax is substituted in Subchapter D, Chapter 151, for "this state" where those words are used to designate the taxing entity or delimit the tax imposed. However, the excise tax authorized by this chapter on the use, storage, or consumption of a taxable item does not apply if the item is first used, stored, or consumed in a municipality or area that has not adopted the taxes authorized by this chapter.

(b) If a sale of a taxable item is consummated in this state but not within a municipality that has adopted the taxes authorized by this chapter and the item is shipped directly, or brought by the purchaser or lessee directly, into a municipality that has adopted the taxes authorized by this chapter, the item is subject to the municipality's use tax. The use is considered to be consummated at the location where the item is first stored, used, or consumed after the intrastate transit has ceased.

(c) If a taxable item is shipped from outside this state to a customer within this state and the use of the item is consummated within a municipality that has adopted the tax authorized by this chapter, the item is subject to the municipality's use tax and not its sales tax. A use is considered to be consummated at the first point in this state where the item is stored, used, or consumed after the interstate transit has ceased. A taxable item delivered to a point in this state is presumed to be for storage, use, or consumption at that point until the contrary is established.

(d) The holder of a direct payment permit issued under Chapter 151 who becomes liable for the use tax under this chapter by reason of the storage, use, or consumption of a taxable item purchased in this state under a direct payment exemption certificate shall allocate the tax to the municipality in which the item was first removed from the permit holder's storage, or if not stored, the place at which the item was first used or consumed by the permit holder after transportation. In this subsection an item is not considered to have been stored, used, or consumed because of a temporary delay or interruption necessary and incidental to its transportation or further fabrication, processing, or assembling within this state for delivery to the permit holder. A charge for fabrication, processing, or further assembly in a municipality that has adopted the tax under this chapter shall be subject to the municipal use tax.

(e) With respect to a taxable service, "use" means the derivation in the municipality of direct or indirect benefit from the service. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 705, Sec. 27, eff. Sept. 1, 1991.

Sec. 321.206.

Sec. 321.205. REPEALED

Sec. 321.206. INCIDENCE OF ADDITIONAL MUNICIPAL SALES AND USE VALUE ADDED TAX. For the purpose of determining the proper sales value added tax under this chapter and the proper excise tax on the use, storage, or other consumption of taxable items under Section 321.101(b):

(1) , if a taxable item service or property is used, stored, or otherwise consumed supplied in a municipality that has adopted the additional municipal sales and use value added tax, the statutes listed in Section 322.108(a) apply; and

(2) if the sales tax applies in a municipality that has not adopted the municipal sales and use tax, the excise tax on the use, storage, or other consumption of the taxable item does not apply. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.15(a), eff. Aug. 28, 1989.

Sec. 321.207.

Sec. 321.207. LOCAL TAX INAPPLICABLE WHEN NO STATE TAX; EXCEPTIONS. (a) The sales value added tax authorized by this chapter does not apply to the sale supply of a taxable item services or property unless the sales value added tax imposed by Subchapter C, Chapter 151 220, also applies to the sale.

(b) The excise tax authorized by this chapter on the use, storage, or consumption of a taxable item does not apply to the use, storage, or consumption of a taxable item unless the tax imposed by Subchapter D, Chapter 151, also applies to the use, storage, or consumption.

(c) Subsections (a) and (b) do not apply to the taxes authorized by this chapter on the sale, production, distribution, lease, or rental of, and the use, storage, or consumption of gas and electricity for residential use.

(d) Subsection (b) does not apply to the application of the tax in a situation described by Section 321.205(b). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 705, Sec. 28, eff. Sept. 1, 1991.

Sec. 321.208.

Sec. 321.208. STATE EXEMPTIONS APPLICABLE. The exemptions and exclusions provided by Subchapter H, Subchapters D and E of Chapter 151, 220 apply to the taxes authorized by this chapter, except as provided by Section 151.317(b).. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.209.

Sec. 321.209. TRANSITION EXEMPTION: GENERAL PURPOSE SALES AND USE VALUE ADDED TAX. (a) For a period of three years only after the effective date of the tax authorized by Section 321.101(a) in a municipality, the otherwise taxable receipts from the sale supply of, and the use, storage, and consumption of, taxable items services or property are exempt from the tax imposed by the municipality under Section 321.101(a) if the notice required by Subsection (b) is given and if:

(1) the items services and/or property are used for suppliedfor the performance of a written contract entered into before the effective date of the tax imposed under Section 321.101(a) in the municipality if the contract may be affected and the contract may not be modified because of the tax; or

(2) the items services and/or property are used supplied under the obligation of a bid submitted before the effective date of the tax imposed under Section 321.101(a) in the municipality if the contract may be affected and the bid may not be withdrawn or modified because of the tax.

(b) The taxpayer must give the comptroller notice of the contract or bid on which an exemption is to be claimed within 60 days after the effective date of the tax imposed under Section 321.101(a) in the municipality. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.14(d), eff. Aug. 28, 1989.

Sec. 321.2091. 321.2091. TRANSITION EXEMPTION: ADDITIONAL MUNICIPAL SALES AND USE VALUE ADDED TAX. (a) The otherwise taxable receipts from the sale, use, or rental supply of services and the storage, use, or consumption of taxable items in this state/or property are exempt from the adoption or increase of the additional municipal sales and use value added tax if the items services and/or property are used supplied:

(1) for the performance of a written contract entered into before the date the adoption or increase of the additional tax takes effect in the municipality, if the contract is not subject to change or modification by reason of the tax; or

(2) pursuant to an obligation of a bid or bids submitted prior to the date the adoption or increase of the additional tax takes effect in the municipality, if the bid or bids may not be withdrawn, modified, or changed by reason of the tax.

(b) The exemptions provided by this section have no effect after three years from the date the adoption or increase of the additional tax takes effect in the municipality. Added by Acts 1989, 71st Leg., ch. 2, Sec. 14.14(c), eff. Aug. 28, 1989. Amended by Acts 1991, 72nd Leg., ch. 184, Sec. 5, eff. May 24, 1991.

Sec. 321.210. TELECOMMUNICATIONS EXEMPTION. (a) There are exempted from the taxes imposed under this chapter the sales within the municipality of telecommunications services unless the application of the exemption is repealed under this section. A municipality may not repeal the application of this exemption as it applies to interstate long-distance telecommunications services, but if a municipality has repealed the exemption before the effective date of Part 4, Article 1, H.B. No. 61, Acts of the 70th Legislature, 2nd Called Session, 1987, interstate long-distance telecommunications services in that municipality are not subject to taxes imposed under this chapter.

(b) The governing body of a municipality by ordinance adopted by a majority vote of the governing body in the manner required for the adoption of other ordinances may repeal the application of the exemption provided by Subsection (a) for telecommunications services sold within the municipality.

(c) A municipality that has repealed the application of the exemption may in the same manner reinstate the exemption.

(d) A vote of the governing body of a municipality repealing the application of or reinstating the exemption must be entered in the minutes of the municipality. The municipal secretary shall send to the comptroller by United States certified or registered mail a copy of each ordinance adopted under this section. The repeal of the application of the exemption or a reinstated exemption takes effect within the municipality as provided by Section 321.102(a) after receipt of a copy of the ordinance. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 1, pt. 4, Sec. 33.

SUBCHAPTER D. ADMINISTRATION OF TAXES

Sec. 321.301. COMPTROLLER TO COLLECT AND ADMINISTER TAXES. The comptroller shall administer, collect, and enforce any tax imposed by a municipality under this chapter. The taxes imposed under this chapter and the tax taxes imposed under Chapter 151 220 shall be collected together, if both taxes are imposed. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.302.

Sec. 321.302. COMPTROLLER'S REPORTING DUTIES. (a) The comptroller shall make quarterly reports to a municipality that has adopted the taxes authorized by this chapter if the municipality requests the reports. A report must include the name, address, and account number of each person in the municipality that has remitted to the comptroller a tax payment during the quarter covered by the report.

(b) If a municipality requests an additional report, the comptroller shall make an additional quarterly report to the municipality including the name, address, and account number, if any, of, and the amount of tax due from, each person doing business in the municipality who has failed to pay the tax under this chapter to the municipality or under Chapter 151 220. The additional report must also include statements:

(1) showing whether or not there has been a partial tax payment by the delinquent taxpayer;

(2) showing whether or not the taxpayer is delinquent in the payment of sales and use value added taxes to the state; and

(3) describing the steps taken by the comptroller to collect the delinquent taxes.

(c) If a municipality determines that a person doing business in the municipality is not included in a comptroller's report, the municipality shall report to the comptroller the name and address of the person. Within 90 days after receiving the report from a municipality, the comptroller shall send to the municipality:

(1) an explanation as to why the person is not obligated for the municipal tax;

(2) a statement that the person is obligated for the municipal tax and the tax is delinquent; or

(3) a certification that the person is obligated for the municipal tax and that the full amount of the tax due has been credited to the municipality's account.

(d) The comptroller shall send by United States certified or registered mail to the municipal tax collector a notice of each person who is delinquent in the payment to the municipality of the taxes authorized by this chapter and shall send a copy of the notice to the attorney general. A notice sent under this subsection is a certification of the amount of tax owed and is prima facie evidence of a determination of that amount and of its delinquency. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.3022.

Sec. 321.3022. TAX INFORMATION. (a) In this section, "other local governmental entity" has the meaning assigned by Section 321.107.

(a-1) Except as otherwise provided by this section, the comptroller on request shall provide to a municipality or other local governmental entity that has adopted a tax under this chapter:

(1) information relating to the amount of tax paid to the municipality or other local governmental entity under this chapter during the preceding or current calendar year by each person doing business in the municipality or other local governmental entity who annually remits to the comptroller state and local sales value added tax payments of more than $5,000; and

(2) any other information as provided by this section.

(a-2) The comptroller on request shall provide to a municipality or other local governmental entity that has adopted a tax under this chapter and that does not impose an ad valorem tax information relating to the amount of tax paid to the municipality or other local governmental entity under this chapter during the preceding or current calendar year by each person doing business in the municipality or other local governmental entity who annually remits to the comptroller state and local sales value added tax payments of more than $500.

(b) The comptroller on request shall provide to a municipality or other local governmental entity that has adopted a tax under this chapter information relating to the amount of tax paid to the municipality or other local governmental entity under this chapter during the preceding or current calendar year by each person doing business in an area, as defined by the municipality or other local governmental entity, that is part of:

(1) an interlocal agreement;

(2) a tax abatement agreement;

(3) a reinvestment zone;

(4) a tax increment financing district;

(5) a revenue sharing agreement;

(6) an enterprise zone;

(7) a neighborhood empowerment zone;

(8) a crime control and prevention district;

(9) a fire control, prevention, and emergency medical services district;

(10) any other agreement, zone, or district similar to those listed in Subdivisions (1)-(9); or

(11) any area defined by the municipality or other local governmental entity for the purpose of economic forecasting.

(c) The comptroller shall provide the information under Subsection (b) as an aggregate total for all persons doing business in the defined area without disclosing individual tax payments.

(d) If the request for information under Subsection (b) involves not more than three persons doing business in the defined area who remit taxes under this chapter, the comptroller shall refuse to provide the information to the municipality or other local governmental entity unless the comptroller receives permission from each of the persons allowing the comptroller to provide the information to the municipality or other local governmental entity as requested.

(e) A separate request for information under this section must be made in writing by the municipality's mayor or chief administrative officer or by the governing body of the other local governmental entity each year.

(f) Information received by a municipality or other local governmental entity under this section is confidential, is not open to public inspection, and may be used only for the purpose of economic forecasting, for internal auditing of a tax paid to the municipality or other local governmental entity under this chapter, or for the purpose described in Subsection (g).

(g) Information received by a municipality or other local governmental entity under Subsection (b) may be used by the municipality or other local governmental entity to assist in determining revenue sharing under a revenue sharing agreement or other similar agreement.

(h) The comptroller may set and collect from a municipality or other local governmental entity reasonable fees to cover the expense of compiling and providing information under this section.

(i) Notwithstanding Chapter 551, Government Code, the governing body of a municipality or other local governmental entity is not required to confer with one or more employees or a third party in an open meeting to receive information or question the employees or third party regarding the information received by the municipality or other local governmental entity under this section. Added by Acts 1995, 74th Leg., ch. 1000, Sec. 70, eff. Oct. 1, 1995. Amended by Acts 1999, 76th Leg., ch. 291, Sec. 1, eff. May 29, 1999; Acts 2001, 77th Leg., ch. 840, Sec. 1, eff. June 14, 2001; Acts 2003, 78th Leg., ch. 1285, Sec. 1, 2. Amended by:

Acts 2007, 80th Leg., R.S., Ch. , Sec. 1, eff. April 5, 2007.

Acts 2009, 81st Leg., R.S., Ch. , Sec. 6, eff. September 1, 2009.

Acts 2009, 81st Leg., R.S., Ch. , Sec. 3, eff. January 1, 2010.

Acts 2011, 82nd Leg., R.S., Ch. , Sec. 1, eff. September 1, 2011.

Sec. 321.3025. 321.3025. DISPOSITION OF AMOUNT ERRONEOUSLY COLLECTED. (a) If in a territory added to a municipality a retailer taxpayer erroneously collects an amount as a tax imposed under this chapter before the date the taxes imposed under this chapter by the municipality take effect in the added territory under Section 321.102, the amount collected is treated as if it were revenue from the taxes imposed by the municipality under this chapter, and the comptroller shall collect and administer the amount in the same manner as tax revenue.

(b) This section does not affect the right of a person who paid an amount erroneously collected by a retailer taxpayer to claim a refund or the authority of the comptroller to make a refund of that amount. Added by Acts 1989, 71st Leg., ch. 291, Sec. 1, eff. June 14, 1989.

Sec. 321.303. SALES TAX PERMITS AND EXEMPTION AND RESALE CERTIFICATES. (a) Each place of business of a retailer must have a permit issued by the comptroller under Subchapter F, Chapter 151.

(b) The same sales tax permit, exemption certificate, and resale certificate required by Chapter 151 for the administration and collection of the taxes imposed by that chapter satisfy the requirements of this chapter. No additional permit or exemption or resale certificate may be required except that the comptroller may prescribe a separate exemption certificate form for the transition exemption for prior contracts and bids under Section 321.209. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.304. 321.304. DISCOUNTS FOR PREPAYMENT AND TAX COLLECTION. All discounts allowed a retailer taxpayer under Chapter 151 220 for the collection and prepayment of the taxes under that chapter are allowed and applicable to the taxes collected under this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.305. 321.305. PENALTIES. The penalties provided by Chapter 151 220 for violations of that chapter apply to violations of this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.306.

Sec. 321.306. COMPTROLLER'S RULES. The comptroller may adopt reasonable rules and prescribe forms that are consistent with this chapter for the administration, collection, reporting, and enforcement of this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.307.

Sec. 321.307. DELINQUENT TAXES: LIMITATIONS. The limitations for the bringing of a suit for the collection of a tax imposed or a penalty due under this chapter after the tax and penalty are delinquent or after a determination against the taxpayer are the same as limitations provided by Chapter 151 220. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.308.

Sec. 321.308. SEIZURE AND SALE OF PROPERTY. If the comptroller lawfully seizes property for the payment of the taxes imposed under Chapter 151 220 and the property owner is delinquent in the payment of taxes under this chapter, the comptroller shall sell sufficient property to pay the delinquent taxes and penalties of both taxes. The proceeds of a sale of seized property shall first be applied to the payment of amounts due the state and the remainder, if any, to the amounts due to the municipality to which the taxes are due. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.309.

Sec. 321.309. SUIT FOR TAX COLLECTION. (a) A municipality acting through its attorney may join as a plaintiff in any suit brought by the attorney general to seek a judgment for delinquent taxes and penalties due to the municipality under this chapter.

(b) A municipality may bring suit for the collection of taxes owed to the municipality under this chapter if:

(1) the taxes are certified by the comptroller in the notice required by Section 321.302(d);

(2) a written notice of the tax delinquency and the municipality's intention to bring suit is given by certified mail to the taxpayer, the attorney general, and the comptroller at least 60 days before the suit is filed; and

(3) neither the comptroller nor the attorney general disapproves of the suit. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.310.

Sec. 321.310. DISAPPROVAL OF MUNICIPAL SUIT. (a) The comptroller or the attorney general may disapprove of the institution of a suit by a municipality under Section 321.309(b) if:

(1) negotiations between the state and the taxpayer are being conducted for the purpose of the collection of delinquent taxes owed to the state and the municipality seeking to bring suit;

(2) the taxpayer owes substantial taxes to the state and there is a reasonable possibility that the taxpayer may be unable to pay the total amount owed;

(3) the state will bring suit against the taxpayer for all taxes due under Chapter 151 220 and this chapter; or

(4) the suit involves a critical legal question relating to the interpretation of state law or a provision of the Texas or United States constitution in which the state has an overriding interest.

(b) A notice of disapproval to a municipality must be in writing and give the reason for the determination by the comptroller or attorney general.

(c) A disapproval is final and not subject to review.

(d) Not earlier than one year after the date of a disapproval of the institution of a municipal collection suit, the municipality may again proceed as provided by Section 321.309(b) even though the liability of the taxpayer includes taxes for which the municipality has previously given notice and the comptroller or attorney general has disapproved of the suit. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.311.

Sec. 321.311. JUDGMENTS IN MUNICIPAL SUIT. (a) A judgment in a suit under Section 321.309(b) for or against a taxpayer does not affect a claim against the taxpayer by another municipality or the state unless the state is party to the suit.

(b) A municipality shall abstract a copy of each final judgment for taxes imposed under this chapter in a case in which the state is not a party and shall send to the comptroller a copy of the judgment and the abstract.

(c) A municipality shall by execution collect the taxes awarded to it in each judgment received by the municipality and is responsible for the renewal of the judgment before its expiration.

(d) The municipality shall notify the comptroller by certified mail of the amount of any taxes collected on the judgment. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.312. 321.312. RETENTION OF CERTAIN MUNICIPAL SALES VALUE ADDED TAXES. A municipality that holds a sales and use value added tax permit issued by the comptroller and that imposes a sales and use value added tax may retain the portion of the tax that the municipality collects and that constitutes the municipality's own tax. The municipality shall remit to the comptroller all other applicable local sales and use value added taxes and the state sales and use value added tax. Added by Acts 2001, 77th Leg., ch. 1263, Sec. 75, eff. Oct. 1, 2001.

SUBCHAPTER E. TAX ELECTION PROCEDURES

Sec. 321.401. CALLING OF ELECTION. (a) An election under this chapter is called by the adoption of an ordinance by the governing body of a municipality.

(b) The governing body may call the election by a vote of a majority of its members.

(c) The governing body shall call the election if a number of qualified voters of the municipality equal to at least 20 percent of the number of votes cast in the most recent regular municipal election petitions the governing body for a vote on the question.

(d) The governing body of any municipality that has not adopted the additional sales and use municipal value added tax shall, on petition of qualified voters of the municipality equal in number to at least five percent of the number of voters registered in the municipality, provide by ordinance for the calling and holding of an election on the question of adopting the additional sales and use municipal value added tax.

(e) The governing body of any municipality that has adopted the additional sales and use municipal value added tax shall, on petition of qualified voters of the municipality equal in number to at least five percent of the number of voters registered in the municipality, provide by ordinance for the calling and holding of an election on the question of increasing, reducing, or repealing the additional sales and use municipal value added tax. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 184, Sec. 6, eff. May 24, 1991.

Sec. 321.402.

Sec. 321.402. DEADLINES AFTER PETITION. (a) After the receipt of a petition for an election under this chapter, the governing body of a municipality shall determine the sufficiency of the petition within 30 days.

(b) If the petition is sufficient, the governing body shall pass the ordinance calling the election within 60 days after receiving the petition. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.403.

Sec. 321.403. TIME OF ELECTION. (a) An election under this chapter to adopt the tax authorized under Section 321.101(a) must be held on the first succeeding uniform election date for which sufficient time elapses for the holding of an election.

(b) An election on the approval of the additional sales and use municipal value added tax must be held on the next succeeding uniform election date not less than 30 days after the passage of the ordinance calling the election. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.404.

Sec. 321.404. BALLOT WORDING. (a) In an election to adopt the tax, the ballot shall be printed to provide for voting for or against the applicable proposition: "A one percent sales and use value added tax is adopted within the city" or "The adoption of an additional sales and use municipal value added tax within the city at the rate of ________ of one percent to be used to reduce the property tax rate" (one-eighth, one-fourth, three-eighths, or one-half to be inserted as appropriate).

(b) In an election to repeal the tax, the ballot shall be printed to provide for voting for or against the applicable proposition: "The local sales and use value added tax within the city is abolished" or "The abolition of the additional sales and use municipal value added tax within the city."

(c) In a municipality that does not impose a property tax, the ballot at an election to adopt the additional municipal sales and use value added tax shall be printed to provide for voting for or against the following proposition: "The adoption of an additional sales and use municipal value added tax within the city at the rate of ________ of one percent" (one-eighth, one-fourth, three-eighths, or one-half to be inserted as appropriate). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.14(b), eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 184, Sec. 7, eff. May 24, 1991.

Sec. 321.405.

Sec. 321.405. OFFICIAL RESULTS OF ELECTION. (a) Within 10 days after an election in which the voters approve of the adoption or abolition of a tax authorized by this chapter, the governing body of the municipality shall by resolution or ordinance entered in its minutes of proceedings, declare the results of the election. A resolution or ordinance under this section must include statements showing:

(1) the date of the election;

(2) the proposition on which the vote was held;

(3) the total number of votes cast for and against the proposition; and

(4) the number of votes by which the proposition was approved.

(b) If the application of the taxes that may be imposed under this chapter is changed by the results of the election, the municipal secretary shall send to the comptroller by United States certified or registered mail a certified copy of the resolution or the ordinance along with a map of the municipality clearly showing its boundaries.

(c) Not later than the 30th day after the date the comptroller receives a certified copy of an ordinance or resolution showing the adoption of the additional municipal sales and use value added tax, the comptroller shall notify the municipal secretary that he is prepared for the administration of the tax. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.406.

Sec. 321.406. FREQUENCY OF ELECTION. An election under this chapter in a municipality may not be held earlier than one year after the date of any previous election under this chapter in the municipality. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.407.

Sec. 321.407. ELECTION CONTEST: NOTICE. (a) If an election held under this chapter is contested, the contestant shall send to the comptroller by United States certified or registered mail within 10 days after the filing of the contest a notice of contest containing the style of the suit, the date it was filed, its case number, and the name of the court in which the contest is pending.

(b) A court may not hear an election contest of an election held under this chapter unless the comptroller is notified within the time and in the manner provided by this section. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.408.

Sec. 321.408. ELECTION CONTEST: DELAYED EFFECTIVE DATE. (a) When the comptroller receives a notice of contest of an election under this chapter, the effective date of the tax or the abolition of a tax is suspended.

(b) When a final judgment is entered in the election contest, the municipal secretary shall notify the comptroller by United States certified or registered mail and enclose a certified copy of the final judgment.

(c) If the final judgment in the election contest results in a change in the tax status of the municipality under this chapter, the tax or the abolition of the tax takes effect as provided by Section 321.102 except that the notice of the final judgment is substituted for the notice of election results prescribed by Section 321.405. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.409. 321.409. COMBINED MUNICIPAL SALES VALUE ADDED TAX BALLOT PROPOSITIONS. (a) Notwithstanding any provisions of this code or other state law, a municipality may by a combined ballot proposition lower or repeal any dedicated or special purpose municipal sales value added tax, including the additional sales value added tax for property tax relief, and by the same proposition raise or adopt any other dedicated or special purpose municipal sales value added tax, including the additional sales value added tax for property tax relief.

(b) A combined sales value added tax proposition under this section shall contain substantially the same language, if any, required by law for the lowering, repealing, raising, or adopting of each tax as appropriate.

(c) A negative vote on a combined sales value added tax proposition under this section shall have no effect on either the sales value added tax to be lowered or repealed by the proposition or the sales value added tax to be raised or adopted by the proposition.

(d) This section does not apply to sales value added tax elections called by any method other than by the governing body.

(e) This section shall not be construed to change the substantive law of any sales value added tax, including the allowed maximum rate or combined rate of local sales value added taxes. Added by Acts 2005, 79th Leg., Ch. , Sec. 1, eff. September 1, 2005.

SUBCHAPTER F. REVENUE DEPOSIT, DISTRIBUTION, AND USE

Sec. 321.501. TRUST ACCOUNT. (a) The comptroller shall deposit the taxes collected by the comptroller under this chapter in trust in the separate suspense account of the municipality from which the taxes were collected.

(b) Repealed by Acts 2003, 78th Leg., ch. 285, Sec. 31(44).

(c) Repealed by Acts 2003, 78th Leg., ch. 285, Sec. 31(44). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 19.123, eff. Sept. 1, 1997; Acts 2003, 78th Leg., ch. 285, Sec. 31(44), eff. Sept. 1, 2003.

Sec. 321.502.

Sec. 321.502. DISTRIBUTION OF TRUST FUNDS. At least twice during each state fiscal year and at other times as often as feasible, the comptroller shall send to the municipal treasurer or to the person who performs the office of the municipal treasurer payable to the municipality the municipality's share of the taxes collected by the comptroller under this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.503.

Sec. 321.503. STATE'S SHARE. Before sending any money to a municipality under this subchapter the comptroller shall deduct two percent of the amount of the taxes collected within the municipality during the period for which a distribution is made as the state's charge for its services under this chapter and shall, subject to premiums payments under Section 321.501(c), credit the money deducted to the general revenue fund. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.504.

Sec. 321.504. AMOUNTS RETAINED IN TRUST ACCOUNT. (a) The comptroller may retain in the suspense account of a municipality a portion of the municipality's share of the tax collected for the municipality under this chapter, not to exceed five percent of the amount remitted to the municipality. If the municipality has abolished the tax, the amount that may be retained may not exceed five percent of the final remittance to the municipality at the time of the termination of the collection of the tax.

(b) From the amounts retained in a municipality's suspense account, the comptroller may make refunds for overpayments to the account and to redeem dishonored checks and drafts deposited to the credit of the account.

(c) Before the expiration of one year after the effective date of the abolition of a municipality's tax under this chapter the comptroller shall send to the municipality the remainder of the money in the municipality's account and shall close the account. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.505.

Sec. 321.505. INTEREST ON TRUST ACCOUNT. Interest earned on all deposits made with the comptroller under Section 321.501, including interest earned from retained suspense accounts, shall be credited to the general revenue fund. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 19.124, eff. Sept. 1, 1997.

Sec. 321.506.

Sec. 321.506. USE OF TAX REVENUE BY MUNICIPALITY. Except as provided by Section 321.507, the money received by a municipality under this chapter is for the use and benefit of the municipality and may be used for any purpose for which the general funds of the municipality may be used, except that a municipality may not pledge the revenue received under this chapter to the payment of bonds or other indebtedness. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.507. 321.507. USE OF ADDITIONAL MUNICIPAL SALES AND USE VALUE ADDED TAX. (a) In each year in which a municipality imposes an additional municipal sales and use value added tax, if the revenue from the collection of the additional tax exceeds the amount of taxes computed for the municipality under Section 26.04(c), except for the amount required to be deposited in a special account under Subsection (b), the excess shall be deposited in an account to be called the municipal sales value added tax debt service fund. Revenue deposited in the municipal sales value added tax debt service fund may be spent only for the reduction of lawful debts of the municipality, except that deposits that exceed the amount of revenue needed to pay the debt service needs of the municipality in the current year may be used for any municipal purpose consistent with the municipal budget.

(b) Revenue from the collection of the additional municipal sales and use value added tax in each of the first three years in which the tax is imposed in the municipality in excess of the amount determined as provided by Section 26.041(d), for each year shall be deposited in an account to be called the excess sales value added tax revenue fund. During those three years, revenue deposited in the excess sales value added tax revenue fund may be spent only if and to the extent that taxes or other revenues of the municipality are collected in amounts less than anticipated. After that period, the revenue in the fund may be used for any municipal purpose consistent with the municipality's budget. The fund ceases to exist when all revenue deposited in the fund has been spent. This subsection does not apply to a municipality that does not impose a property tax. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.16(a), eff. Aug. 28, 1989.

Sec. 321.508.

Sec. 321.508. PLEDGE OF TAX REVENUE. (a) A municipality may call and hold an election on the issue of authorizing the municipality to pledge a percentage of the sales and use value added tax revenue received under Section 321.101(a) or (b), or both, to the payment of obligations issued to pay all or part of the costs of one or more sports needed infrastructure, development and community venue other capital projects located in within or otherwise supporting the municipality.

(b) The ballot at the election under this section must be printed to permit voting for or against the proposition: "Authorizing the City of ______ (insert name of municipality) to pledge not more than ______ percent (insert percentage not to exceed 25 percent) of the revenue received from the municipal the _________ (insert municipal sales and use value added tax, additional municipal sales and use tax, or both) previously adopted in the city to the payment of obligations issued to pay all or part of the costs of _________ (insert description of each sports and community venue project)."

(c) If a majority of the voters vote in favor of the proposition, the municipality may:

(1) issue bonds, notes, or other obligations that are payable from the pledged revenues to pay for all or part of the costs of the sports and community venue project or projects described in the proposition; and

(2) set aside the portion of the revenue approved at the election that the municipality actually receives and pledge that revenue as security for the payment of the bonds, notes, or other obligations.

(d) If the municipality pledges revenue under Subsection (c), the pledge and security interest shall continue while the bonds, notes, or obligations, including refunding obligations, are outstanding and unpaid.

(e) The municipality may direct the comptroller to deposit the pledged revenue to a trust or account as may be required to obtain the financing and to protect the related security interest.

(f) Sections 321.506 and 321.507 do not apply to taxes pledged under this section.

(g) In this section, "sports and community venue project" has the meaning assigned by Section 334.001, Local Government Code. Added by Acts 1997, 75th Leg., ch. 551, Sec. 4, eff. Sept. 1, 1997.

Sec. 321.509.

Sec. 321.509. TAX POWERS OF MUNICIPALITY NOT LIMITED. This chapter does not abolish or limit the tax powers of a municipality. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 321.510. 321.510. REALLOCATION OF MUNICIPAL OR LOCAL GOVERNMENTAL ENTITY TAX REVENUE. (a) In this section, "local governmental entity" includes any governmental entity created by the legislature that has a limited purpose or function, that has a defined or restricted geographic territory, and that is authorized by law to impose a local sales and use value added tax the imposition, computation, administration, enforcement, and collection of which is governed by this chapter.

(b) This section applies only if:

(1) the comptroller:

(A) reallocates local tax revenue from a municipality or local governmental entity to another municipality or local governmental entity; or

(B) refunds local tax revenue that was previously allocated to a municipality or local governmental entity; and

(2) the amount the comptroller reallocates or refunds is at least equal to the lesser of:

(A) $200,000;

(B) an amount equal to 10 percent of the revenue received by the municipality or local governmental entity under this chapter during the calendar year preceding the calendar year in which the reallocation or refund is made; or

(C) an amount that increases or decreases the amount of revenue the municipality or local governmental entity receives under this chapter during a calendar month by more than 15 percent as compared to revenue received by the municipality or local governmental entity during the same month in any previous year.

(c) Subject to the criteria provided by this section, a municipality or local governmental entity may request a review of all available sales value added tax returns and reports in the comptroller's possession filed by not more than five individual taxpayers doing business in the municipality or local governmental entity that are included and identified by the municipality or local governmental entity from the information received from the comptroller under Section 321.3022 and that relate to a reallocation or refund in an amount described by Subsection (b).

(d) The comptroller shall provide the returns and reports requested under Subsection (c) for review regardless of whether the information in the returns or reports is confidential under state law, including Sections 111.006 and 151.027.

(e) The provision of confidential information to a municipality or local governmental entity under this section does not affect the confidential nature of the information in the returns or reports. A municipality or local governmental entity shall use the information only in a manner that maintains the confidential nature of the information and may not disclose or release the information to the public.

(f) A municipality or local governmental entity must submit the request under Subsection (c) not later than the 90th day after the date the municipality or local governmental entity discovers a reallocation or refund described by Subsection (b).

(g) Not earlier than the 30th day or later than the 90th day after the date the comptroller receives a request under Subsection (c), the comptroller shall provide the requested returns and reports to the requesting municipality or local governmental entity for review.

(h) The comptroller may set and collect from a municipality or local governmental entity a reasonable fee to cover the expense of compiling and providing information under this section. Added by Acts 2011, 82nd Leg., R.S., Ch. , Sec. 2, eff. September 1, 2011.

TAX CODE

TITLE 3. LOCAL TAXATION

SUBTITLE C. LOCAL SALES AND USE VALUE ADDED TAXES

CHAPTER 322. SALES AND USE VALUE ADDED TAXES FOR SPECIAL PURPOSE

TAXING AUTHORITIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 322.001. APPLICATION OF CHAPTER. (a) This chapter applies to the imposition, assessment, collection, administration, and enforcement of a sales and use value added tax imposed under Chapter 451, 452, 453, or 460, Transportation Code.

(b) The effective dates and rates of the taxes imposed by a taxing entity are determined under the laws authorizing the adoption of the taxes. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1997, 75th Leg., ch. 165, Sec. 30.266, eff. Sept. 1, 1997; Acts 2003, 78th Leg., ch. 209, Sec. 56, eff. Oct. 1, 2003.

Sec. 322.002. DEFINITIONS. In this chapter:

(1) "Taxing entity" means a rapid transit authority, a regional transit authority, including a subregional transportation authority, or a municipal mass transit department created under Chapter 451, 452, or 453, Transportation Code, or a coordinated county transportation authority created under Chapter 460, Transportation Code, that has adopted a sales and use value added tax under the law authorizing the creation of the entity.

(2) "Entity area" means the geographical limits of a taxing entity.

(3) "Municipal sales and use value added tax" means a sales and use value added tax imposed by a municipality under the Municipal Sales and Use Value added Tax Act (Chapter 321) within an entity area. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1997, 75th Leg., ch. 165, Sec. 30.267, eff. Sept. 1, 1997; Acts 2003, 78th Leg., ch. 209, Sec. 57, eff. Oct. 1, 2003.

SUBCHAPTER B. ASSESSMENT AND COMPUTATION OF TAXES

Sec. 322.101. SALES VALUE ADDED TAX. There A value added tax is imposed on the supply in a taxing entity of any service or property by any person in the ordinary course of a sales tax at the trade or business in which the person engages for the purpose of profit. The rate of value added tax imposed is authorized and set as provided by the law authorizing the creation of the taxing entity and applied to the taxable receipts from the sale all supplies within the entity area of all taxable items services and property that are subject to the sales value added tax under Chapter 151 220. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.102. USE TAX. In a taxing entity, there is imposed an excise tax on the use, storage, and other consumption within the entity area of taxable items purchased, leased, or rented from a retailer during the period that the sales tax is effective within the entity area. The rate of the excise tax is the same rate as the rate of the sales tax imposed by the taxing entity and is applied to the sales price of the taxable item. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.103. COMPUTATION OF SALES VALUE ADDED TAXES. (a) Each retailer taxpayer in an entity area shall add the sales value added tax imposed under this chapter, the sales value added taxes imposed under Chapter 151 220, and, if applicable, any sales value added taxes imposed under Chapter 321 or 323 to the sales supply price, and the sum of the taxes is shall be a part of the price, a debt of the purchaser customer to the retailer taxpayer until paid, and recoverable at law in the same manner as the purchase supply price.

(b) The amount of the total tax is computed by multiplying the combined applicable tax rates by the amount of the sales price. taxable receipts received in consideration for supplying the services or property. If the product results in a fraction of a cent less than one-half of one cent, the fraction of a cent is not collected. If the fraction is one-half of one cent or more, the fraction shall be collected as one cent.

(c) The exclusion provided by Section 151.411 applies to a retailer under this chapter 50 percent of whose receipts from the sales of taxable items comes from individual transactions in which the sales price is an amount on which no tax is produced from the combined applicable tax rates. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.104. COMPUTATION OF USE TAX. (a) In each taxing entity the tax imposed by Subchapter D, Chapter 151 220, the tax imposed under Section 321.104(a), if applicable, and the tax imposed under Section 322.102 are added together to form a single combined tax rate, except in a situation described by Section 322.105(b)..

(b) The formula prescribed by Section 322.103(b) applies to the computation of the amount of the tax under this section. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.105. USE TAX: WHERE USE OCCURS. (a) In determining the incidence of the use tax of a taxing entity, the name of the taxing entity is substituted in Subchapter D, Chapter 151, for "this state" where those words are used to designate the taxing entity or delimit the tax imposed. However, the excise tax of a taxing entity on the use, storage, or other consumption of a taxable item does not apply if the item is first used, stored, or consumed in an area other than an entity area.

(b) If a sale of a taxable item is consummated within this state but not within an entity area and the item is shipped directly or brought by the purchaser or lessee directly into an entity area, the item is subject to the entity's use tax. The use is considered to be consummated at the location where the item is first used, stored, or consumed after the intrastate transit has ceased.

(c) If a taxable item is shipped from outside this state to a customer within this state, the item is subject to the use tax of the taxing entity and not its sales tax. A use is considered to be consummated at the first point in this state where the item is stored, used, or consumed after the interstate transit has ceased. A taxable item delivered to a point in this state is presumed to be for storage, use, or consumption at that point until the contrary is established.

(d) Repealed by Acts 2007, 80th Leg., R.S., Ch. 823, Sec. 1(1), eff. September 1, 2007.

(e) With respect to a taxable service, "use" means the derivation in the taxing entity of direct or indirect benefit from the service. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.21(a), eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 705, Sec. 29, eff. Sept. 1, 1991. Amended by:

Acts 2007, 80th Leg., R.S., Ch. , Sec. 1(1), eff. September 1, 2007.

Sec. 322.105. REPEALED

Sec. 322.106. TAX INAPPLICABLE WHEN NO STATE TAX; EXCEPTIONS. (a). The sales value added tax of a taxing entity does not apply to the sale supply of a taxable item services or property unless the sales value added tax imposed under Subchapter C, Chapter 151, 220 also applies to the sale.

(b) The excise tax of a taxing entity on the use, storage, or consumption of a taxable item does not apply to the use, storage, or consumption of an item unless the tax imposed by Subchapter D, Chapter 151, also applies to the use, storage, or consumption of the item.

(c) Subsection (b) does not apply to the application of the tax in a situation described by Section 322.105(b). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 705, Sec. 30, eff. Sept. 1, 1991.

Sec. 322.108. CERTAIN PROVISIONS OF MUNICIPAL SALES AND USE VALUE ADDED TAX APPLICABLE. (a) Except as provided by Subsection (b), the following apply to the taxes imposed by this chapter in the same manner as applicable to a municipality under Chapter 321:

(1) Section 321.002(a)(3);

(2) Section 321.003;

(3) Section 321.203;

(4) Section 321.205(d);

(5) Section 321.208;

(6) Section 321.209;

(7) Section 321.303;

(8) Section 321.304;

(9) Section 321.305; and

(10) Section 321.510.

(b) The provisions of this chapter applicable to a taxing entity created under Chapter 453, Transportation Code, prevail over any inconsistent provision in a statute listed in Subsection (a). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.20(a), eff. Aug. 28, 1989; Acts 1997, 75th Leg., ch. 165, Sec. 30.268, eff. Sept. 1, 1997. Amended by:

Acts 2011, 82nd Leg., R.S., Ch. , Sec. 3, eff. September 1, 2011.

Sec. 322.109. TELECOMMUNICATIONS EXEMPTION. (a) There are exempted from the taxes imposed by a taxing entity under this chapter the sales within the entity area of telecommunications services unless the application of the exemption is repealed under this section. A taxing entity may not repeal the application of this exemption as it applies to interstate long-distance telecommunications services, but if a taxing entity has repealed the exemption before the effective date of Part 4, Article 1, H.B. No. 61, Acts of the 70th Legislature, 2nd Called Session, 1987, interstate long-distance telecommunications services in that taxing entity are not subject to taxes imposed under this chapter.

(b) Except as provided by Subsection (d), the board of a taxing entity may, by a majority vote of the board in the manner required for the adoption of other orders, repeal the application of the exemption provided by Subsection (a) for telecommunications services sold within the city.

(c) A taxing entity board that has repealed the application of the exemption may in the same manner reinstate the exemption.

(d) The governing board of a taxing entity created under Chapter 451, Transportation Code, may not repeal the application of the exemption provided by Subsection (a) unless the repeal is first approved by a majority of the members of the governing body of each municipality that created the taxing entity. A reinstatement of the exemption must be approved in the same manner.

(e) A vote of a taxing entity board repealing the application of or reinstating the exemption must be entered in the minutes of the entity. The entity board chairman or secretary shall send to the comptroller by United States certified or registered mail a copy of each order adopted under this section. The repeal of the application of the exemption or a reinstated exemption takes effect within the entity on the first day of the first calendar quarter after the expiration of the first complete calendar quarter after the date on which the comptroller receives a copy of the order. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 1, pt. 4, Sec. 34; Acts 1999, 76th Leg., ch. 1008, Sec. 1, eff. June 18, 1999.

Sec. 322.110. TRANSITION EXEMPTION IN CERTAIN TAXING ENTITIES. (a) The taxable receipts from the sale, use, or rental supply of services and the storage, use, or consumption of taxable items/or property in this state are exempt from the tax imposed under this chapter by a taxing entity created under Chapter 453, Transportation Code, if the items are services and/or propertyare used:

(1) for the performance of a written contract entered into before the date the tax takes effect in the taxing entity, if the contract is not subject to change or modification by reason of the tax; or

(2) pursuant to an obligation of a bid or bids submitted before the date the tax takes effect in the taxing entity, if the bid or bids may not be withdrawn, modified, or changed by reason of the tax.

(b) The exemptions provided by this section have no effect after three years from the date the tax takes effect in the taxing entity. Added by Acts 1989, 71st Leg., ch. 2, Sec. 14.19(a), eff. Aug. 28, 1989. Amended by Acts 1997, 75th Leg., ch. 165, Sec. 30.269, eff. Sept. 1, 1997.

SUBCHAPTER C. ADMINISTRATION OF TAXES

Sec. 322.201. COMPTROLLER TO COLLECT AND ADMINISTER TAXES. (a) The comptroller shall administer, collect, and enforce the sales and use value added tax of a taxing entity.

(b) The sales and use value added taxes imposed under this chapter, the taxes imposed under Chapters 321 and 323, and the taxes imposed under Chapter 151 220 shall be collected together to the extent that each is imposed in an entity area. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.202. COMPTROLLER'S REPORTING DUTIES. (a) The comptroller shall report to a taxing entity on the entity's sales and use value added taxes by making substantially the same reports that are required to be made by the comptroller to a municipality under Sections 321.302(a), (b), and (c).

(b) The comptroller shall send to a taxing entity by United States certified or registered mail a notice of each person who is delinquent in the payment of the entity's sales and use value added taxes and shall send to the attorney general a copy of the notice. A notice sent under this subsection is a certification of the amount of tax owed and is prima facie evidence of a determination of that amount and of its delinquency. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.2022. TAX INFORMATION. (a) Except as otherwise provided by this section, the comptroller on request shall provide to a taxing entity:

(1) information relating to the amount of tax paid to the entity under this chapter during the preceding or current calendar year by each person doing business in the area included in the entity who annually remits to the comptroller state and local sales value added tax payments of more than $5,000; and

(2) any other information as provided by this section.

(b) The comptroller on request shall provide to a taxing entity information relating to the amount of tax paid to the entity under this chapter during the preceding or current calendar year by each person doing business in an area included in the entity, as defined by the entity, that is part of:

(1) an interlocal agreement;

(2) a revenue sharing agreement;

(3) any other agreement similar to those listed in Subdivisions (1) and (2); or

(4) any area defined by the entity for the purpose of economic forecasting.

(c) The comptroller shall provide the information under Subsection (b) as an aggregate total for all persons doing business in the defined area without disclosing individual tax payments.

(d) If the request for information under Subsection (b) involves not more than three persons doing business in the defined area who remit taxes under this chapter, the comptroller shall refuse to provide the information to the taxing entity unless the comptroller receives permission from each of the persons allowing the comptroller to provide the information to the entity as requested.

(e) A separate request for information under this section must be made in writing by the governing body of the taxing entity each year.

(f) Information received by a taxing entity under this section is confidential, is not open to public inspection, and may be used only for the purpose of economic forecasting, for internal auditing of a tax paid to the entity under this chapter, or for the purpose described by Subsection (g).

(g) Information received by a taxing entity under Subsection (b) may be used by the entity to assist in determining revenue sharing under a revenue sharing agreement or other similar agreement.

(h) The comptroller may set and collect from a taxing entity reasonable fees to cover the expense of compiling and providing information under this section.

(i) Notwithstanding Chapter 551, Government Code, the governing body of a taxing entity is not required to confer with one or more employees or a third party in an open meeting to receive information or question the employees or third party regarding the information received by the entity under this section. Added by Acts 2009, 81st Leg., R.S., Ch. , Sec. 7, eff. September 1, 2009. Amended by:

Acts 2011, 82nd Leg., R.S., Ch. , Sec. 2, eff. September 1, 2011.

Sec. 322.203. COMPTROLLER'S RULES. The comptroller may adopt reasonable rules and prescribe forms that are consistent with this chapter for the administration, collection, and enforcement of this chapter and for the reporting of the taxes imposed under this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.204. DELINQUENT TAXES: LIMITATIONS. The limitations for the bringing of a suit for the collection of a sales and use value added tax imposed by a taxing entity or a penalty due on the tax after the tax and penalty are delinquent or after a determination against a taxpayer are the same as the limitations provided by Chapter 151 220. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.205. SEIZURE AND SALE OF PROPERTY. (a) If the comptroller lawfully seizes property for the payment of the taxes imposed under Chapter 151 220 and the property owner is delinquent in the payment of taxes under this chapter, the comptroller shall sell sufficient property to pay the delinquent taxes and penalties under this chapter, Chapter 151 220, and Chapter 321.

(b) The proceeds of the sale of seized property shall first be applied to the payment of amounts due the state, then to the payments of amounts due a municipality under Chapter 321, and the remainder, if any, to the payment of amounts due to the taxing entity to which the taxes are due. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.206. SUITS FOR TAX COLLECTION. (a) A taxing entity acting through its attorney may join as a plaintiff in any suit brought by the attorney general to seek a judgment for delinquent taxes and penalties due to the taxing entity under this chapter.

(b) A taxing entity may bring suit for the collection of taxes owed to the taxing entity under this chapter if:

(1) the taxes are certified by the comptroller in the notice required by Section 322.202(b);

(2) a written notice of the tax delinquency and the entity's intention to bring suit is given by certified mail to the taxpayer, the attorney general, and the comptroller at least 60 days before the suit is filed; and

(3) neither the comptroller nor the attorney general disapproves of the suit. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.207. DISAPPROVAL OF SUIT. (a) The comptroller or the attorney general may disapprove of the institution of a suit by a taxing entity under Section 322.206(b) if:

(1) negotiations between the state and the taxpayer are being conducted for the purpose of the collection of delinquent taxes owed to the state and the taxing entity seeking to bring suit;

(2) the taxpayer owes substantial taxes to the state and there is a reasonable possibility that the taxpayer may be unable to pay the total amount owed;

(3) the state will bring suit against the taxpayer for all taxes due under Chapter 151 220 and this chapter; or

(4) the suit involves a critical legal question relating to the interpretation of state law or a provision of the Texas or United States constitution in which the state has an overriding interest.

(b) A notice of disapproval to a taxing entity must be in writing and give the reason for the determination by the comptroller or attorney general.

(c) A disapproval is final and not subject to review.

(d) Not earlier than one year after the date of a disapproval of the institution of a taxing entity collection suit, the taxing entity may again proceed as provided by Section 322.206(b) even though the liability of the taxpayer includes taxes for which the entity has previously given notice and the comptroller or attorney general has disapproved of the suit. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.208. JUDGMENTS IN SUIT. (a) A judgment in a suit under Section 322.206(b) for or against a taxpayer does not affect a claim against the taxpayer by a municipality or the state unless the state is party to the suit.

(b) A taxing entity shall abstract a copy of each final judgment for taxes imposed under this chapter in a case in which the state is not a party and shall send to the comptroller a copy of the judgment and the abstract.

(c) A taxing entity shall by execution collect the taxes awarded to it in each judgment received by it and is responsible for the renewal of the judgment before its expiration.

(d) The taxing entity shall notify the comptroller by certified mail of the amount of any taxes collected on the judgment. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

SUBCHAPTER D. REVENUE DEPOSIT, DISTRIBUTION, AND USE

Sec. 322.301. COLLECTIONS HELD BY COMPTROLLER. The comptroller shall deposit, hold, account for, and transmit sales and use value added taxes collected under this chapter for each taxing entity in the same manner as required under Section 321.501 for each municipality. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.302. DISTRIBUTION OF TRUST FUNDS. At least quarterly during each state fiscal year and as often as feasible, the comptroller shall send to the person at each taxing entity who performs the function of entity treasurer, payable to the taxing entity, the entity's share of the taxes collected by the comptroller under this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 16, Sec. 5, eff. Aug. 31, 1989; Acts 1997, 75th Leg., ch. 165, Sec. 30.270, eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1467, Sec. 2.68, eff. Oct. 1, 1999.

Sec. 322.303. STATE'S SHARE. Before sending any money to a taxing entity under this subchapter, the comptroller shall deduct two percent of the amount of the taxes collected within the entity area during the period for which a distribution is made as the state's charge for its services under this chapter and shall credit the money deducted to the general revenue fund. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 322.304. AMOUNTS RETAINED IN TRUST ACCOUNT. (a) The comptroller may retain in the suspense account of a taxing entity a portion of the entity's share of the tax collected for the entity under this chapter, not to exceed five percent of the amount remitted to the entity. If the entity has abolished the tax, the amount that may be retained may not exceed five percent of the final remittance to the entity at the time of the termination of the collection of the tax.

(b) From the amounts retained in an entity's suspense account, the comptroller may make refunds for overpayments to the account and to redeem dishonored checks and drafts deposited to the credit of the account.

(c) Before the expiration of one year after the effective date of the abolition of an entity's tax under this chapter other than a department under Chapter 453, Transportation Code, the comptroller shall send to the entity the remainder of the money in the entity's account and shall close the account. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1997, 75th Leg., ch. 165, Sec. 30.271, eff. Sept. 1, 1997.

Sec. 322.305. INTEREST ON TRUST ACCOUNTS. Interest earned on all deposits made with the comptroller under this chapter, including interest earned on retained accounts, shall be credited to the general revenue fund. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 19.125, eff. Sept. 1, 1997.

Sec. 322.306. RETENTION OF CERTAIN SPECIAL PURPOSE DISTRICT SALES VALUE ADDED TAXES. A taxing entity that holds a sales and use value added tax permit issued by the comptroller and that imposes a sales and use value added tax may retain the portion of the tax that the taxing entity collects and that constitutes the entity's own tax. The taxing entity shall remit to the comptroller all other applicable local sales and use value added taxes and the state sales and use value added tax. Added by Acts 2001, 77th Leg., ch. 1263, Sec. 76, eff. Oct. 1, 2001.

TAX CODE

TITLE 3. LOCAL TAXATION

SUBTITLE C. LOCAL SALES AND USE VALUE ADDED TAXES

CHAPTER 323. COUNTY SALES AND USE VALUE ADDED TAX ACT

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 323.001. SHORT TITLE. This chapter may be cited as the County Sales and Use Value added Tax Act. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.002. 323.002. DEFINITIONS. The words used in this chapter and defined by Chapters 151 220 and 321 have the meanings assigned by Chapters 151 220 and 321. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.003.

Sec. 323.003. OTHER PORTIONS OF TAX APPLICABLE. Subtitles A and B, Title 2, and Chapters 142 and 151 Chapter 220 apply to the taxes and to the administration and enforcement of the taxes imposed by this chapter in the same manner that those laws apply to state taxes unless modified by this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.13, eff. Aug. 28, 1989; Acts 2003, 78th Leg., ch. 1310, Sec. 117, eff. Oct. 1, 2003.

SUBCHAPTER B. IMPOSITION OF SALES AND USE VALUE ADDED TAXES BY

COUNTIES

Sec. 323.101. TAX AUTHORIZED. (a) A qualified county may adopt or repeal the county sales and use value added 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 value added 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 value added tax under this section if as a result of the adoption of the tax the combined rate of all sales and use taxes 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.

(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 value added taxes imposed by the county and other political subdivisions of this state having territory in the county would exceed two three percent at any location in the county, the election to adopt a county sales and use tax has no effect.

(e) If the voters of a county approve the adoption of a value added tax at an election held on the same election date on which a municipality having territory in the county adopts a value added tax or an additional municipal value added tax and as a result the combined rate of all value added taxes imposed by the county and other political subdivisions of this state having territory in the county would exceed three percent at any location in the county, the election to adopt a county value added tax has no effect.

(f) The provisions of this chapter govern the application, collection, and administration of a sales and use value added tax imposed under Chapter 285 or 775, 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.

(g) Expired. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 54, Sec. 2, eff. Oct. 20, 1987; Acts 1989, 71st Leg., 1st C.S., ch. 40, Sec. 6, eff. Sept. 1, 1989; Acts 1997, 75th Leg., ch. 65, Sec. 2, eff. May 9, 1997; Acts 1997, 75th Leg., ch. 165, Sec. 30.272, eff. Sept. 1, 1997. Amended by: Acts 2011, 82nd Leg., R.S., Ch. , Sec. 15, eff. June 17, 2011.

Sec. 323.102.

Sec. 323.102. EFFECTIVE DATES: NEW TAX, TAX REPEAL. (a) Except as provided by Subsection (c), a tax imposed under this chapter takes effect on the October 1st after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a notice of the action as required by Section 323.405(b).

(b) The repeal of a tax abolished under this chapter takes effect on the October 1st after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a notice of the action as required by Section 323.405(b).

(c) A tax imposed under Section 323.105 of this code or Chapter 326 or 383, Local Government Code, takes effect on the first day of the first calendar quarter after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a notice of the action as required by Section 323.405(b). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 256, Sec. 2, eff. Sept. 1, 1989; Acts 1995, 74th Leg., ch. 342, Sec. 1, eff. Aug. 28, 1995; Acts 1999, 76th Leg., ch. 1467, Sec. 2.69, eff. June 19, 1999. Amended by: Acts 2007, 80th Leg., R.S., Ch. , Sec. 12, eff. September 1, 2007.

Sec. 323.103. SALES 323.103. VALUE ADDED TAX. (a) In a county that has adopted the tax authorized by this chapter, there is imposed a value added tax on the taxable receipts from the sale at retail of taxable items within the supply in such county of any service or property by any person in the ordinary course of a trade or business in which the person engages for the purpose of profit.

(b) The tax is imposed at the rate approved by the voters. The rate, when the tax is adopted, must be equal to any increment any increment of one-half eighth percentage point from zero to a maximum of one percent, or in a unless the county that includes no territory within the limits of a municipality, one in which case the maximum rate shall be two percent. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.104. USE TAX. In a , unless the county that has adopted the tax authorized by this chapter, there is imposed an excise tax on the use, storage, or includes no territory within the limits of a special district (i.e., any local taxing unit other consumption within the than a municipality, county of taxable items purchased, leased, or rented from a retailer during the period that the tax is effective within the county. The rate of the excise tax is the same as school district), in which case the rate of the sales tax portion maximum rate shall be two percent. The rate may be reduced in one or more increments of the tax and is one-eighth of one percent to a minimum of one-eighth of one percent or increased in one or more increments of one-eighth of one percent to a maximum of one percent, or the tax may be abolished. This rate is then applied to the sales price of the taxable item. With respect to a taxable service, "use" means the derivation in the county of direct or indirect benefit from the service taxpayer's taxable receipts attributable to any applicable tax period to determine the applicable municipal value added tax. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 705, Sec. 32, eff. Sept. 1, 1991. Sec.

Sec. 323.104. REPEALED

Sec. 323.105. CRIME CONTROL DISTRICT TAX. (a) Subject to an election held in accordance with the Crime Control and Prevention District Act, a county in which a crime control and prevention district is established shall adopt a sales and use value added tax in the area of the district for the purpose of financing the operation of the crime control and prevention district. The revenue from the tax may be used only for the purpose of financing the operation of the crime control and prevention district. The proposition for adopting a tax under this section and the proposition for creation of a crime control and prevention district shall be submitted at the same election. For purposes of Subsection (c) of Section 323.101 of this code, a tax under this section is not a county sales and use value added tax.

(b) A tax adopted for a district under this section for financing the operation of the district may be decreased in increments of one-eighth of one percent by order of the board of directors of the district.

(c) The board of directors or the governing body of the governmental entity that proposed the creation of the crime control and prevention district may call an election on the question of decreasing the tax rate in increments of one-eighth of one percent in the district if the district was created before January 1, 1996. The board of directors or governing body may dedicate a portion of the tax for the payment of bonds used in conjunction with the renovation or extension of a county-owned or municipally owned convention center facility, as defined in Section 351.001, that was constructed before 1969 if the dedication is approved by a majority of the qualified voters in an election held in the district on the question of decreasing the tax rate. At the election, the ballot shall be printed to provide for voting for or against the following proposition: "The decrease of the _______ Crime Control and Prevention District sales and use value added tax to _____ percent and authorizing the use of ______ of one percent for the payment of bonds issued for the renovation or extension of certain county-owned or municipally owned convention center facilities as that term is defined under Section 351.001, Tax Code, and authorizing that the tax expire on payment of the bonds."

(d) The rate of a tax adopted for a district under this section may be increased in increments of one-eighth of one percent, not to exceed a total tax rate of one-quarter half percent for financing the operation of the crime control and prevention district, by order of the board of directors of the crime control and prevention district if approved by a majority of the qualified voters voting at an election called by the board and held in the district on the question of increasing the tax rate. At the election, the ballot shall be printed to provide for voting for or against the following proposition: "The increase of the ____________ Crime Control and Prevention District sales and use value added tax rate to ____________ percent." If there is an increase or decrease under this subsection in the rate of a tax imposed under this section, the new rate takes effect on the first day of the next calendar quarter after the expiration of one calendar quarter after the comptroller receives notice of the increase or decrease. However, if the comptroller notifies the president of the board of directors of the district in writing within 10 days after receipt of the notification that the comptroller requires more time to implement reporting and collection procedures, the comptroller may delay implementation of the rate change for one whole calendar quarter. In that event, the new rate takes effect on the first day of the next calendar quarter following the elapsed quarter.

(e) The comptroller shall remit to the county amounts collected at the rate imposed under this section as part of the regular allocation of county tax revenue collected by the comptroller if the district is composed of the entire county. The comptroller shall, if the district is composed of an area less than the entire county, remit that amount to the district. Retailers Taxpayers may not be required to use the allocation and reporting procedures in the collection of taxes under this section different from the procedures that retailers taxpayers use in the collection of other sales and use value added taxes under this chapter. An item, transaction, A supply of services and/or service property that is taxable in a county under a sales or use value added tax authorized by another section of this chapter is taxable under this section. An item, transaction, or service A supply of services and/or property that is not taxable in a county under a sales or use value added tax authorized by another section of this chapter is not taxable under this section.

(f) If, in a county where a crime control and prevention district is composed of the whole county, a county sales and use value added tax or a county sales and use value added tax rate increase for the purpose of financing a crime control and prevention district is approved, the county is responsible for distributing to the district that portion of the county sales and use value added tax revenue received from the comptroller that is to be used for the purposes of financing the crime control and prevention district. Not later than the 10th day after the date the county receives funds under this section from the comptroller, the county shall make the distribution in the proportion that the crime control and prevention portion of the tax rate bears to the total sales and use value added tax rate of the county. The amounts distributed to a crime control and prevention district are not considered to be sales and use value added tax revenue for the purpose of property tax reduction and computation of the county tax rate under Section 26.041, Tax Code.

(g) For purposes of the tax imposed under this section, a reference in this chapter to the county as the territory in which the tax or an incident of the tax applies means only the territory located in the crime control and prevention district, if that district is composed of an area less than an entire county.

(h) The comptroller may adopt rules and the county commissioners court may adopt orders to administer this section. Added by Acts 1989, 71st Leg., ch. 664, Sec. 2, eff. June 14, 1989. Amended by Acts 1993, 73rd Leg., ch. 864, Sec. 15, eff. June 18, 1993; Acts 1997, 75th Leg., ch. 1248, Sec. 6, eff. June 20, 1997; Acts 1999, 76th Leg., ch. 1467, Sec. 2.70, eff. Oct. 1, 1999.

SUBCHAPTER C. COMPUTATION OF TAXES

Sec. 323.201. COMPUTATION OF SALES VALUE ADDED TAXES. (a) Each retailer taxpayer in a county that has adopted the tax authorized by this chapter shall add the sales value added tax imposed by this chapter and by Chapter 151 220, plus any other applicable sales value added tax, to the sales supply price, and the sum of the taxes is a part of the price, a debt of the purchaser customer to the retailer taxpayer until paid, and recoverable at law in the same manner as the purchase supply price.

(b) The amount of the total tax is computed by multiplying the combined applicable tax rates by the amount of the sales supply price. If the product results in a fraction of a cent less than one-half of one cent, the fraction of a cent is not collected. If the fraction of a cent is one-half of one cent or more, the fraction shall be collected as one cent. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Sec. 323.202. METHOD OF REPORTING: RETAILERS HAVING SALES BELOW TAXABLE AMOUNT. The exclusion provided by Section 151.411 applies to a retailer under this chapter 50 percent of whose receipts from the sales of taxable items comes from individual transactions in which the sales price is an amount on which no tax is produced from the combined state and local taxes.

Added by Acts 1987, 70th Leg., ch. 191,

Sec. 323.202. REPEALED.

Sec. 323.203. REPEALED Sec. 1, eff. Sept. 1, 1987. For expiration of Subsections (c-2) and (c-3), see Subsection (c-3). Sec. 323.203. CONSUMMATION OF SALE. (a) A sale of a taxable item occurs within the county in which the sale is consummated. A sale is consummated as provided by this section regardless of the place where transfer of title or possession occurs. (b) If a retailer has only one place of business in this state, all of the retailer's retail sales of taxable items are consummated at that place of business except as provided by Subsection (e). (c) If a retailer has more than one place of business in this state, each sale of each taxable item by the retailer is consummated at the place of business of the retailer in this state where the retailer first receives the order, provided that the order is placed in person by the purchaser or lessee of the taxable item at the place of business of the retailer in this state where the retailer first receives the order. (c-1) If the retailer has more than one place of business in this state and Subsection (c) does not apply, the sale is consummated at the place of business of the retailer in this state: (1) from which the retailer ships or delivers the item, if the retailer ships or delivers the item to a point designated by the purchaser or lessee; or (2) where the purchaser or lessee takes possession of and removes the item, if the purchaser or lessee takes possession of and removes the item from a place of business of the retailer. Text of subsection effective until September 01, 2014 (c-2) Subsection (c) does not apply if: (1) the taxable item is shipped or delivered from a warehouse: (A) that is a place of business of the retailer; (B) in relation to which the retailer has an economic development agreement with: (i) the county in which the warehouse is located that was entered into under Chapter 381, Local Government Code, before January 1, 2009; or (ii) the municipality in which the warehouse is located that was entered into under Chapter 380, 504, or 505, Local Government Code, or a predecessor statute, before January 1, 2009; and (C) in relation to which the county provides information relating to the economic development agreement as required by Subsection (c-3) by the deadline prescribed by that subsection, or, if appropriate, the municipality complies with Section 321.203(c-3) by the deadline prescribed by that section; and (2) the place of business of the retailer at which the retailer first receives the order in the manner described by Subsection (c) is a retail outlet identified in the information required by Subsection (c-3) or Section 321.203(c-3) as being served by the warehouse on January 1, 2009. (c-3) Not later than September 1, 2009, a county that has entered into an economic development agreement described by Subsection (c-2) shall send to the comptroller information prescribed by the comptroller relating to the agreement that identifies each warehouse subject to the agreement and each retail outlet that, on January 1, 2009, was served by that warehouse. The comptroller shall prescribe the manner in which the information must be provided. The provision of information to the comptroller under this subsection does not affect whether information described by this subsection is confidential or excepted from required public disclosure. This subsection and Subsection (c-2) expire September 1, 2014. (d) If the retailer has more than one place of business in this state and Subsections (c) and (c-1) do not apply, the sale is consummated at: (1) the place of business of the retailer in this state where the order is received; or (2) if the order is not received at a place of business of the retailer, the place of business from which the retailer's agent or employee who took the order operates. (e) A sale of a taxable item is consummated at the location in this state to which the item is shipped or delivered or at which possession is taken by the customer if transfer of possession of the item occurs at, or shipment or delivery of the item originates from, a location in this state other than a place of business of the retailer and if: (1) the retailer is an itinerant vendor who has no place of business in this state; (2) the retailer's place of business where the purchase order is initially received or from which the retailer's agent or employee who took the order operates is outside this state; or (3) the purchaser places the order directly with the retailer's supplier and the item is shipped or delivered directly to the purchaser by the supplier. (f) The sale of natural gas and electricity is consummated at the point of delivery to the consumer. (g) The sale of mobile telecommunications services is consummated in accordance with Section 151.061. (g-1) The sale of telecommunications services sold based on a price that is measured by individual calls is consummated at the location where the call originates and terminates or the location where the call either originates or terminates and at which the service address is also located. (g-2) Except as provided by Subsection (g-3), the sale of telecommunications services sold on a basis other than on a call-by-call basis is consummated at the location of the customer's place of primary use. (g-3) A sale of post-paid calling services is consummated at the location of the origination point of the telecommunications signal as first identified by the seller's telecommunications system or by information received by the seller from the seller's service provider if the system used to transport the signal is not that of the seller. (h) The sale of an amusement service is consummated in the county in which the performance or other delivery of the service takes place. (i) If a purchaser who has given a resale certificate makes any use of a taxable item that subjects the taxable item to the sales tax under the provisions of Section 151.154, the use or other consumption of the taxable item that subjected the taxable item to the tax is consummated at the place where the taxable item is stored or kept at the time of or just before the use or consumption. (j) The sale of services delivered through a cable system is consummated at the point of delivery to the consumer. (k) The sale of garbage or other solid waste collection or removal service is consummated at the location at which the garbage or other solid waste is located when its collection or removal begins. (l) Repealed by Acts 2007, 80th Leg., R.S., Ch. 1266, Sec. 15(5), eff. September 1, 2007. (m) A sale of a service described by Section 151.0047 to remodel, repair, or restore nonresidential real property is consummated at the location of the job site. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.22(b), eff. Aug. 28, 1989; Acts 1989, 71st Leg., ch. 810, Sec. 2, eff. Oct. 1, 1989; Acts 1991, 72nd Leg., ch. 705, Sec. 33, eff. Sept. 1, 1991; Acts 2001, 77th Leg., ch. 370, Sec. 3, eff. Aug. 1, 2002; Acts 2003, 78th Leg., ch. 209, Sec. 58, eff. Oct. 1, 2003; Acts 2003, 78th Leg., ch. 1310, Sec. 118, eff. July 1, 2004. Amended by: Acts 2007, 80th Leg., R.S., Ch. , Sec. 13, eff. September 1, 2007. Acts 2007, 80th Leg., R.S., Ch. , Sec. 15(5), eff. September 1, 2007. Acts 2009, 81st Leg., R.S., Ch. , Sec. 8, eff. June 19, 2009.

Sec. 323.204. 323.204. COMPUTATION OF USE TAX. In each county that has adopted the taxes authorized by this chapter, the tax imposed by Section 323.104, by other applicable local taxes, and by Subchapter D, Chapter 151, 220, are added together to form a single combined tax rate, except only the rate of the county tax is used in a situation described by Section 323.205(b).. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.205. REPEALED. Sec. 323.205. USE TAX: 206. COUNTY IN WHICH USE OCCURS. (a) In determining the incidence of the use TAX INAPPLICABLE WHEN NO STATE TAX. The value added tax authorized by this chapter, the name of the county adopting the tax is substituted in Subchapter D, Chapter 151, for "this state" where those words are used to designate the taxing entity or delimit the tax imposed. However, the excise tax authorized by this chapter on the use, storage, or consumption does not apply to the supply of a taxable item does not apply if the taxable item is first used, stored, or consumed in a county that has not adopted the taxes authorized by this chapter. (b) If a sale of a taxable item is consummated in this state but not within a county that has adopted the taxes authorized by this chapter and the taxable item is shipped directly, or brought by the purchaser or lessee directly, into a county that has adopted the taxes authorized by this chapter, the taxable item is subject to the county's use tax. The use is considered to be consummated at the location where the item is first stored, used, or consumed after the intrastate transit has ceased. (c) If a taxable item is shipped from outside this state to a customer within this state and the use of the taxable item is consummated within a county that has adopted the tax authorized by this chapter, the taxable item is subject to a county's use tax and not its sales tax. A use is considered to be consummated at the first point in this state where the taxable item is stored, used, or consumed after the interstate transit has ceased. A taxable item delivered to a point in this state is presumed to be for storage, use, or consumption at that point until the contrary is established. (d) The holder of a direct payment permit issued under Chapter 151 who becomes liable for the use tax under this chapter by reason of the storage, use, or consumption of a taxable item purchased in this state under a direct payment exemption certificate shall allocate the tax to the county in which the item was first removed from the permit holder's storage, or if not stored, the place at which the item was first used or consumed by the permit holder after transportation. In this subsection an item is not considered to have been stored, used, or consumed because of a temporary delay or interruption necessary and incidental to its transportation or further fabrication, processing, or assembling within this state for delivery to the permit holder. A charge for fabrication, processing, or further assembly in a county that has adopted the tax under this chapter shall be subject to the county use tax. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 705, Sec. 34, eff. Sept. 1, 1991.

Sec. 323.206. COUNTY TAX INAPPLICABLE WHEN NO STATE TAX; EXCEPTIONS. (a) The sales tax authorized by this chapter does not apply to the sale of a taxable item service or supply unless the sales value added tax imposed by Subchapter C, Chapter 151 220, also applies to the sale. (b) The excise tax authorized by this chapter on the use, storage, or consumption of a taxable item does not apply to the use, storage, or consumption of an item unless the tax imposed by Subchapter D, Chapter 151, also applies to the use, storage, or consumption. (c) Subsections (a) and (b) do not apply to the taxes authorized by this chapter on the sale, production, distribution, lease, or rental of, and the use, storage, or consumption of gas and electricity for residential use. (d) Subsection (b) does not apply to the application of the tax in a situation described by Section 323.205(b). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1991, 72nd Leg., ch. 705, Sec. 35, eff. Sept. 1, 1991.

Sec. 323.207.

Sec. 323.207. STATE EXEMPTIONS APPLICABLE. The exemptions and exclusions provided by Subchapter H, Subchapters D and E of Chapter 151 220, apply to the taxes authorized by this chapter, except as provided by Section 151.317(b).. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Sec. 323.208. TELECOMMUNICATIONS EXEMPTION. (a) There are exempted from the taxes imposed under this chapter the sale within the county of telecommunications services unless the application of the exemption is repealed under this section. A county may not repeal the application of this exemption as it applies to interstate long-distance telecommunications services, but if a county has repealed the exemption before the effective date of Part 4, Article 1, H.B. No. 61, Acts of the 70th Legislature, 2nd Called Session, 1987, interstate long-distance telecommunications services in that county are not subject to taxes imposed under this chapter. (b) The commissioners court of a county by a majority vote may repeal the application of the exemption provided by Subsection (a) for telecommunications services sold within the county. (c) A county that has repealed the application of the exemption may in the same manner reinstate the exemption. (d) A vote of the commissioners court repealing the application of or reinstating the exemption must be entered in the minutes of the court. The county judge shall send to the comptroller by United States certified or registered mail a copy of each order adopted under this section. The repeal of the application of the exemption or a reinstated exemption takes effect within the county on the first day of the first calendar quarter after the expiration of the first complete calendar quarter after the date on which the comptroller receives notification of the order. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., 2nd C.S., ch. 5, art. 1, pt. 4, Sec. 35. Sec. 323.209. TRANSITION EXEMPTION. (a) The receipts from the sale, use, or rental of and the storage, use, or consumption of taxable items in this state are exempt from the tax imposed by a county under this chapter if the items are used: (1) for the performance of a written contract entered into before the date the tax takes effect in the county, if the contract is not subject to change or modification by reason of the tax; or (2) pursuant to an obligation of a bid or bids submitted before the date the tax takes effect in the county, if the bid or bids may not be withdrawn, modified, or changed by reason of the tax. (b) The exemptions provided by this section have no effect after three years from the date the tax takes effect in the county. Added by Acts 1989, 71st Leg., ch. 2, Sec. 14.17(a), eff. Aug. 28, 1989.

SUBCHAPTER D. ADMINISTRATION OF TAXES

Sec. 323.301. COMPTROLLER TO COLLECT AND ADMINISTER TAXES. The comptroller shall administer, collect, and enforce any tax imposed by a county under this chapter. The tax imposed under this chapter and the tax imposed under Chapter 151 220 shall be collected together, if both taxes are imposed. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.302.

Sec. 323.302. COMPTROLLER'S REPORTING DUTIES. (a) The comptroller shall make quarterly reports to a county that has adopted the taxes authorized by this chapter if the county requests the reports. A report must include the name, address, and account number of each person in the county that has remitted to the comptroller a tax payment during the quarter covered by the report.

(b) If a county requests an additional report, the comptroller shall make an additional quarterly report to the county including the name, address, and account number, if any, of, and the amount of tax due from, each person doing business in the county who has failed to pay the tax under this chapter to the county or under Chapter 151 220. The additional report must also include statements:

(1) showing whether or not there has been a partial tax payment by the delinquent taxpayer;

(2) showing whether or not the taxpayer is delinquent in the payment of sales and use value added taxes to the state; and

(3) describing the steps taken by the comptroller to collect the delinquent taxes.

(c) If a county determines that a person doing business in the county is not included in a comptroller's report, the county shall report to the comptroller the name and address of the person. Within 90 days after receiving the report from a county, the comptroller shall send to the county:

(1) an explanation as to why the person is not obligated for the county tax;

(2) a statement that the person is obligated for the county tax and the tax is delinquent; or

(3) a certification that the person is obligated for the county tax and that the full amount of the tax due has been credited to the county's account.

(d) The comptroller shall send by United States certified or registered mail to the county attorney a notice of each person who is delinquent in the payment to the county of the taxes authorized by this chapter and shall send a copy of the notice to the attorney general. A notice sent under this subsection is a certification of the amount of tax owed and is prima facie evidence of a determination of that amount and of its delinquency. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.3022.

Sec. 323.3022. TAX INFORMATION. (a) In this section, "other local governmental entity" includes any governmental entity created by the legislature that has a limited purpose or function, that has a defined or restricted geographic territory, and that is authorized by law to impose a local sales and use value added tax the imposition, computation, administration, enforcement, and collection of which is governed by this chapter.

(b) Except as otherwise provided by this section, the comptroller on request shall provide to a county or other local governmental entity that has adopted a tax under this chapter:

(1) information relating to the amount of tax paid to the county or other local governmental entity under this chapter during the preceding or current calendar year by each person doing business in the county or other local governmental entity who annually remits to the comptroller state and local sales value added tax payments of more than $5,000; and

(2) any other information as provided by this section.

(c) The comptroller on request shall provide to a county or other local governmental entity that has adopted a tax under this chapter information relating to the amount of tax paid to the county or other local governmental entity under this chapter during the preceding or current calendar year by each person doing business in an area, as defined by the county or other local governmental entity, that is part of:

(1) an interlocal agreement;

(2) a tax abatement agreement;

(3) a reinvestment zone;

(4) a tax increment financing district;

(5) a revenue sharing agreement;

(6) an enterprise zone;

(7) any other agreement, zone, or district similar to those listed in Subdivisions (1)-(6); or

(8) any area defined by the county or other local governmental entity for the purpose of economic forecasting.

(d) The comptroller shall provide the information under Subsection (c) as an aggregate total for all persons doing business in the defined area without disclosing individual tax payments.

(e) If the request for information under Subsection (c) involves not more than three persons doing business in the defined area who remit taxes under this chapter, the comptroller shall refuse to provide the information to the county or other local governmental entity unless the comptroller receives permission from each of the persons allowing the comptroller to provide the information to the county or other local governmental entity as requested.

(f) A separate request for information under this section must be made in writing each year by the county judge or the governing body of the other local governmental entity.

(g) Information received by a county or other local governmental entity under this section is confidential, is not open to public inspection, and may be used only for the purpose of economic forecasting, for internal auditing of a tax paid to the county or other local governmental entity under this chapter, or for the purpose described by Subsection (h).

(h) Information received by a county or other local governmental entity under Subsection (c) may be used by the county or other local governmental entity to assist in determining revenue sharing under a revenue sharing agreement or other similar agreement.

(i) The comptroller may set and collect from a county or other local governmental entity reasonable fees to cover the expense of compiling and providing information under this section.

(j) Notwithstanding Chapter 551, Government Code, the commissioners court of a county or the governing body of the other local governmental entity is not required to confer with one or more employees or a third party in an open meeting to receive information or question the employees or third party regarding the information received by the county or other local governmental entity under this section. Added by Acts 2009, 81st Leg., R.S., Ch. , Sec. 9, eff. September 1, 2009. Amended by: Acts 2011, 82nd Leg., R.S., Ch. , Sec. 3, eff. September 1, 2011. Sec. 323.303. SALES TAX PERMITS AND EXEMPTION AND RESALE CERTIFICATES. (a) Each place of business of a retailer must have a permit issued by the comptroller under Subchapter F, Chapter 151. (b) The same sales tax permit, exemption certificate, and resale certificate required by Chapter 151 for the administration and collection of the taxes imposed by that chapter satisfy the requirements of this chapter. No additional permit or exemption or resale certificate may be required. (c) The comptroller may prescribe the form of an exemption certificate for a prior contract exemption under this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.304. 323.304. DISCOUNTS FOR PREPAYMENT AND TAX COLLECTION. All discounts allowed a retailer taxpayer under Chapter 151 220 for the collection and prepayment of the taxes under that chapter are allowed and applicable to the taxes collected under this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.305. 323.305. PENALTIES. The penalties provided by Chapter 151 220 for violations of that chapter apply to violations of this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.306.

Sec. 323.306. COMPTROLLER'S RULES. The comptroller may adopt reasonable rules and prescribe forms that are consistent with this chapter for the administration, collection, reporting, and enforcement of this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.307.

Sec. 323.307. DELINQUENT TAXES: LIMITATIONS. The limitations for the bringing of a suit for the collection of a tax imposed or a penalty due under this chapter after the tax and penalty are delinquent or after a determination against the taxpayer are the same as limitations provided by Chapter 151 220. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.308.

Sec. 323.308. SEIZURE AND SALE OF PROPERTY. If the comptroller lawfully seizes property for the payment of the taxes imposed under Chapter 151 220 and the property owner is delinquent in the payment of taxes under this chapter, the comptroller shall sell sufficient property to pay the delinquent taxes and penalties of both taxes. The proceeds of a sale of seized property shall first be applied to the payment of amounts due the state, any remainder to the amounts due to a municipality to which the taxes are due under Chapter 321, and any remainder to the amounts due to a county to which taxes are due. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Sec. 323.309.

Sec. 323.309. SUIT FOR TAX COLLECTION. (a) A county acting through its attorney may join as a plaintiff in any suit brought by the attorney general to seek a judgment for delinquent taxes and penalties due to the county under this chapter.

(b) A county may bring suit for the collection of taxes owed to the county under this chapter if:

(1) the taxes are certified by the comptroller in the notice required by Section 323.302(d);

(2) a written notice of the tax delinquency and the county's intention to bring suit is given by certified mail to the taxpayer, the attorney general, and the comptroller at least 60 days before the suit is filed; and

(3) neither the comptroller nor the attorney general disapproves of the suit. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Sec. 323.310.

Sec. 323.310. DISAPPROVAL OF COUNTY SUIT. (a) The comptroller or the attorney general may disapprove of the institution of a suit by a county under Section 323.309(b) if:

(1) negotiations between the state and the taxpayer are being conducted for the purpose of the collection of delinquent taxes owed to the state and the county seeking to bring suit;

(2) the taxpayer owes substantial taxes to the state and there is a reasonable possibility that the taxpayer may be unable to pay the total amount owed;

(3) the state will bring suit against the taxpayer for all taxes due under Chapter 151 220 and this chapter; or

(4) the suit involves a critical legal question relating to the interpretation of state law or a provision of the Texas or United States constitution in which the state has an overriding interest.

(b) A notice of disapproval to a county must be in writing and give the reason for the determination by the comptroller or attorney general.

(c) A disapproval is final and not subject to review.

(d) Not earlier than one year after the date of a disapproval of the institution of a county collection suit, the county may again proceed as provided by Section 323.309(b) even though the liability of the taxpayer includes taxes for which the county has previously given notice and the comptroller or attorney general has disapproved of the suit. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.311.

Sec. 323.311. JUDGMENTS IN COUNTY SUIT. (a) A judgment in a suit under Section 323.309(b) for or against a taxpayer does not affect a claim against the taxpayer by another county, a municipality, or the state unless the state is party to the suit.

(b) A county shall abstract a copy of each final judgment for taxes imposed under this chapter in a case in which the state is not a party and shall send to the comptroller a copy of the judgment and the abstract.

(c) A county shall by execution collect the taxes awarded to it in each judgment received by the county and is responsible for the renewal of the judgment before its expiration.

(d) The county shall send to the comptroller for deposit in the county's suspense account the amount of any taxes collected on the judgment. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Sec. 323.312. RETENTION OF CERTAIN COUNTY SALES TAXES. A county that holds a sales and use tax permit issued by the comptroller and that imposes a sales and use tax may retain the portion of the tax that the county collects and that constitutes the county's own tax. The county shall remit to the comptroller all other applicable local sales and use taxes and the state sales and use tax. Added by Acts 2001, 77th Leg., ch. 1263, Sec. 77, eff. Oct. 1, 2001.

SUBCHAPTER E. TAX ELECTION PROCEDURES

Sec. 323.401. CALLING OF ELECTION. (a) An election under this chapter is called by the adoption of an order by the commissioners court of a county.

(b) The commissioners court may call the election by a vote of a majority of its members.

(c) The commissioners court shall call the election if a number of qualified voters of the county equal to at least five percent of the number of registered voters in the county petitions for a vote on the question. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.402.

Sec. 323.402. DEADLINES AFTER PETITION. (a) After the receipt of a petition for an election under this chapter, the commissioners court shall determine the sufficiency of the petition within 30 days.

(b) If the petition is sufficient, the commissioners court shall pass the ordinance calling the election within 60 days after receiving the petition. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Sec. 323.403.

Sec. 323.403. TIME OF ELECTION. An election under this chapter must be held on the next uniform election day not less than 30 days after the day on which the order calling the election was passed. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.404.

Sec. 323.404. BALLOT WORDING. (a) Except as provided by Subsection (b), in an election to adopt the tax, the ballot shall be printed to provide for voting for or against the proposition: "Adoption of a ____one-half percent county sales and use value added tax within the county to be used to help eliminate property taxes reduce the county property tax rate."

(b) In an election in a county that includes no territory within the limits of a municipality, the ballot shall be printed to provide for voting for or against the proposition: "Adoption of a one percent county sales and use value added tax within the county to be used to reduce the county property tax rate."

(c) In an election to repeal the tax, the ballot shall be printed to provide for voting for or against the proposition: "Abolition of the county sales and use value added tax within the county." Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.405.

Sec. 323.405. OFFICIAL RESULTS OF ELECTION. (a) Within 10 days after an election in which the voters of a county approve of the adoption or abolition of the tax authorized by this chapter, the commissioners court of the county shall, by resolution entered in its minutes of proceedings, declare the results of the election. A resolution or ordinance under this section must include statements showing:

(1) the date of the election;

(2) the proposition on which the vote was held;

(3) the total number of votes cast for and against the proposition; and

(4) the number of votes by which the proposition was approved.

(b) If the application of the taxes that may be imposed under this chapter is changed by the results of the election, the county judge shall send to the comptroller by United States certified or registered mail a certified copy of the resolution. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.406.

Sec. 323.406. FREQUENCY OF ELECTION. An election under this chapter in a county may not be held earlier than one year after the date of any previous election under this chapter in the county. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Sec. 323.407.

Sec. 323.407. ELECTION CONTEST: NOTICE. (a) If an election held under this chapter is contested, the contestant shall send to the comptroller by United States certified or registered mail within 10 days after the filing of the contest a notice of contest containing the style of the suit, the date it was filed, its case number, and the name of the court in which the contest is pending.

(b) A court may not hear an election contest of an election held under this chapter unless the comptroller is notified within the time and in the manner provided by this section. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.408.

Sec. 323.408. ELECTION CONTEST: DELAYED EFFECTIVE DATE. (a) When the comptroller receives a notice of contest of an election under this chapter, the effective date of the tax or the abolition of a tax is suspended.

(b) When a final judgment is entered in the election contest, the county judge shall notify the comptroller by United States certified or registered mail and enclose a certified copy of the final judgment.

(c) If the final judgment in the election contest results in a change in the tax status of the county under this chapter, the tax or the abolition of the tax takes effect as provided by Section 323.102 except that the notice of the final judgment is substituted for the notice of election results prescribed by Section 323.405. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

SUBCHAPTER F. REVENUE DEPOSIT, DISTRIBUTION, AND USE

Sec. 323.501. TRUST ACCOUNT. (a) The comptroller shall deposit the taxes collected by the comptroller under this chapter in trust in the separate suspense account of the county from which the taxes were collected. (b) Repealed by Acts 2003, 78th Leg., ch. 285, Sec. 31(45). (c) Repealed by Acts 2003, 78th Leg., ch. 285, Sec. 31(45). (d) Repealed by Acts 2003, 78th Leg., ch. 285, Sec. 31(45). Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 19.126, eff. Sept. 1, 1997; Acts 2003, 78th Leg., ch. 285, Sec. 31(45), eff. Sept. 1, 2003.

Sec. 323.502.

Sec. 323.502. DISTRIBUTION OF TRUST FUNDS. At least twice during each state fiscal year and at other times as often as feasible, the comptroller shall send to the county treasurer payable to the county the county's share of the taxes collected by the comptroller under this chapter. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.503.

Sec. 323.503. STATE'S SHARE. Before sending any money to a county under this subchapter the comptroller shall deduct two percent of the amount of the taxes collected within the county during the period for which a distribution is made as the state's charge for its services under this chapter and shall, subject to premiums payments under Section 323.501(c), credit the money deducted to the general revenue fund. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.504.

Sec. 323.504. AMOUNTS RETAINED IN TRUST ACCOUNT. (a) The comptroller may retain in the suspense account of a county a portion of the county's share of the tax collected for the county under this chapter, not to exceed five percent of the amount remitted to the county. If the county has abolished the tax, the amount that may be retained may not exceed five percent of the final remittance to the county at the time of the termination of the collection of the tax.

(b) From the amounts retained in a county's suspense account, the comptroller may make refunds for overpayments to the account and to redeem dishonored checks and drafts deposited to the credit of the account.

(c) Before the expiration of one year after the effective date of the abolition of a county's tax under this chapter the comptroller shall send to the county the remainder of the money in the county's account and shall close the account. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987.

Sec. 323.5041.

Sec. 323.5041. INTEREST ON TAX REVENUE. Interest earned on all deposits made with the comptroller under this chapter, including interest earned from the suspense accounts retained under Section 323.504, shall be credited to the general revenue fund. Added by Acts 1989, 71st Leg., ch. 2, Sec. 14.18(a), eff. Aug. 28, 1989. Amended by Acts 1997, 75th Leg., ch. 1423, Sec. 19.127, eff. Sept. 1, 1997.

Sec. 323.505. USE 323.508. PLEDGE OF TAX REVENUE. (a) The money received by a county under this chapter is for the use and benefit of the county and shall be used for the replacement of property tax revenue lost as a result of the adoption of the taxes authorized by this chapter. Except as provided by Subsection (b), the revenue in excess of the revenue used to replace those property taxes shall be used for the reduction of indebtedness of the county. After all indebtedness is paid, the excess may be used for any purpose for which county general revenue may be used. A county may not call and hold an election on the issue of authorizing the county to pledge anticipated a percentage of the value added tax revenue from this source received under Section 323.101 to secure the payment of bonds or other indebtedness for a period longer than one year obligations issued to fund needed infrastructure, development and other capital projects located within or otherwise supporting the county. (b) Revenue collected from the tax imposed under this chapter in each of the first three years in which the tax is imposed in the county in excess of the amount determined as provided by Section 26.041(d) for each year shall be deposited in an account to be called the excess sales tax revenue fund. During those three years, revenue deposited in the excess sales tax revenue fund may be used only if and to the extent that taxes or other revenues of the county are collected in amounts less than anticipated. After that period, the revenue in the fund may be used for any purpose for which county general revenue may be used. The fund ceases to exist when all revenue deposited in the fund has been spent. Added by Acts 1987, 70th Leg., ch. 191, Sec. 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, Sec. 14.18(b), eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 16, Sec. 17.07, eff. Aug. 26, 1991.

Sec. 323.510. (b) The ballot at the election under this section must be printed to permit voting for or against the proposition: "Authorizing the County of ______ (insert name of county) to pledge not more than ______ percent (insert percentage not to exceed 25 percent) of the revenue received from the _________ (insert county value added tax) previously adopted in the county to the payment of obligations issued to pay all or part of the costs of _________ (insert description of each project)."

(c) If a majority of the voters vote in favor of the proposition, the county may:

(1) issue bonds, notes, or other obligations that are payable from the pledged revenues to pay for all or part of the costs of the projects described in the proposition; and

(2) set aside the portion of the revenue approved at the election that the county actually receives and pledge that revenue as security for the payment of the bonds, notes, or other obligations.

(d) If the county pledges revenue under Subsection (c), the pledge and security interest shall continue while the bonds, notes, or obligations, including refunding obligations, are outstanding and unpaid.

(e) The county may direct the comptroller to deposit the pledged revenue to a trust or account as may be required to obtain the financing and to protect the related security interest.

(f) Sections 328.506 and 328.507 do not apply to taxes pledged under this section.

Sec. 323.510. REALLOCATION OF COUNTY OR LOCAL GOVERNMENTAL ENTITY TAX REVENUE. (a) In this section, "local governmental entity" includes any governmental entity created by the legislature that has a limited purpose or function, that has a defined or restricted geographic territory, and that is authorized by law to impose a local sales and use value added tax the imposition, computation, administration, enforcement, and collection of which is governed by this chapter.

(b) This section applies only if:

(1) the comptroller:

(A) reallocates local tax revenue from a county or local governmental entity to another county or local governmental entity; or

(B) refunds local tax revenue that was previously allocated to a county or local governmental entity; and

(2) the amount the comptroller reallocates or refunds is at least equal to the lesser of:

(A) $200,000;

(B) an amount equal to 10 percent of the revenue received by the county or local governmental entity under this chapter during the calendar year preceding the calendar year in which the reallocation or refund is made; or

(C) an amount that increases or decreases the amount of revenue the county or local governmental entity receives under this chapter during a calendar month by more than 15 percent as compared to revenue received by the county or local governmental entity during the same month in any previous year.

(c) Subject to the criteria provided by this section, a county or local governmental entity may request a review of all available sales value added tax returns and reports in the comptroller's possession filed by not more than five individual taxpayers doing business in the county or local governmental entity that are included and identified by the county or local governmental entity from the information received from the comptroller under Section 323.3022 and that relate to a reallocation or refund in an amount described by Subsection (b).

(d) The comptroller shall provide the returns and reports requested under Subsection (c) for review regardless of whether the information in the returns or reports is confidential under state law, including Sections 111.006 and 151.027.

(e) The provision of confidential information to a county or local governmental entity under this section does not affect the confidential nature of the information in the returns or reports. A county or local governmental entity shall use the information only in a manner that maintains the confidential nature of the information and may not disclose or release the information to the public.

(f) A county or local governmental entity must submit the request under Subsection (c) not later than the 90th day after the date the county or local governmental entity discovers a reallocation or refund described by Subsection (b).

(g) Not earlier than the 30th day or later than the 90th day after the date the comptroller receives a request under Subsection (c), the comptroller shall provide the requested returns and reports to the requesting county or local governmental entity for review.

(h) The comptroller may set and collect from a county or local governmental entity a reasonable fee to cover the expense of compiling and providing information under this section. Added by Acts 2011, 82nd Leg., R.S., Ch. , Sec. 4, eff. September 1, 2011.

TAX CODE

TITLE 3. LOCAL TAXATION

SUBTITLE C. LOCAL SALES AND USE VALUE ADDED TAXES

CHAPTER 324. COUNTY HEALTH SERVICES SALES AND USE VALUE ADDED TAX

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 324.001. COUNTY SALES AND USE VALUE ADDED TAX ACT APPLICABLE. Except to the extent that a provision of this chapter applies, Chapter 323 applies to the tax authorized by this chapter in the same manner as that chapter applies to the tax authorized by that chapter. Added by Acts 1989, 71st Leg., 1st C.S., ch. 40, Sec. 7, eff. Sept. 1, 1989.

SUBCHAPTER B. IMPOSITION OF TAX

Sec. 324.021. TAX AUTHORIZED. (a) A county having a population of 50,000 or less may adopt, increase, decrease, or abolish the sales and use value added tax authorized by this chapter at an election held in the county.

(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 value added taxes imposed by the county and other political subdivisions of this state having territory in the county would exceed two three 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 value added tax or approves the increase in the rate of its sales and use value added tax and as a result the combined rate of all sales and use value added taxes imposed by the county and other political subdivisions of this state having territory in the county would exceed two three percent at any location in the county, the election to adopt a sales and use value added tax under this chapter or increase the tax has no effect. Added by Acts 1989, 71st Leg., 1st C.S., ch. 40, Sec. 7, eff. Sept. 1, 1989. Amended by: Acts 2005, 79th Leg., Ch. , Sec. 1, eff. June 17, 2005.

Sec. 324.022.

Sec. 324.022. TAX RATE. (a) The tax authorized by this chapter may be imposed at the rate of one-half, five-eighths, three-fourths, seven-eighths, or one percent.

(b) The rate may be reduced in one or more increments of one-eighth of one percent to a minimum of one-half of one percent or increased in one or more increments of one-eighth of one percent to a maximum of one percent, or the tax may be abolished. Added by Acts 1989, 71st Leg., 1st C.S., ch. 40, Sec. 7, eff. Sept. 1, 1989. Amended by: Acts 2005, 79th Leg., Ch. , Sec. 2, eff. June 17, 2005.

Sec. 324.023. SALES AND USE

Sec. 324.023. VALUE ADDED TAX EFFECTIVE DATE. (a) The adoption, increase, decrease, or abolition of the tax takes effect on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a notice of the results of the election.

(b) If the comptroller determines that an effective date provided by Subsection (a) will occur before the comptroller can reasonably take the action required to begin collecting the tax or to implement the increase, decrease, or abolition of the tax, the effective date may be extended by the comptroller until the first day of the next succeeding calendar quarter. Added by Acts 1989, 71st Leg., 1st C.S., ch. 40, Sec. 7, eff. Sept. 1, 1989. Amended by: Acts 2005, 79th Leg., Ch. , Sec. 3, eff. June 17, 2005.

SUBCHAPTER C. TAX ELECTION PROCEDURES

Sec. 324.061. ELECTION PROCEDURE. (a) An election to adopt, increase, decrease, or abolish the tax authorized by this chapter is called by the adoption of an order by the commissioners court of the county. The commissioners court shall call an election if a number of qualified voters of the county equal to at least five percent of the number of registered voters in the county petitions the commissioners court to call the election.

(b) At an election to adopt the tax, the ballot shall be prepared to permit voting for or against the proposition: "The adoption of a local sales and use value added tax in (name of county) at the rate of _________ (one-half, five-eighths, three-fourths, seven-eighths, or one, to be inserted as appropriate) percent to provide revenue for health services in the county."

(b-1) At an election to increase or decrease the tax, the ballot shall be prepared to permit voting for or against the proposition: "The (increase or decrease) of the local sales and use value added tax in (name of county) to the rate of _________ (one-half, five-eighths, three-fourths, seven-eighths, or one, to be inserted as appropriate) percent to provide revenue for health services in the county."

(c) At an election to abolish the tax, the ballot shall be prepared to permit voting for or against the proposition: "The abolition of the local health services sales and use value added tax in (name of county)." Added by Acts 1989, 71st Leg., 1st C.S., ch. 40, Sec. 7, eff. Sept. 1, 1989. Amended by: Acts 2005, 79th Leg., Ch. , Sec. 4, eff. June 17, 2005.

SUBCHAPTER D. USE OF TAX REVENUE

Sec. 324.081. USE OF TAX REVENUE. Revenue from the tax imposed under this chapter may be used only to provide health services in the county. The county imposing the tax may allocate all or part of that revenue to:

(1) a county hospital authority or a hospital district having the same boundaries as the county; or

(2) a public health district in which the county participates. Added by Acts 1989, 71st Leg., 1st C.S., ch. 40, Sec. 7, eff. Sept. 1, 1989.

TAX CODE

TITLE 3. LOCAL TAXATION

SUBTITLE C. LOCAL SALES AND USE VALUE ADDED TAXES

CHAPTER 325. COUNTY SALES AND USE VALUE ADDED TAX FOR LANDFILL AND

CRIMINAL DETENTION CENTER

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 325.001. COUNTY SALES AND USE VALUE ADDED TAX ACT APPLICABLE. Except to the extent that a provision of this chapter applies, Chapter 323 applies to the tax authorized by this chapter in the same manner as that chapter applies to the tax authorized by that chapter. Added by Acts 1995, 74th Leg., ch. 39, Sec. 1, eff. May 5, 1995.

SUBCHAPTER B. IMPOSITION OF TAX

Sec. 325.021. TAX AUTHORIZED. (a) A county having a population of 55,000 or less that borders the Rio Grande containing a municipality with a population of more than 22,000 may adopt or abolish the sales and use value added tax authorized by this chapter at an election held in the county.

(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 value added taxes imposed by the county and other political subdivisions of this state having territory in the county would exceed two three 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 value added tax or approves the increase in the rate of its sales and use value added tax and as a result the combined rate of all sales and use value added taxes imposed by the county and other political subdivisions of this state having territory in the county would exceed two three percent at any location in the county, the election to adopt a sales and use value added tax under this chapter has no effect.

(d) That portion of the tax collected under this chapter necessary for the operation of the landfill is dedicated solely to that purpose.

(e) That portion of the tax collected under this chapter necessary for debt services for criminal detention center bonds is dedicated solely to that purpose. (f) Any tax collected under this chapter not dedicated under Subsection (d) or (e) shall be used for ad valorem reduction.

(f) RESERVED

(g) The dedication established under Subsection (d) expires when the landfill is sold or closed. The dedication established under Subsection (e) expires when the criminal detention center bonds are retired.

(h) If the commissioners court adopts an order finding that the purposes for which the dedications made under Subsections (d) and (e) have been accomplished, the tax authorized by this chapter is abolished. Added by Acts 1995, 74th Leg., ch. 39, Sec. 1, eff. May 5, 1995. Amended by Acts 2001, 77th Leg., ch. 669, Sec. 121, eff. Sept. 1, 2001. Amended by: Acts 2011, 82nd Leg., R.S., Ch. , Sec. 119, eff. September 1, 2011.

Sec. 325.022. 325.022. TAX RATE. The rate of the tax authorized by this chapter is one-quarter-half percent. Added by Acts 1995, 74th Leg., ch. 39, Sec. 1, eff. May 5, 1995.

Sec. 325.023. SALES AND USE

Sec. 325.023. VALUE ADDED TAX EFFECTIVE DATE. (a) The adoption or abolition of the tax takes effect on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a notice of the results of the election.

(b) If the comptroller determines that an effective date provided by Subsection (a) will occur before the comptroller can reasonably take the action required to begin collecting the tax or to implement the abolition of the tax, the effective date may be extended by the comptroller until the first day of the next succeeding calendar quarter. Added by Acts 1995, 74th Leg., ch. 39, Sec. 1, eff. May 5, 1995.

SUBCHAPTER C. TAX ELECTION PROCEDURES

Sec. 325.061. ELECTION PROCEDURE. (a) An election to adopt or abolish the tax authorized by this chapter is called by the adoption of an order by the commissioners court of the county. The commissioners court may call an election on its own motion or shall call an election if a number of qualified voters of the county equal to at least five percent of the number of registered voters in the county petition the commissioners court to call the election. An election under this chapter must be held on the next uniform election date not less than 10 days after the day on which the order calling the election was passed.

(b) At an election to adopt the tax, the ballot shall be prepared to permit voting for or against the proposition: "The adoption of a local sales and use value added tax in (name of county) at the rate of one-quarter half percent to provide revenue for the operation of a county landfill and a criminal detention center."

(c) At an election to abolish the tax, the ballot shall be prepared to permit voting for or against the proposition: "The abolition of the sales and use value added tax for the operation of a county landfill and a criminal detention center in (name of county)."

(d) The commissioners court shall modify regular election procedures as necessary to hold an election on a day permitted under Subsection (a). Added by Acts 1995, 74th Leg., ch. 39, Sec. 1, eff. May 5, 1995.

SUBCHAPTER D. USE OF TAX REVENUE

Sec. 325.081. USE OF TAX REVENUE. Revenue from the tax imposed under this chapter may be used only to build, operate, or maintain a landfill and a criminal detention center in the county. Added by Acts 1995, 74th Leg., ch. 39, Sec. 1, eff. May 5, 1995.

TAX CODE

TITLE 3. LOCAL TAXATION

SUBTITLE C. LOCAL SALES AND USE VALUE ADDED TAXES

CHAPTER 327. MUNICIPAL SALES AND USE VALUE ADDED TAX FOR STREET

MAINTENANCE

Sec. 327.001. DEFINITION. In this chapter, "municipal street" means the entire width of a way held by a municipality in fee or by easement or dedication that has a part open for public use for vehicular travel. The term does not include a designated state or federal highway or road or a designated county road. Added by Acts 2001, 77th Leg., ch. 464, Sec. 1, eff. June 11, 2001.

Sec. 327.002. 327.002. MUNICIPAL SALES AND USE VALUE ADDED TAX ACT APPLICABLE. Except to the extent that a provision of this chapter applies, Chapter 321 applies to the tax authorized by this chapter in the same manner as that chapter applies to the tax authorized by that chapter. Added by Acts 2001, 77th Leg., ch. 464, Sec. 1, eff. June 11, 2001.

Sec. 327.003.

Sec. 327.003. TAX AUTHORIZED. (a) A municipality may adopt the sales and use value added tax authorized by this chapter at an election held in the municipality.

(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 value added taxes imposed by the municipality and other political subdivisions of this state having territory in the municipality would exceed two three 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 value added tax or approves the increase in the rate of its sales and use value added tax and as a result the combined rate of all sales and use value added taxes imposed by the municipality and other political subdivisions of this state having territory in the municipality would exceed two three percent at any location in the municipality, the election to adopt a sales and use value added tax under this chapter has no effect. Added by Acts 2001, 77th Leg., ch. 464, Sec. 1, eff. June 11, 2001. Amended by Acts 2003, 78th Leg., ch. 403, Sec. 1, eff. June 20, 2003.

Sec. 327.004. 327.004. TAX RATE. The tax authorized by this chapter may be imposed at the rate of one-eighth of one percent or one-fourth of one percent.

Added by Acts 2001, 77th Leg., ch. 464, Sec. 1, eff. June 11, 2001. Amended by Acts 2003, 78th Leg., ch. 403, Sec. 2, eff. June 20, 2003.

Sec. 327.005. SALES AND USE

Sec. 327.005. VALUE ADDED TAX EFFECTIVE DATE. (a) The adoption of the tax or the change in the rate of the tax takes effect on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives notice of the results of the election.

(b) If the comptroller determines that an effective date provided by Subsection (a) will occur before the comptroller can reasonably take the action required to begin collecting the tax, the effective date may be extended by the comptroller until the first day of the next succeeding calendar quarter. Added by Acts 2001, 77th Leg., ch. 464, Sec. 1, eff. June 11, 2001. Amended by Acts 2003, 78th Leg., ch. 403, Sec. 3, eff. June 20, 2003.

Sec. 327.006. 327.006. ELECTION PROCEDURE. (a) An election to adopt the tax authorized by this chapter is called by the adoption of an ordinance by the governing body of the municipality.

(b) At an election to adopt the tax, the ballot shall be prepared to permit voting for or against the proposition: "The adoption of a local sales and use value added tax in (name of municipality) at the rate of (insert one-eighth of one percent or one-fourth of one percent) to provide revenue for maintenance and repair of municipal streets."

(c) At an election to abolish the tax, the ballot shall be prepared to permit voting for or against the proposition: "The abolition of the value added tax in (name of municipality) for the maintenance and repair of municipal streets." Added by Acts 2001, 77th Leg., ch. 464, Sec. 1, eff. June 11, 2001. Amended by Acts 2003, 78th Leg., ch. 403, Sec. 4, eff. June 20, 2003.

Sec. 327.0065. RATE CHANGE. (a) A municipality that has adopted a sales and use tax under this chapter at a rate of one-fourth of one percent may by ordinance decrease the rate of the tax to one-eighth of one percent.

(b) A municipality that has adopted a sales and use tax under this chapter at a rate of one-eighth of one percent may by ordinance increase the rate of the tax to one-fourth of one percent if the increase is authorized at an election held in the municipality.

(c) The ballot for an election to increase the tax shall be printed to permit voting for or against the proposition: "The adoption of a local sales and use tax in (name of municipality) at the rate of one-fourth of one percent to provide revenue for maintenance and repair of municipal streets." Added by Acts 2003, 78th Leg., ch. 403, Sec. 5, eff. June 20, 2003.

Sec. 327.007. 327.007. REAUTHORIZATION OF TAX. (a) Unless imposition of the sales and use value added tax authorized by this chapter is reauthorized as provided by this section, the tax expires on:

(1) the fourth anniversary of the date the tax originally took effect under Section 327.005; or

(2) the first day of the first calendar quarter occurring after the fourth anniversary of the date the tax was last reauthorized under this section.

(b) An election to reauthorize the tax is called and held in the same manner as an election to adopt the tax under Section 327.006, except the ballot proposition shall be prepared to permit voting for or against the proposition: "The reauthorization of the local sales and use value added tax in (name of municipality) at the rate of (insert appropriate rate) to continue providing revenue for maintenance and repair of municipal streets."

(c) If an election to reauthorize the tax is not held before the tax expires as provided by Subsection (a), or if a majority of the votes cast in an election to reauthorize the tax do not favor reauthorization, the municipality may not call an election on the question of authorizing a new tax under this chapter before the first anniversary of the date on which the tax expired.

(d) Not later than the 10th day after the date the municipality determines that the tax will expire as provided by Subsection (a), the municipality shall notify the comptroller of the scheduled expiration. The comptroller may delay the scheduled expiration date if the comptroller notifies the municipality that more time is required. The comptroller must provide a new expiration date that is not later than the last day of the first calendar quarter occurring after the notification to the comptroller. Added by Acts 2001, 77th Leg., ch. 464, Sec. 1, eff. June 11, 2001. Amended by Acts 2003, 78th Leg., ch. 403, Sec. 6, eff. June 20, 2003.

Sec. 327.008.

Sec. 327.008. USE OF TAX REVENUE. Revenue from the tax imposed under this chapter may be used only to maintain and repair municipal streets existing on the date of the election to adopt the tax.

TAX CODE

TITLE 3. LOCAL TAXATION

SUBTITLE C. LOCAL VALUE ADDED TAXES

CHAPTER 328. SCHOOL DISTRICT ENRICHMENT VALUE ADDED TAX

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 328.001. SHORT TITLE. This chapter may be cited as the Texas School District Enrichment Value Added Tax Act.

Sec. 328.002. DEFINITIONS. Words used in this chapter and defined by Chapter 220 have the meanings assigned by Chapter 220.

Sec. 328.003. OTHER PORTIONS OF TAX APPLICABLE. Subtitles A and B, Title 2, and Chapter 220 apply to the taxes and to the administration and enforcement of the taxes imposed by this chapter in the same manner that those laws apply to state taxes, unless modified by this chapter.

SUBCHAPTER B. IMPOSITION OF VALUE ADDED TAXES BY SCHOOL DISTRICTS

Sec. 328.101. TAX AUTHORIZED. A school district may adopt or repeal a value added tax authorized by this chapter at an election in which a majority of the qualified voters of the school district approve the adoption or repeal of the tax.

Sec. 328.102. EFFECTIVE DATES: NEW TAX, TAX REPEAL, BOUNDARY CHANGE. (a) A tax imposed under this chapter or the repeal of a tax abolished under this chapter takes effect on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a notice of the action as required by Section 328.405(b).

(b) RESERVED

(c) If a school district in which the tax imposed under this chapter is in effect changes its boundaries, the school district secretary shall send by United States registered or certified mail to the comptroller a certified copy of the legal instrument that adds or detaches school district territory and that shows the effective date of the boundary change. The instrument must be accompanied by a map clearly showing the added or detached territory. Except as provided by Subsection (d), the tax takes effect in the added territory or is inapplicable to the detached territory on the first day of the first calendar quarter after the comptroller receives the ordinance and map.

(d) If, within 10 days after the receipt of the certified copy and map sent under Subsection (c), the comptroller notifies the secretary of the school district that more time is required, the effective date of the application of the tax in the added or detached area is the first day of the first calendar quarter after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives the ordinance and map.

(e) If as a result of the imposition or increase in a value added tax by a school district in which there is located all or part of a local governmental entity (other than a county or school district) that has adopted a value added tax or as a result of the annexation by a school district of all or part of the territory in a local governmental entity (other than a county or school district) that has adopted a value added tax the overlapping local value added taxes in the area will exceed three percent, the entity's value added tax is automatically reduced in that area to a rate that when added to the combined rate of local value added taxes will equal three percent.

(f) If an entity's rate is reduced in accordance with Subsection (e), the comptroller shall withhold from the school district's quarterly value added tax allocation an amount equal to the amount that would have been collected by the entity had the school district not imposed or increased its value added tax or annexed the area in the entity less amounts that the entity collects following the school district's levy of or increase in its value added tax or annexation of the area in the entity. The comptroller shall withhold and pay the amount withheld to the entity under policies or procedures that the comptroller considers reasonable.

Sec. 328.103. VALUE ADDED TAX. In a school district that has adopted the tax authorized by Section 328.101(a), there is imposed a value added tax on the supply in that school district of any service or property by any person in the ordinary course of a trade or business in which the person engages for the purpose of profit.

(b) The tax so adopted is imposed at the rate approved by the voters. The rate, when the tax is adopted, must be equal to a minimum of one-eighth of one percent, up to a maximum of one-half percent, or at any one-eighth percentage point increment in-between. The rate may be reduced in one or more increments of one-eighth of one percent to a minimum of one-eighth of one percent or increased in one or more increments of one-eighth of one percent to a maximum of one-half of one percent, or the tax may be abolished.

(c) The exemptions and exclusions of Chapter 220, Subchapters D and E apply equally to the determination of taxable receipts for purposes of any school district value added tax.

(d) The comptroller may adopt rules and the governing body of the school district may adopt orders to administer this section.

SUBCHAPTER C. COMPUTATION OF TAXES

Sec. 328.201. COMPUTATION OF TAXES. (a) Each taxpayer in a school district that has adopted a tax authorized by this chapter shall add each value added tax imposed by a local taxing unit under this chapter and by Chapter 220 to the supply price, and the sum of the taxes is a part of the price, a debt of the customer to the taxpayer until paid, and recoverable at law in the same manner as the supply price.

(b) The amount of the total tax is computed by multiplying the combined applicable tax rates, by the amount of the supply price. If the product results in a fraction of a cent less than one-half of one cent, the fraction of a cent is not collected. If the fraction of a cent is one-half of one cent or more, the fraction shall be collected as one cent.

(c) The comptroller may publish schedules and brackets of amounts of taxes based on the formula provided by Subsection (b) for use in school districts that have adopted the taxes authorized by this chapter.

Sec. 328.202. RESERVED

Sec. 328.203. RESERVED

Sec. 328.204. COMPUTATION OF TAX. In each school district that has adopted the taxes authorized by this chapter, the taxes imposed by Section 328.104(a) and the tax imposed by Chapter 220, are added together to form a single combined tax rate.

Sec. 328.205. RESERVED

Sec. 328.206. RESERVED

Sec. 328.207. LOCAL TAX INAPPLICABLE WHEN NO STATE TAX; EXCEPTIONS. (a) The value added tax authorized by this chapter does not apply to the supply of services or property unless the value added tax imposed by Chapter 220, also applies to the sale.

Sec. 328.208. STATE EXEMPTIONS APPLICABLE. The exemptions and exclusions provided by Subchapters D and E of Chapter 220 apply to the taxes authorized by this chapter.

Sec. 328.209. TRANSITION EXEMPTION: GENERAL PURPOSE VALUE ADDED TAX. (a) For a period of three years only after the effective date of the tax authorized by Section 328.101(a) in a school district, otherwise taxable receipts from the supply of services or property are exempt from the tax imposed by the school district under Section 328.101(a) if the notice required by Subsection (b) is given and if:

(1) the services and/or property are supplied for the performance of a written contract entered into before the effective date of the tax imposed under Section 328.101(a) in the school district if the contract may be affected and the contract may not be modified because of the tax; or

(2) the services and/or property are supplied under the obligation of a bid submitted before the effective date of the tax imposed under Section 328.101(a) in the school district if the contract may be affected and the bid may not be withdrawn or modified because of the tax.

(b) The taxpayer must give the comptroller notice of the contract or bid on which an exemption is to be claimed within 60 days after the effective date of the tax imposed under Section 328.101(a) in the school district.

SUBCHAPTER D. ADMINISTRATION OF TAXES

Sec. 328.301. COMPTROLLER TO COLLECT AND ADMINISTER TAXES. The comptroller shall administer, collect, and enforce any tax imposed by a school district under this chapter. The taxes imposed under this chapter and the taxes imposed under Chapter 220 shall be collected together, if both taxes are imposed.

Sec. 328.302. COMPTROLLER'S REPORTING DUTIES. (a) The comptroller shall make quarterly reports to a school district that has adopted the taxes authorized by this chapter if the school district requests the reports. A report must include the name, address, and account number of each person in the school district that has remitted to the comptroller a tax payment during the quarter covered by the report.

(b) If a school district requests an additional report, the comptroller shall make an additional quarterly report to the school district including the name, address, and account number, if any, of, and the amount of tax due from, each person doing business in the school district who has failed to pay the tax under this chapter to the school district or under Chapter 220. The additional report must also include statements:

(1) showing whether or not there has been a partial tax payment by the delinquent taxpayer;

(2) showing whether or not the taxpayer is delinquent in the payment of value added taxes to the state; and

(3) describing the steps taken by the comptroller to collect the delinquent taxes.

(c) If a school district determines that a person doing business in the school district is not included in a comptroller's report, the school district shall report to the comptroller the name and address of the person. Within 90 days after receiving the report from a school district, the comptroller shall send to the school district:

(1) an explanation as to why the person is not obligated for the school district tax;

(2) a statement that the person is obligated for the school district tax and the tax is delinquent; or

(3) a certification that the person is obligated for the school district tax and that the full amount of the tax due has been credited to the school district's account.

(d) The comptroller shall send by United States certified or registered mail to the school district tax collector a notice of each person who is delinquent in the payment to the school district of the taxes authorized by this chapter and shall send a copy of the notice to the attorney general. A notice sent under this subsection is a certification of the amount of tax owed and is prima facie evidence of a determination of that amount and of its delinquency.

Sec. 328.3025. DISPOSITION OF AMOUNT ERRONEOUSLY COLLECTED. (a) If in a territory added to a school district a taxpayer erroneously collects an amount as a tax imposed under this chapter before the date the taxes imposed under this chapter by the school district take effect in the added territory under Section 328.102, the amount collected is treated as if it were revenue from the taxes imposed by the school district under this chapter, and the comptroller shall collect and administer the amount in the same manner as tax revenue.

(b) This section does not affect the right of a person who paid an amount erroneously collected by a taxpayer to claim a refund or the authority of the comptroller to make a refund of that amount.

Sec. 328.304. DISCOUNTS FOR PREPAYMENT AND TAX COLLECTION. All discounts allowed a taxpayer under Chapter 220 for the collection and prepayment of the taxes under that chapter are allowed and applicable to the taxes collected under this chapter.

Sec. 328.305. PENALTIES. The penalties provided by Chapter 220 for violations of that chapter apply to violations of this chapter.

Sec. 328.306. COMPTROLLER'S RULES. The comptroller may adopt reasonable rules and prescribe forms that are consistent with this chapter for the administration, collection, reporting, and enforcement of this chapter.

Sec. 328.307. DELINQUENT TAXES: LIMITATIONS. The limitations for the bringing of a suit for the collection of a tax imposed or a penalty due under this chapter after the tax and penalty are delinquent or after a determination against the taxpayer are the same as limitations provided by Chapter 220.

Sec. 328.308. SEIZURE AND SALE OF PROPERTY. If the comptroller lawfully seizes property for the payment of the taxes imposed under Chapter 220 and the property owner is delinquent in the payment of taxes under this chapter, the comptroller shall sell sufficient property to pay the delinquent taxes and penalties of both taxes. The proceeds of a sale of seized property shall first be applied to the payment of amounts due the state and the remainder, if any, to the amounts due to the school district to which the taxes are due.

Sec. 328.309. SUIT FOR TAX COLLECTION. (a) A school district acting through its attorney may join as a plaintiff in any suit brought by the attorney general to seek a judgment for delinquent taxes and penalties due to the school district under this chapter.

(b) A school district may bring suit for the collection of taxes owed to the school district under this chapter if:

(1) the taxes are certified by the comptroller in the notice required by Section 328.302(d);

(2) a written notice of the tax delinquency and the school district's intention to bring suit is given by certified mail to the taxpayer, the attorney general, and the comptroller at least 60 days before the suit is filed; and

(3) neither the comptroller nor the attorney general disapproves of the suit.

Sec. 328.310. DISAPPROVAL OF SCHOOL DISTRICT SUIT. (a) The comptroller or the attorney general may disapprove of the institution of a suit by a school district under Section 328.309(b) if:

(1) negotiations between the state and the taxpayer are being conducted for the purpose of the collection of delinquent taxes owed to the state and the school district seeking to bring suit;

(2) the taxpayer owes substantial taxes to the state and there is a reasonable possibility that the taxpayer may be unable to pay the total amount owed;

(3) the state will bring suit against the taxpayer for all taxes due under Chapter 220 and this chapter; or

(4) the suit involves a critical legal question relating to the interpretation of state law or a provision of the Texas or United States constitution in which the state has an overriding interest.

(b) A notice of disapproval to a school district must be in writing and give the reason for the determination by the comptroller or attorney general.

(c) A disapproval is final and not subject to review.

(d) Not earlier than one year after the date of a disapproval of the institution of a school district collection suit, the school district may again proceed as provided by Section 328.309(b) even though the liability of the taxpayer includes taxes for which the school district has previously given notice and the comptroller or attorney general has disapproved of the suit.

Sec. 328.311. JUDGMENTS IN SCHOOL DISTRICT SUIT. (a) A judgment in a suit under Section 328.309(b) for or against a taxpayer does not affect a claim against the taxpayer by another school district or the state unless the state is party to the suit.

(b) A school district shall abstract a copy of each final judgment for taxes imposed under this chapter in a case in which the state is not a party and shall send to the comptroller a copy of the judgment and the abstract.

(c) A school district shall by execution collect the taxes awarded to it in each judgment received by the school district and is responsible for the renewal of the judgment before its expiration.

(d) The school district shall notify the comptroller by certified mail of the amount of any taxes collected on the judgment.

Sec. 328.312. RETENTION OF CERTAIN SCHOOL DISTRICT VALUE ADDED TAXES. A school district that holds a value added tax permit issued by the comptroller and that imposes a value added tax may retain the portion of the tax that the school district collects and that constitutes the school district's own tax. The school district shall remit to the comptroller all other applicable local value added taxes and the state value added tax.

SUBCHAPTER E. TAX ELECTION PROCEDURES

Sec. 328.401. CALLING OF ELECTION. (a) An election under this chapter is called by the adoption of a resolution by the governing body of a school district.

(b) The governing body may call the election by a vote of a majority of its members.

(c) The governing body shall call the election if a number of qualified voters of the school district equal to at least 20 percent of the number of votes cast in the most recent regular school district election petitions the governing body for a vote on the question.

(d) RESERVED

(e) RESERVED

Sec. 328.402. DEADLINES AFTER PETITION. (a) After the receipt of a petition for an election under this chapter, the governing body of a school district shall determine the sufficiency of the petition within 30 days.

(b) If the petition is sufficient, the governing body shall pass the ordinance calling the election within 60 days after receiving the petition.

Sec. 328.403. TIME OF ELECTION. (a) An election under this chapter to adopt the tax authorized under Section 328.101(a) must be held on the first succeeding uniform election date for which sufficient time elapses for the holding of an election.

(b) An election on the approval of the additional school district value added tax must be held on the next succeeding uniform election date not less than 30 days after the passage of the ordinance calling the election.

Sec. 328.404. BALLOT WORDING. (a) In an election to adopt the tax, the ballot shall be printed to provide for voting for or against the applicable proposition: "A one half percent value added tax is adopted within the [insert name of] district."

(b) In an election to repeal the tax, the ballot shall be printed to provide for voting for or against the applicable proposition: "The local school district value added tax within the district is abolished" or "The abolition of the additional school district value added tax within the district."

Sec. 328.405. OFFICIAL RESULTS OF ELECTION. (a) Within 10 days after an election in which the voters approve of the adoption or abolition of a tax authorized by this chapter, the governing body of the school district shall by resolution or ordinance entered in its minutes of proceedings, declare the results of the election. A resolution or ordinance under this section must include statements showing:

(1) the date of the election;

(2) the proposition on which the vote was held;

(3) the total number of votes cast for and against the proposition; and

(4) the number of votes by which the proposition was approved.

(b) If the application of the taxes that may be imposed under this chapter is changed by the results of the election, the school district secretary shall send to the comptroller by United States certified or registered mail a certified copy of the resolution or the ordinance along with a map of the school district clearly showing its boundaries.

Sec. 328.406. FREQUENCY OF ELECTION. An election under this chapter in a school district may not be held earlier than one year after the date of any previous election under this chapter in the school district.

Sec. 328.407. ELECTION CONTEST: NOTICE. (a) If an election held under this chapter is contested, the contestant shall send to the comptroller by United States certified or registered mail within 10 days after the filing of the contest a notice of contest containing the style of the suit, the date it was filed, its case number, and the name of the court in which the contest is pending.

(b) A court may not hear an election contest of an election held under this chapter unless the comptroller is notified within the time and in the manner provided by this section.

Sec. 328.408. ELECTION CONTEST: DELAYED EFFECTIVE DATE. (a) When the comptroller receives a notice of contest of an election under this chapter, the effective date of the tax or the abolition of a tax is suspended.

(b) When a final judgment is entered in the election contest, the school district secretary shall notify the comptroller by United States certified or registered mail and enclose a certified copy of the final judgment.

(c) If the final judgment in the election contest results in a change in the tax status of the school district under this chapter, the tax or the abolition of the tax takes effect as provided by Section 328.102 except that the notice of the final judgment is substituted for the notice of election results prescribed by Section 328.405.

Sec. 328.409. COMBINED SCHOOL DISTRICT VALUE ADDED TAX BALLOT PROPOSITIONS. (a) Notwithstanding any provisions of this code or other state law, a school district may by a combined ballot proposition lower or repeal any dedicated or special purpose school district value added tax, including the additional value added tax for property tax relief, and by the same proposition raise or adopt any other dedicated or special purpose school district value added tax, including the additional value added tax for property tax relief.

(b) A combined value added tax proposition under this section shall contain substantially the same language, if any, required by law for the lowering, repealing, raising, or adopting of each tax as appropriate.

(c) A negative vote on a combined value added tax proposition under this section shall have no effect on either the value added tax to be lowered or repealed by the proposition or the value added tax to be raised or adopted by the proposition.

(d) This section does not apply to value added tax elections called by any method other than by the governing body.

(e) This section shall not be construed to change the substantive law of any value added tax, including the allowed maximum rate or combined rate of local value added taxes.

SUBCHAPTER F. REVENUE DEPOSIT, DISTRIBUTION, AND USE

Sec. 328.501. TRUST ACCOUNT. (a) The comptroller shall deposit the taxes collected by the comptroller under this chapter in trust in the separate suspense account of the school district from which the taxes were collected.

(b) Repealed by Acts 2001, 77th 2003, 78th Leg., ch. 464 285, Sec. 31(44).

(c) Repealed by Acts 2003, 78th Leg., ch. 285, Sec. 31(44).

Sec. 328.502. DISTRIBUTION OF TRUST FUNDS. At least twice during each state fiscal year and at other times as often as feasible, the comptroller shall send to the school district treasurer or to the person who performs the office of the school district treasurer payable to the school district the school district's share of the taxes collected by the comptroller under this chapter.

Sec. 328.503. STATE'S SHARE. Before sending any money to a school district under this subchapter the comptroller shall deduct two percent of the amount of the taxes collected within the school district during the period for which a distribution is made as the state's charge for its services under this chapter and shall, subject to premiums payments under Section 328.501(c), credit the money deducted to the general revenue fund.

Sec. 328.504. AMOUNTS RETAINED IN TRUST ACCOUNT. (a) The comptroller may retain in the suspense account of a school district a portion of the school district's share of the tax collected for the school district under this chapter, not to exceed five percent of the amount remitted to the school district. If the school district has abolished the tax, the amount that may be retained may not exceed five percent of the final remittance to the school district at the time of the termination of the collection of the tax.

(b) From the amounts retained in a school district's suspense account, the comptroller may make refunds for overpayments to the account and to redeem dishonored checks and drafts deposited to the credit of the account.

(c) Before the expiration of one year after the effective date of the abolition of a school district's tax under this chapter the comptroller shall send to the school district the remainder of the money in the school district's account and shall close the account.

Sec. 328.505. INTEREST ON TRUST ACCOUNT. Interest earned on all deposits made with the comptroller under Section 328.501, including interest earned from retained suspense accounts, shall be credited to the general revenue fund.

Sec. 328.506. USE OF TAX REVENUE BY SCHOOL DISTRICT. Except as provided by Section 328.507, the money received by a school district under this chapter is for the use and benefit of the school district and must be used exclusively for school enrichment facilities and activities and the service and repayment of debt incurred to fund school enrichment facilities and activities. For the avoidance of doubt, "school enrichment" for this purpose is understood to exclude all school-related expenditures and investments that are (i) properly classified as being appropriate and essential to the "general diffusion of knowledge" within the meaning of the Texas constitution and (2) eligible in principle for funding through the Texas Foundation School program.

Sec. 328.508. PLEDGE OF TAX REVENUE. (a) A school district may call and hold an election on the issue of authorizing the school district to pledge a percentage of the value added tax revenue received under Section 328.101 to the payment of obligations issued to pay all or part of the costs of one or more projects located in the school district.

(b) The ballot at the election under this section must be printed to permit voting for or against the proposition: "Authorizing the ________ School District (insert name of school district) to pledge not more than ______ percent (insert percentage not to exceed 25 percent) of the revenue received from the _________ (insert school district value added tax) previously adopted in the district to the payment of obligations issued to pay all or part of the costs of _________ (insert description of each project)."

(c) If a majority of the voters vote in favor of the proposition, the school district may:

(1, eff. June 11, 2001) issue bonds, notes, or other obligations that are payable from the pledged revenues to pay for all or part of the costs of the school-related enrichment project or projects described in the proposition (which may include, without limitation, sports, music, language, culture, technical, vocational, and similar projects); and

(2) set aside the portion of the revenue approved at the election that the school district actually receives and pledge that revenue as security for the payment of the bonds, notes, or other obligations.

(d) If the school district pledges revenue under Subsection (c), the pledge and security interest shall continue while the bonds, notes, or obligations, including refunding obligations, are outstanding and unpaid.

(e) The school district may direct the comptroller to deposit the pledged revenue to a trust or account as may be required to obtain the financing and to protect the related security interest.

(f) Sections 328.506 and 328.507 do not apply to taxes pledged under this section.

Sec. 328.510. REALLOCATION OF SCHOOL DISTRICT OR LOCAL GOVERNMENTAL ENTITY TAX REVENUE. (a) In this section, "local governmental entity" includes any governmental entity created by the legislature that has a limited purpose or function, that has a defined or restricted geographic territory, and that is authorized by law to impose a local value added tax the imposition, computation, administration, enforcement, and collection of which is governed by this chapter.

(b) This section applies only if:

(1) the comptroller:

(A) reallocates local tax revenue from a school district or local governmental entity to another school district or local governmental entity; or

(B) refunds local tax revenue that was previously allocated to a school district or local governmental entity; and

(2) the amount the comptroller reallocates or refunds is at least equal to the lesser of:

(A) $200,000;

(B) an amount equal to 10 percent of the revenue received by the school district or local governmental entity under this chapter during the calendar year preceding the calendar year in which the reallocation or refund is made; or

(C) an amount that increases or decreases the amount of revenue the school district or local governmental entity receives under this chapter during a calendar month by more than 15 percent as compared to revenue received by the school district or local governmental entity during the same month in any previous year.

(c) Subject to the criteria provided by this section, a school district or local governmental entity may request a review of all available value added tax returns and reports in the comptroller's possession filed by not more than five individual taxpayers doing business in the school district or local governmental entity that are included and identified by the school district or local governmental entity from the information received from the comptroller under Section 328.3022 and that relate to a reallocation or refund in an amount described by Subsection (b).

(d) The comptroller shall provide the returns and reports requested under Subsection (c) for review regardless of whether the information in the returns or reports is confidential under state law.

(e) The provision of confidential information to a school district or local governmental entity under this section does not affect the confidential nature of the information in the returns or reports. A school district or local governmental entity shall use the information only in a manner that maintains the confidential nature of the information and may not disclose or release the information to the public.

(f) A school district or local governmental entity must submit the request under Subsection (c) not later than the 90th day after the date the school district or local governmental entity discovers a reallocation or refund described by Subsection (b).

(g) Not earlier than the 30th day or later than the 90th day after the date the comptroller receives a request under Subsection (c), the comptroller shall provide the requested returns and reports to the requesting school district or local governmental entity for review.

(h) The comptroller may set and collect from a school district or local governmental entity a reasonable fee to cover the expense of compiling and providing information under this section.

[END OF ARTICLE 4, SECTION 4.01]

SECTION 4.02. (A) Subject to Section 4.03 of this Article 4, and effective on and after September 1, 2013 (as used in this Article, the "Effective Date"), HEALTH AND SAFETY CODE, TITLE 9, SAFETY, SUBTITLE B, EMERGENCIES, CHAPTER 775, EMERGENCY SERVICES DISTRICTS, is amended by replacing "sales and use" with "value added" in each place where the term appears in Sections 775.0241 and 775.032, and by revising Sections 775.0751 - 775.0753 as follows:

Sec. 775.0751. SALES AND USE VALUE ADDED TAX. (a) A district may adopt a sales and use value added tax, change the rate of its sales and use value added tax, or abolish its sales and use value added tax at an election held as provided by Section 775.0752. The district may impose the tax at a rate from one-eighth of one percent to one two percent in increments of one-eighth of one percent. Revenue from the tax may be used for any purpose in for which ad valorem tax revenue of the district may lawfully engage be used.

(b) Chapter 323, Tax Code, applies to the application, collection, and administration of the tax imposed under this section. The comptroller may make rules for the collection and administration of this tax in the same manner as for a tax imposed under Chapter 323, Tax Code. Where a county and a hospital district both impose a sales and use value added tax, the comptroller may by rule provide for proportionate allocation of sales and use value added tax collections between a county and a hospital district on the basis of the period of time each tax is imposed and the relative tax rates.

(c) Except as provided by Subsection (c-1), 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 value added taxes imposed by the district and other political subdivisions of this state having territory in the district would exceed two percent three percent at any location in the district.

(c-1) A district that otherwise would be precluded from adopting a sales and use value added tax under Subsection (c) may adopt a sales and use value added tax, change the rate of its sales and use value added tax, or abolish its sales and use value added tax at an election held as provided by Section 775.0752, if the board:

(1) excludes from the election and the applicability of any proposed sales and use value added tax any territory in the district where the sales and use value added tax is then at two percent three percent; and

(2) not later than the 30th day after the date on which the board issues the election order, gives, for informational purposes, written or oral notice on the proposed imposition, increase, or abolition of the sales and use value added tax, including the reasons for the proposed change, to the commissioners court of each county in which the district is located.

(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 value added tax or approves the increase in the rate of its sales and use value added tax and as a result the combined rate of all sales and use value added taxes imposed by the district and other political subdivisions of this state having territory in the portion of the district in which the district sales and use value added tax will apply would exceed two percent three percent at any location in that portion of the district, the election to adopt a sales and use value added tax or to increase the rate of the sales and use value added tax in the district under this subchapter has no effect.

(e) to (h) Expired.

Sec. 775.0752. SALES AND USE VALUE ADDED TAX ELECTION PROCEDURES. (a) Except as otherwise provided by this subchapter, an election to adopt or abolish a district's sales and use value added tax or to change the rate of the tax is governed by the provisions of Subchapter E, Chapter 323, Tax Code, applicable to an election to adopt or abolish a county sales and use value added tax.

(b) An election is called by the adoption of a resolution by the board. The board shall call an election if a number of qualified voters of the district equal to at least five percent of the number of registered voters in the district petitions the board to call the election.

(c) At an election to adopt the tax, the ballot shall be prepared to permit voting for or against the proposition: "The adoption of a local sales and use value added tax in (name of district) at the rate of (proposed tax rate) percent."

(d) At an election to abolish the tax, the ballot shall be prepared to permit voting for or against the proposition: "The abolition of the local sales and use value added tax in (name of district)."

(e) At an election to change the rate of the tax, the ballot shall be prepared to permit voting for or against the proposition: "The (increase or decrease, as applicable) in the rate of the local sales and use value added tax imposed by (name of district) from (tax rate on election date) percent to (proposed tax rate) percent." Added by Acts 1989, 71st Leg., 1st C.S., ch. 40, Sec. 3, eff. Sept. 1, 1989.

Sec. 775.0753. SALES AND USE VALUE ADDED TAX EFFECTIVE DATE; BOUNDARY CHANGE. (a) The adoption or abolition of the tax or change in the tax rate takes effect on the first day of the first calendar quarter occurring after the expiration of the first complete calendar quarter occurring after the date on which the comptroller receives a notice of the results of the election.

(b) If the comptroller determines that an effective date provided by Subsection (a) will occur before the comptroller can reasonably take the action required to begin collecting the tax or to implement the abolition of the tax or the tax rate change, the effective date may be extended by the comptroller until the first day of the next succeeding calendar quarter.

(c) The provisions of Section 321.102, Tax Code, governing the application of a municipal sales and use value added tax in the event of a change in the boundaries of a municipality apply to the application of a tax imposed under this chapter in the event of a change in the district's boundaries.

[END OF SECTION 4.02(A)]

(B) Subject to Section 4.03 of this Article 4, and effective on and after September 1, 2013 (as used in this Article, the "Effective Date"), HEALTH AND SAFETY CODE, TITLE 4, HEALTH FACILITIES, SUBTITLE D, HOSPITAL DISTRICTS, CHAPTER 285, SPECIAL PROVISIONS RELATING TO HOSPITAL DISTRICTS, is amended by replacing "sales and use" with "value added" in each place where the term appears in that chapter.

SECTION 4.03.

(A) Subject to the provisions of Section 4.03(B) of this Article, the revisions to various chapters and sections referenced in this Article 4 shall be prospective in application only and without prejudice to any rights and obligations of taxpayers, or the amounts owed to and the authorities of the comptroller or of this state, accruing or arising with respect to periods prior to the Effective Date, including but not limited to refunds, adjustments and similar items that would otherwise have been payable by or on behalf of any authority of the state or any political subdivision thereof on or after the Effective Date.

(B) Notwithstanding the foregoing, but without prejudice to any other applicable limitation of actions, expiration or "sunset" provision, no judicial or administrative enforcement action shall be commenced by any authority of this state or any of its political subdivisions on or after the fifth anniversary of the Effective Date under the provisions of these chapters and sections as they were in effect prior to the Effective Date.

ARTICLE 5.

PROPERTY TAXES

SECTION 5.01. Subject to Section 5.04 of this Article, and effective on and after September 1, 2013 (as used in this Article, the "Effective Date"), the LOCAL GOVERNMENT CODE and the TAX CODE are amended as set forth in this Article.

SECTION 5.02. LOCAL GOVERNMENT CODE, TITLE 4, FINANCES, SUBTITLE C, FINANCIAL PROVISIONS APPLYING TO MORE THAN ONE TYPE OF LOCAL GOVERNMENT, is amended by adding Section 140.008 to read as follows:

Sec. 140.008. RESTRICTION OF AD VALOREM PROPERTY TAXES.

(a) Except as and to the extent authorized by any self-executing provision of the Texas Constitution or by Chapter 302, Tax Code, and regulations promulgated by the comptroller in conformity therewith, and notwithstanding any other provision of law, neither this state nor any political subdivision of this state, nor any of its or their authorities, may impose, levy, assess, collect or otherwise administer ad valorem taxes on the ownership of property, wherever located or by whomever owned.

(b) This section does not bar the taxation of transactions involving the supply of property as provided in Chapter 220, Tax Code, whether the taxable value is measured by the value of the property supplied or payments or exchanges determined by reference to such value.

(c) Without limiting the foregoing, this section prevails over a provision of a municipal charter to the extent of a conflict.

SECTION 5.02. TAX CODE, TITLE 1, PROPERTY TAX CODE, SUBTITLE A, GENERAL PROVISIONS, is amended to revise Section 1.02, APPLICABILITY OF TITLE, as follows:

Sec. 1.02. APPLICABILITY OF TITLE. This title applies to a taxing unit that is created by or pursuant to any general, special, or local law enacted before or after the enactment of this title unless a law enacted after enactment of this title by or pursuant to which the taxing unit is created expressly provides that this title does not apply. This title supersedes any provision of a municipal charter or ordinance relating to property taxation. Nothing in this title invalidates or restricts the right of voters to utilize municipal-level initiative and referendum to set a tax rate, level of spending, or limitation on tax increase for that municipality.

SECTION 5.03. TAX CODE, TITLE 3, LOCAL TAXATION, is amended by revising SUBTITLE A, GENERAL TAXING AUTHORITY AND PROVISIONS, as follows:

CHAPTER 302. TAXATION POWERS OF MUNICIPALITIES

SUBCHAPTER A. PROPERTY TAXES

Sec. 302.001. EXEMPTED LOCAL TAXING UNITS PROPERTY TAXES AUTHORIZED; PURPOSES. (a) A local taxing unit shall be authorized to levy ad valorem property taxes only with respect to those fiscal periods as to which the comptroller has certified such unit for this purpose as an exempted local taxing unit, and then only to the extent of the projected shortfall specified for that period in such certification.

(b) During fiscal periods ending on or before August 31, 2017, a A Type A general-law municipality exempted hereunder may levy property taxes only for the purpose of funding for current expenses, for the construction or purchase of public buildings, water works, sewers, and other permanent improvements in the municipality, including municipal schools and school sites, and for the construction and improvement of municipal roads, streets, and bridges in the municipality.

(c b) During fiscal periods ending on or before August 31, 2017, a A Type B general-law municipality exempted hereunder may levy property taxes at an annual rate not to exceed 25 cents for each $100 of property valuation.

Sec. 302.002. CERTIFICATION BY COMPTROLLER. (a) Upon application by a local taxing unit, the comptroller shall certify such unit as an "exempted local taxing unit" for purposes of this subchapter if, in the comptroller's determination:

(i) the revenues that could reasonably be expected to be realized by that unit for the fiscal period in question through collections under the authority of Tax Code Chapter 220 will be materially insufficient to replace the revenues to be lost by application of Texas Tax Reform Act of 2013, and

(ii) no other source or potential source of revenues reasonably available to the local taxing unit will be sufficient to alleviate the projected shortfall. Such certifications shall specify the shortfall projected for the fiscal period(s) in question, and any actual collections in excess of 115% of such certified amounts shall be refunded by the local taxing unit to property owners in proportion to their respective shares of taxes actually collected for that period.

(b) The comptroller shall review such determinations annually and, after notice to and reasonable opportunity to be heard by the local taxing unit(s) in question, discontinue such certifications upon determining that the unit no longer qualifies for such certification. However, no such exemption shall extend in effect beyond three years from the date of issuance, and no exemption may be issued for any local taxing unit with respect to fiscal periods beginning on or after September 1, 2017 except by pursuant to an act of the legislature specifying by individual unit, or by class of units, the fiscal periods affected and the limits, if any, on rates or levies to be authorized during such periods.

(c) The comptroller shall report to the legislature biannually on the applications for and certifications issued under this subchapter, as well as on any local taxing units determined to enjoy direct authorization by the Texas Constitution to levy ad valorem property taxes in spite of any contrary act by the legislature. Such reports shall include recommendations for legislative or policy changes to facilitate the discontinuation of ad valorem property taxation by the local taxing units affected at the earliest practicable opportunity, including recommendations for consolidation of financing for local taxing units in certain cases (such as between counties and the special districts situated therein, for example), as well as recommendations for such amendments to the Texas Constitution as may be necessary or appropriate for this purpose.

Sec. 302.003. TRANSITION OF LOCAL TAXING UNITS. To the extent that the Texas Constitution authorizes the levying of ad valorem property taxes by a local taxing unit without regard to any contrary act of the legislature, and to the extent that the comptroller certifies as exempt any local taxing units, the comptroller shall implement a program of communication and coordination to encourage the transition of such units away from reliance on ad valorem property taxes in favor of the taxes authorized in Tax Code, Chapter 220, or other sources or potential sources of revenues available or that could through, appropriate legislation or regulation, be made available to such units. Such coordination shall, where appropriate, include consideration of changes in defined boundaries, funding sources or other organizational changes at the level of such units. The status and prospects for such transitions and communications shall be addressed in the comptroller's biannual reports.

Sec. 302.004. WIND-DOWN OF APPRAISAL DISTRICT OPERATIONS. The comptroller shall supervise and assist with the reduction in size and scope of appraisal district operations in those jurisdictions where ad valorem property taxation is being reduced. In those counties where no local taxing unit continues to levy ad valorem property taxes, the appraisal district, assessment and collection operations shall be wound down and closed in an expeditious but orderly fashion, subject to such limited retention of facilities and capabilities as shall remain necessary for management of pending or potential proceedings arising out of assessments and/or collections with respect to previous periods.

Section 302.005. RETENTION OF RECORDS. The comptroller shall make suitable arrangement for archiving and maintaining records of appraisal offices closed in accordance with this subchapter.

Section 302.006. REGULATIONS. The comptroller shall issue regulations not inconsistent with the provisions of this subchapter prescribing such rules, forms and procedures as shall be necessary and appropriate to implement its provisions and policy.

Sec. 302.00 2. OTHER TAXES NOT CONSIDERED: CERTAIN HOME-RULE MUNICIPALITIES. In determining the power of certain home-rule municipalities to levy taxes, the taxes levied by a county, a political subdivision of a county, or a district under Article III, Section 52, of the Texas Constitution are not considered.

(b) This section prevails over a provision of a municipal charter to the extent of a conflict.

(c) This section applies only to a municipality that attempted to amend its charter before June 30, 1939, and at the time of the election to amend the charter did not own a water system, sanitary sewer system, electric light system, or natural gas system from which it could derive revenue.

SECTION 302.007. DEFINITIONS. As used in this subchapter:

(a) "Local taxing unit" means any county, municipality, school district, special district or authority (including a junior college district, a hospital district, a district created by or pursuant to the Water Code, a mosquito control district, a fire prevention district, a crime control district, a noxious weed control district) or any other political unit of this state, whether created by or pursuant to the constitution or a local, special, or general law, that is authorized to impose and is imposing ad valorem property taxes even if the governing body of another political unit determines the tax rate for the unit or otherwise governs its affairs.

(b) "Municipality" means any incorporated city, town or village, including but not limited to a home-rule city.

SECTION 5.04.

(A) Subject to the provisions of Section 5.04(B) of this Article, the revisions to various chapters and sections referenced in this Article shall be prospective in application only and without prejudice to any rights and obligations of taxpayers, or the amounts owed to and the authorities of the comptroller or of this state, accruing or arising with respect to periods prior to the Effective Date, including but not limited to refunds, adjustments and similar items that would otherwise have been payable by or on behalf of any authority of the state or any political subdivision thereof on or after the Effective Date.

(B) Notwithstanding the foregoing, but without prejudice to any other applicable limitation of actions, expiration or "sunset" provision, no judicial or administrative enforcement action shall be commenced by any authority of this state or any of its political subdivisions on or after the fifth anniversary of the Effective Date under the provisions of these chapters and sections as they were in effect prior to the Effective Date.

ARTICLE 6

SCHOOL FINANCE REFORM

SECTION 6.01. Subject to Section 6.08 of this Article, and effective on and after September 1, 2013 (as used in this Article, the "Effective Date"), the EDUCATION CODE is amended as set forth in this Article.

SECTION 6.02. EDUCATION CODE, TITLE 2, PUBLIC EDUCATION, SUBTITLE I, SCHOOL FINANCE AND FISCAL MANAGEMENT, CHAPTER 41, EQUALIZED WEALTH LEVELS, is repealed in its entirety.

SECTION 6.03. EDUCATION CODE, TITLE 2, PUBLIC EDUCATION, SUBTITLE I, SCHOOL FINANCE AND FISCAL MANAGEMENT, CHAPTER 42, FOUNDATION SCHOOL PROGRAM, Sec. 42.001, STATE POLICY, is amended by adding a new paragraph (c) to Section 42.001 as follows:

(c) The state shall discharge its responsibility through the appropriation and/or dedication of state revenues sufficient to supply each school district out of state resources with funding necessary to meet the standards established under this title on an equitable basis that, at minimum, satisfies the Texas Constitution's requirements for a general diffusion of knowledge, while at the same time allowing school districts to select and fund out of locally available resources those additional enrichment opportunities deemed appropriate by the boards of such districts and their constituent voters.

SECTION 6.04. EDUCATION CODE, TITLE 2, PUBLIC EDUCATION, SUBTITLE I, SCHOOL FINANCE AND FISCAL MANAGEMENT, CHAPTER 42, FOUNDATION SCHOOL PROGRAM, Sec. 42.002, PURPOSES OF FOUNDATION SCHOOL PROGRAM, is amended by revising paragraph (b) thereof as follows:

(b) The Foundation School Program consists of:

(1) two tiers of funding from state revenues that in combination provide for:

(A) sufficient financing for all school districts to provide a basic program of education meeting constitutional standards that is rated acceptable or higher under Section 39.054 and meets other applicable legal standards, including but not limited to provision for instructional facilities such as real property, improvements to real property, and necessary fixtures of an improvement to real property that is used predominantly for teaching the curriculum required under Section 28.002; and

(B) the minimum financing required to lay the foundation for all school districts to pursue to facilitate a locally funded enrichment program.; and

(2) a facilities component as provided by Chapter 46. The second tier of such funding is not intended to sustain even a modest enrichment program by modern community standards; rather it is intended to serve in effect as "seed" funding to overcome the introductory barriers that would be faced by most districts in seeking to initiate and develop a modest enrichment program.

SECTION 6.05. EDUCATION CODE, TITLE 2, PUBLIC EDUCATION, SUBTITLE I, SCHOOL FINANCE AND FISCAL MANAGEMENT, CHAPTER 42, FOUNDATION SCHOOL PROGRAM, is further amended as set forth below:

(A) Section 42.101, BASIC ALLOTMENT, paragraph (a), is revised as set forth below:

Text of subsection effective on September 01, 2015

(a) For each student in average daily attendance, not including the time students spend each day in special education programs in an instructional arrangement other than mainstream or career and technology education programs, for which an additional allotment is made under Subchapter C, a district is entitled to an allotment equal to the lesser of $4,765 or the amount that results from the following formula:

A = $4,765 X (DCR/MCR)

where:

"A" is the allotment to which a district is entitled;

"DCR" is the district's compressed tax rate, which is the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year; and

"MCR" is the state maximum compressed tax rate, which is the product of the state compression percentage, as determined under Section 42.2516, multiplied by $1.50. Text of section effective until September 01, 2015

Sec. 42.101. BASIC AND REGULAR PROGRAM ALLOTMENTS. (a) The basic allotment is an amount equal to the lesser of $4,765 or the amount that results from the following formula: A = $4,765 X (DCR/MCR) where:

"A" is the resulting amount for a district;

"DCR" is the district's compressed tax rate, which is the product of the state compression percentage, as determined under Section 42.2516, multiplied by the maintenance and operations tax rate adopted by the district for the 2005 tax year; and

"MCR" is the state maximum compressed tax rate, which is the product of the state compression percentage, as determined under Section 42.2516, multiplied by $1.50.

(a-1) Repealed by Acts 2011, 82nd Leg., 1st C.S., Ch. 4, Sec. 57.31, effective September 28, 2011

(a-2) Repealed by Acts 2011, 82nd Leg., 1st C.S., Ch. 4, Sec. 57.31, effective September 28, 2011

(b) A greater amount for any school year for the basic allotment under Subsection (a) may be provided by appropriation.

(c) A school district is entitled to a regular program allotment equal to the amount that results from the following formula:

RPA = ADA X AA X RPAF

where:

"RPA" is the regular program allotment to which the district is entitled;

"ADA" is the number of students in average daily attendance in a district, not including the time students spend each day in special education programs in an instructional arrangement other than mainstream or career and technology education programs, for which an additional allotment is made under Subchapter C;

"AA" is the district's adjusted basic allotment, as determined under Section 42.102 and, if applicable, as further adjusted under Section 42.103; and

"RPAF" is the regular program adjustment factor.

(c-1) Except as provided by Subsection (c-2), the regular program adjustment factor ("RPAF") is 0.9239 for the 2011-2012 school year and 0.98 for the 2012-2013 school year.

(c-2) For a school district that does not receive funding under Section 42.2516 for the 2011-2012 school year, the commissioner may set the regular program adjustment factor ("RPAF") at 0.95195 for the 2011-2012 and 2012-2013 school years if the district demonstrates that funding reductions as a result of adjustments to the regular program allotment made by S.B. No. 1, Acts of the 82nd Legislature, 1st Called Session, 2011, will result in a hardship to the district in the 2011-2012 school year. Notwithstanding any other provision of this subsection, the commissioner shall adjust the regular program adjustment factor ("RPAF") for the 2012-2013 school year for a school district whose regular program adjustment factor is set in accordance with this subsection to ensure that the total amount of state and local revenue in the combined 2011-2012 and 2012-2013 school years does not differ from the amount the district would have received if the district's regular program adjustment factor had not been set in accordance with this subsection. A determination by the commissioner under this subsection is final and may not be appealed.

(c-3) The regular program adjustment factor ("RPAF") is 0.98 for the 2013-2014 and 2014-2015 school years or a greater amount established by appropriation, not to exceed 1.0. This subsection and Subsections (c), (c-1), and (c-2) expire September 1, 2015.

(B) Section 42.151, SPECIAL EDUCATION, paragraph (k), is amended by revising "$10 million" to "$XXX million,"

(C) Section 42.152, COMPENSATORY EDUCATION ADJUSTMENT, paragraph (s) is amended by revising "$650" to "$XXXX," and paragraph (s-2) is amended by revision "$9.9 million" to "$XXX million".

(D) Section 42.154, CAREER AND TECHNOLOGY EDUCATION ALLOTMENT, paragraph (a) is amended by revising "$50" to "$XXXX," and paragraph (s-2) is amended by revising "$9.9 million" to "$XXX million".

(E) Section 42.156, GIFTED AND TALENTED STUDENT ALLOTMENT, paragraph (f) is amended by revising "$500,000" to "$XXXX million."

(F) Section 42.158, NEW INSTRUCTIONAL FACILITY ALLOTMENT, is amended by revising "$250" to "$XXXX" in each place where it appears, "$25 million" to "$XXX million" where it appears in paragraph (d), and "$1 million" to "$XXX million" where it appears in paragraph (d-1).

(G) Section 42.251, FINANCING; GENERAL RULE, paragraph (b) is amended to read as set forth below:

(b) The program shall be financed by:

(1) ad valorem tax revenue generated by an equalized uniform school district effort;

(2) ad valorem tax revenue generated by local school district effort in excess of the equalized uniform school district effort;

(13) state available school funds distributed in accordance with law; and

(24) state funds appropriated for the purposes of public school education and allocated to each district in an amount sufficient to finance the cost of each district's Foundation School Program not covered by other funds specified in this subsection.

(H) Section 42.2513, ADDITIONAL STATE AID FOR STAFF SALARY INCREASES, paragraph (a), is amended by revising "$250" and $500" to "$XXXX" and "$XXXX", respectively, in each of the places where they appear.

(I) Section 42.2516, ADDITIONAL STATE AID FOR TAX REDUCTION, is repealed in its entirety.

(J) Section 42.252, LOCAL SHARE OF PROGRAM COST (TIER ONE), is repealed in its entirety.

(K) Sections 42.2521, 42.2522, and 45.2523 are repealed in their entirety.

(L) Section 42.2531, ADJUSTMENT BY COMMISSIONER, amended by repealing paragraphs (b) and (c) thereof in their entirety.

(M) Section 42.254, ESTIMATES REQUIRED, is revised to read as set forth below:

Sec. 42.254. ESTIMATES REQUIRED. (a) Not later than October 1 of each even-numbered year:

(1) the agency shall submit to the legislature an estimate of the tax rate and student enrollment of each school district for the following biennium; and

(2) the comptroller shall submit to the legislature an estimate of the total dedicated and undedicated state value added tax revenues projected taxable value of all property in the state as determined under Subchapter M, Chapter 403, Government Code, for the following biennium.

(b) The agency and the comptroller shall update the information provided to the legislature under Subsection (a) not later than March 1 of each odd-numbered year.

(N) Section 42.257, EFFECT OF APPRAISAL APPEAL, is repealed in its entirety.

(O) Section 42.259, FOUNDATION SCHOOL FUND TRANSFERS, is revised as set forth below:

Sec. 42.259. FOUNDATION SCHOOL FUND TRANSFERS. (a) In this section:

(1) "Category 1 school district" means a school district having a wealth per student of less than one-half of the statewide average wealth per student.

(2) "Category 2 school district" means a school district having a wealth per student of at least one-half of the statewide average wealth per student but not more than the statewide average wealth per student.

(3) "Category 3 school district" means a school district having a wealth per student of more than the statewide average wealth per student.

(4) "Wealth per student" means the taxable property values reported by the comptroller to the commissioner under Section 42.252 divided by the number of students in average daily attendance.

(b) Payments from the foundation school fund to each category 1 school district shall be made as follows:

(1) 15 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of September of a fiscal year;

(2) 80 percent of the yearly entitlement of the district shall be paid in eight equal installments to be made on or before the 25th day of October, November, December, January, March, May, June, and July; and

(3) five percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of February.

(c) Payments from the foundation school fund to each category 2 school district shall be made as follows:

(1) 22 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of September of a fiscal year;

(2) 18 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of October;

(3) 9.5 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of November;

(4) 7.5 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of April;

(5) five percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of May;

(6) 10 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of June;

(7) 13 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of July; and

(8) 15 percent of the yearly entitlement of the district shall be paid in an installment to be made after the 5th day of September and not later than the 10th day of September of the calendar year following the calendar year of the payment made under Subdivision (1).

(d) Payments from the foundation school fund to each category 3 school district shall be made as follows:

(1) 45 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of September of a fiscal year;

(2) 35 percent of the yearly entitlement of the district shall be paid in an installment to be made on or before the 25th day of October; and

(3) 20 percent of the yearly entitlement of the district shall be paid in an installment to be made after the 5th day of September and not later than the 10th day of September of the calendar year following the calendar year of the payment made under Subdivision (1).

(b e) The amount of any installment required by this section may be modified to provide a school district with the proper amount to which the district may be entitled by law and to correct errors in the allocation or distribution of funds. If an installment under this section is required to be equal to other installments, the amount of other installments may be adjusted to provide for that equality. A payment under this section is not invalid because it is not equal to other installments.

(cf) Except as provided by Subsection (ac)(8) or (d)(3), any previously unpaid additional funds from prior fiscal years owed to a district shall be paid to the district together with the September payment of the current fiscal year entitlement.

(dg) The commissioner shall make all annual Foundation School Program payments under this section for purposes described by Sections 45.252(a)(1) and (2) before the deadline established under Section 45.263(b) for payment of debt service on bonds. Notwithstanding any other provision of this section, the commissioner may make Foundation School Program payments under this section after the deadline established under Section 45.263(b) only if the commissioner has not received notice under Section 45.258 concerning a district's failure or inability to pay matured principal or interest on bonds.

(P) Section 42.260, USE OF CERTAIN FUNDS, is repealed in its entirety.

(Q) Section 42.261, CERTAIN FUNDS APPROPRIATED FOR PURPOSE OF TAX REDUCTION, is repealed in its entirety.

(R) CHAPTER 42, SUBCHAPTER F, GUARANTEED YIELD PROGRAM, is repealed in its entirety.

SECTION 6.06. EDUCATION CODE, TITLE 2, PUBLIC EDUCATION, SUBTITLE I, SCHOOL FINANCE AND FISCAL MANAGEMENT, CHAPTER 44, FISCAL MANAGEMENT, is amended by adding new Sections 44.012 and 44.013 as set forth below:

Sec. 44.012. TRANSITION TO VALUE ADDED TAX FUNDING. (a) The commissioner shall supervise and assist the governing boards of independent school districts and rural high school districts and county commissioners courts, with respect to each common school district under their respective jurisdictions, in effectuating an orderly transition to the substitution of expanded Foundation School Program funding and supplemental local value added tax revenues for ad valorem property tax revenues in the districts' budgeting, funding and debt servicing.

(b) Not later than 180 days following the enactment of the Texas Tax Reform Act of 2013, each district, in coordination with the commissioner and the comptroller, shall prepare and submit to the commissioner, a report (the "Transition Report") estimating the budgets, sources of funds, debt service, operating and capital expenditures, and public bond offerings anticipated over the forthcoming one-, five- and ten- fiscal year periods. Estimates and financial statements contained in this report shall meet the standards of this subtitle for other statements, budgets, plans and reports presenting similar data. Such reports shall have been certified by the comptroller for confidence as to the projections of funds that could reasonably be expected to be received by the district through the expanded Foundation School Program set forth in Chapter 42, the local value added tax revenues to be realized under the school district enrichment value added tax authorized under TAX CODE, TITLE 3, LOCAL TAXATION, SUBTITLE C, LOCAL VALUE ADDED TAXES, CHAPTER 328, SCHOOL DISTRICT ENRICHMENT, and the funds from ad valorem property taxes to be lost by application of the Texas Tax Reform Act of 2013. This report shall classify each item of projected operating and capital expenditures as either basic educatiand foundational ("basic") or enrichment ("enrichment") in and foundational ("basic") or enrichment ("enrichment") in conformity to the standards set forth in Title 2, Chapter 42, Sections 42.001 and 42.002, and shall similarly classify all current and projected debts and debt service requirements in proportion to the uses to which the proceeds of such debt offerings have been, are being, and are projected to be put.

(c) The commissioner, in coordination and consultation with the comptroller and each district, shall prepare and present to the comptroller recommendations for refunding, redeeming or amending outstanding bonds to the payment of which the district has pledged ad valorem property taxes.

(1) To the extent that such bonds have been classified as "enrichment" bonds, such refundings, redemptions or amendments, and all future issuances of such bonds, shall be the responsibility of the district, and the requirements of Chapter 45 for approval by the attorney general may be met by reference to anticipated local value added tax revenues in lieu of property valuations and ad valorem tax levies.

(2) To the extent that such bonds have been classified as "basic" bonds, then such refundings, redemptions or amendments, and all future issuances of such bonds, shall be the responsibility of the state, and shall be addressed through such mechanisms and formulae as shall be available under the Foundation School Program under Chapter 42.

(c) The commissioner shall report to the comptroller and to the legislature annually on the status of and prospects for this transition. Such reports shall include recommendations for legislative or policy changes to facilitate the required financial changes while maintaining and improving upon the efficiency, quality and results of public school education.

Sec. 44.013. RESTORATION OF LOCAL CONTROL AND COMMUNITY ENGAGEMENT IN DISTRICTS. (a) It is the policy of this state to promote community engagement in and control of district affairs at the smallest geographic and demographic levels practicable. With the financial relief to be provided districts under the Texas Tax Reform Act of 2013 (the "Act"), district boundaries need no longer be established principally by reference to the extent of such districts' ad valorem property tax base.

(b) Commencing immediately upon enactment of the Act, the commissioner is directed to work with districts and the agency to develop recommendations to reorganize those school districts encompassing populations of more than 100,000 into districts of sufficient locality as to promote heightened familiarization of, and engagement by, parents and community leaders with district leaders, policies and practices. Accommodation should be made to preserve and promote charter or "magnet" schools that, by design, are intended to attract students and families from broadly dispersed geographic areas, but in all other cases district boundaries should be drawn on the basis of geographic proximity, shared community ties and interests, and transportation patterns and limitations for students and families. The commissioner shall report to the legislature no later than September 1, 2014 with recommendations and analysis.

(c) The commissioner shall issue regulations not inconsistent with the provisions of this section prescribing such rules, forms and procedures as shall be necessary and appropriate to implement its provisions and policy.

SECTION 6.07. EDUCATION CODE, TITLE 2, PUBLIC EDUCATION, SUBTITLE I, SCHOOL FINANCE AND FISCAL MANAGEMENT, CHAPTER 46, ASSISTANCE WITH INSTRUCTIONAL FACILITIES AND PAYMENT OF EXISTING DEBT, is repealed in its entirety.

SECTION 6.08.

(A) Subject to the provisions of Section 6.08(B) of this Article, the revisions to various chapters and sections referenced in this Article shall be prospective in application only and without prejudice to any rights and obligations of taxpayers, or the amounts owed to and the authorities of the comptroller or of this state, accruing or arising with respect to periods prior to the Effective Date, including but not limited to refunds, adjustments and similar items that would otherwise have been payable by or on behalf of any authority of the state or any political subdivision thereof on or after the Effective Date.

(B) Notwithstanding the foregoing, but without prejudice to any other applicable limitation of actions, expiration or "sunset" provision, no judicial or administrative enforcement action shall be commenced by any authority of this state or any of its political subdivisions on or after the fifth anniversary of the Effective Date under the provisions of these chapters and sections as they were in effect prior to the Effective Date.

ARTICLE 7

TITLE OF ACT

SECTION 7.01. This Act may be cited as the "Texas Tax Reform Act of 2013," and references herein to "this Act" are to be read accordingly.