BILL ANALYSIS

 

 

 

C.S.H.B. 3504

By: Martinez Fischer

Ways & Means

Committee Report (Substituted)

 

 

 

BACKGROUND AND PURPOSE

 

The bill author has informed the committee that the country is currently facing a shortage of skilled labor. According to Associated Builders and Contractors, the construction industry will need to attract nearly 454,000 new workers in 2025 to keep up with industry demand. The bill author has also informed the committee that the state's shortage of skilled workers, including plumbers, electricians, and HVAC technicians, has had tangible effects, such as slowing recovery efforts following Winter Storm Uri. Furthermore, the bill author has informed the committee that tools are a significant cost for workers seeking to start a career in skilled labor. C.S.H.B. 3504 seeks to address these issues by creating a new sales tax holiday for certain tools and equipment.

 

CRIMINAL JUSTICE IMPACT

 

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

 

RULEMAKING AUTHORITY

 

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

 

ANALYSIS

 

C.S.H.B. 3504 amends the Tax Code to create a sales tax holiday for qualified tools or equipment items sold during a period beginning at 12:01 a.m. on the Friday preceding the first Monday in September and ending at 11:59 p.m. on the first Monday in September. For this purpose, the bill defines "qualified tool or equipment item" as the following:

·       a power tool, a pair of work boots, an industry textbook or codebook, or a job box, toolbox, or tool organizer, the sales price of which is less than the greater of $225 or the applicable increased amount provided by the bill's provisions; or

·       a hand tool, a pair or set of safety glasses, protective coveralls, or a pair of work gloves, the sales price of which is less than the greater of $100 or the applicable increased amount provided by the bill's provisions.

 

C.S.H.B. 3504 establishes that, beginning January 1, 2027, on January 1 of each fifth year, the sales price amounts of $225 and $100 prescribed by the bill's provisions, respectively, are increased by an amount equal to the prescribed amount on December 31 of the preceding year multiplied by the cumulative percentage increase, if any, in the consumer price index during the preceding five-year period and rounded to the nearest five dollars. For this purpose, the bill defines "consumer price index" as the average over a state fiscal year of the Consumer Price Index for All Urban Consumers (CPI-U), U.S. City Average, published monthly by the U.S. Bureau of Labor statistics or its successor in function.

 

C.S.H.B. 3504 does not affect tax liability accruing before the bill's effective date. That liability continues in effect as if the bill had not been enacted, and the former law is continued in effect for the collection of taxes due and for civil and criminal enforcement of the liability for those taxes.

 

EFFECTIVE DATE

 

September 1, 2026.

 

COMPARISON OF INTRODUCED AND SUBSTITUTE

 

While C.S.H.B. 3504 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

 

Whereas the introduced created a sales tax holiday for skilled trade tool items sold during a certain period, the substitute creates a sales tax holiday for qualified tools or equipment items sold during a certain period. Accordingly, the substitute replaces the introduced version's definition of "skilled trade tool item" with a definition of "qualified tool or equipment item." The substitute also changes the period during which the applicable sales tax holiday takes place from a period beginning at 12:01 a.m. on the first Friday in September and ending at 11:59 p.m. on the following Monday, as in the introduced, to a period beginning at 12:01 a.m. on the Friday preceding the first Monday in September and ending at 11:59 p.m. on the first Monday in September.

 

While both the introduced and the substitute exempt the sale of certain items from the sales tax during the applicable sales tax holiday, the versions differ in the following ways:

·       the introduced exempted the sale of following items, whereas the substitute does not:

o   a toolbox for a vehicle, the sales price of which is less than $300;

o   a power tool battery, handheld pipe cutters, a drain opening tool, or plumbing inspection equipment, the sales price of which is less than $150;

o   a tool belt, electrical voltage testing equipment, or a shop light, the sales price of which is less than $100; and

o   a duffle or tote bag or an LED flashlight, the sales price of which is less than $50;

·       the substitute exempts the sale of a job box or tool organizer, the sales price of which is less than the greater of $225 or the applicable increased amount, whereas the introduced did not;

·       while both the introduced and the substitute exempt the sale of a toolbox, the substitute changes the applicable sales price from less than $75, as in the introduced, to less than the greater of $225 or the applicable increased amount;

·       while both the introduced and the substitute exempt the sale of a power tool, the substitute changes the applicable sales price from less than $300, as in the introduced, to less than the greater of $225 or the applicable increased amount;

·       while both the introduced and the substitute exempt the sale of a pair of work boots, the substitute changes the applicable sales price from less than $175, as in the introduced, to less than the greater of $225 or the applicable increased amount;

·       while both the introduced and the substitute exempt the sale of an industry textbook or codebook, the substitute changes the applicable sales price from less than $125, as in the introduced, to less than the greater of $225 or the applicable increased amount;

·       while both the introduced and the substitute exempt the sale of a hand tool, a pair or set of safety glasses, and protective coveralls, the substitute changes the applicable sales price from less than $50, as in the introduced, to less than the greater of $100 or the applicable increased amount; and

·       while both the introduced and the substitute exempt the sale of a pair of work gloves, the substitute changes the applicable sales price from less than $25, as in the introduced, to less than the greater of $100 or the applicable increased amount.

The substitute includes a provision absent from the introduced establishing that, beginning January 1, 2027, on January 1 of each fifth year, the sales price amounts of $225 and $100 prescribed by the substitute's provisions, respectively, are increased by an amount equal to the prescribed amount on December 31 of the preceding year multiplied by the cumulative percentage increase, if any, in the consumer price index during the preceding five-year period and rounded to the nearest five dollars. Accordingly, the substitute defines "consumer price index," whereas the introduced did not.

 

The substitute changes the bill's effective date from on passage, or, if the bill does not receive the necessary vote, September 1, 2025, as in the introduced, to September 1, 2026.