Honorable Morgan Meyer, Chair, House Committee on Ways & Means
FROM:
Jerry McGinty, Director, Legislative Budget Board
IN RE:
HB3504 by Martinez Fischer (Relating to an exemption from sales and use taxes for tools and equipment of skilled trade workers for a limited period.), As Introduced
Estimated Two-year Net Impact to General Revenue Related Funds for HB3504, As Introduced: a negative impact of ($37,040,000) through the biennium ending August 31, 2027.
Additionally, the bill will have a direct impact of a revenue loss to the Tax Reduction and Excellence in Education Fund of ($1,338,000) for the 2026-27 biennium. Any loss to the Tax Reduction and Excellence in Education must be made up with an equal amount of General Revenue to fund the Foundation School Program.
General Revenue-Related Funds, Five- Year Impact:
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026
($18,100,000)
2027
($18,940,000)
2028
($19,820,000)
2029
($20,740,000)
2030
($21,680,000)
All Funds, Five-Year Impact:
Fiscal Year
Probable Revenue (Loss) from General Revenue Fund 1
Probable Revenue (Loss) from Tax Reduc. & Excell. Edu. Fund 305
Probable Revenue (Loss) from Cities
Probable Revenue (Loss) from Transit Authorities
2026
($18,100,000)
($652,000)
($3,430,000)
($1,140,000)
2027
($18,940,000)
($686,000)
($3,590,000)
($1,190,000)
2028
($19,820,000)
($723,000)
($3,760,000)
($1,250,000)
2029
($20,740,000)
($753,000)
($3,930,000)
($1,300,000)
2030
($21,680,000)
($789,000)
($4,110,000)
($1,360,000)
Fiscal Year
Probable Revenue (Loss) from Counties & Special Districts
2026
($850,000)
2027
($890,000)
2028
($930,000)
2029
($970,000)
2030
($1,010,000)
Fiscal Analysis
The bill would exempt certain tools and equipment from sales and use tax. The bill provides the period beginning at 12:01 a.m. on the first Friday of September until 11:59 p.m. on the following Monday during which the items described by the bill would be exempt.
Under the provisions of the bill the following items would be exempt during the period specified by the bill: a toolbox for a vehicle, or power tool priced under $300; work boots less than $175; a power tool battery, handheld pipe cutters, drain opening tools, and plumbing inspection equipment less than $150; industry textbooks less than $125; tool belts, electrical voltage testing equipment, or shop light under $100; toolbox under $75; a hand tool, set of safety glasses, protective coveralls, duffle or tote bag, or LED flashlight under $50; and a pair of work gloves under $25.
The bill would take effect immediately upon enactment, assuming it receives the requisite two-thirds majority votes in both houses of the Legislature. Otherwise, it would take effect September 1, 2025.
Methodology
According to the Comptroller, information regarding the market size for the items eligible for exemption under the bill was gathered from industry reports and public sources of information, apportioned to Texas, reduced for the time period of the exemption in the bill, adjusted for the price caps of the eligible items, and extrapolated forward.
Local Government Impact
There would be a corresponding loss of sales and use tax revenue from local taxing jurisdictions displayed in the above tables.