Sales Tax Programs

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).

Economic Development Corporations

Cities can finance new and expanded business enterprises through economic development corporations (EDCs) funded by local sales taxes.

EDC Resources and statutes

Municipal Development Districts (MDDs)

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.

MDD resources and statutes:

Municipal Sales and Use Tax for Street Maintenance (PDF)

The Tax Code authorizes cities to impose a special sales tax to fund maintenance of existing streets and sidewalks.

Resources and statutes

Municipal Development Corporations (MDC)^*

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.

Resources and statute

Fire Control, Prevention, and Emergency Medical Services (EMS) Districts^*

Certain cities may create an EMS district to finance the operation of a fire control, prevention and EMS program.

Resources and statute

Metropolitan and Rapid Transit Authorities/Municipal Transit Departments^*

Authorities may be created to levy a sales tax to provide transportation services in participating cities – generally metropolitan areas.

Resources and statutes

Emergency Services District (ESD)^*

Resources and statutes

Local Hotel Occupancy Tax (HOT)

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).

HOT resources and statutes

County Assistance Districts

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.

Resources and statutes:

Sales Tax for Property Tax Relief (PDF)

Cities and counties may choose to adopt additional sales tax in exchage for reducing property taxes.

Resources and statutes

Crime Control and Prevention District^*

Revenues from the sales tax may be used to finance a wide variety of crime control and prevention programs.

Resources and statutes

Library District Sales Tax (PDF)

The creation of library districts in rural or suburban areas would provide residents with access to a public library.

Statutes

Sports and Community Venue Tax (PDF)

Cities and counties have authority to levy certain taxes and issue bonds to finance a range of community and sports-related capital projects.

Resources and statutes

Enterprise Zones

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.

Manufacturing Exemptions