A city, county or special purpose district may adopt a sales tax provided the combined rate of all local sales taxes would not exceed 2 percent within its territorial limits. All local sales taxes require voter approval.
Local Sales Tax Options (PDF) contains an overview of sales tax-related economic development programs. For additional economic development programs, download Tax-Related State and Local Economic Development Programs (PDF).
Cities can finance new and expanded business enterprises through economic development corporations (EDCs) funded by local sales taxes.
Cities may hold an election in all or part of a city, including its extra territorial jurisdiction, to create a municipal development district and to adopt a sales tax to fund it. The district could undertake a variety of projects including a convention center, civic center, auditorium and other eligible projects.
Sales tax options are one-eighth, one-fourth, three-eighths or one-half of 1 percent.
The Tax Code authorizes cities to impose a special sales tax to fund maintenance of existing streets and sidewalks.
A city may create a municipal development corporation to undertake projects that provide job training, early childhood education, after-school programs, scholarships, literacy promotion and other projects.
Certain cities may create an EMS district to finance the operation of a fire control, prevention and EMS program.
Authorities may be created to levy a sales tax to provide transportation services in participating cities – generally metropolitan areas.
In addition to the state hotel occupancy tax, cities and counties in Texas can levy a local hotel occupancy tax. (Both taxes are commonly referred to as HOT.)
The purpose of the local hotel occupancy tax is to promote tourism and the convention and hotel industry. Municipalities are authorized to levy a tax on a person who pays for the use ofa hotel room or other lodging (Tax Code Chapter 156).
County assistance district funds can be used for services that promote tourism and benefit public welfare. This includes construction, maintenance or improvement of roads or highways, libraries, museums, parks or other recreational facilities; provision of law enforcement and detention services; firefighting and fire prevention services and more.
This sales tax can be adopted in all or part of any county, if the new combined local sales tax rate would not exceed 2 percent within the district. The commissioners court serves as the board of directors.
Cities and counties may choose to adopt additional sales tax in exchage for reducing property taxes.
Revenues from the sales tax may be used to finance a wide variety of crime control and prevention programs.
The creation of library districts in rural or suburban areas would provide residents with access to a public library.
Cities and counties have authority to levy certain taxes and issue bonds to finance a range of community and sports-related capital projects.
Local communities may partner with the state of Texas to encourage job creation and capital investment in economically distressed areas, creating an "enterprise project." Approved projects are eligible to apply for state sales and use tax refunds on qualified expenditures.
For more information on the Texas Enterprise Zone Program, visit the Governor's Economic Development Finance department, or call 512-936-0100.
*This tax is imposed by a board, district or authority created by and for the benefit of a city or county.
For additional information, contact the Data Analysis and Transparency Division via email or at 844-519-5672.