economyEconomic Development

Enact the Tax

Tax Rate Increments

A Type A or B sales tax rate can be increased or decreased in increments of 0.125 percent. The tax may not be less than 0.125 percent and the total local sales tax cannot exceed 2 percent.

Initiating the Ordinance

If a city is already imposing an economic development sales tax, the city's governing body may call for an election to increase, reduce or repeal the tax rate. This may be initiated in two ways:

• by a majority vote of the governing body; or
• by petition of registered voters.

Petition Requirements

To initiate a change in the rate of a Type A tax, 10 percent or more of the registered voters must petition the city to call an election for that purpose.

General provisions of the Tax Code for calling an election may be used for changes to the rate of a Type B tax. Under these provisions, the city council must call an election if it is petitioned by registered city voters equal to at least 20 percent of the number of votes cast in the most recent regular municipal election.

Dissolution of a Type B corporation can be called for by petition of 10 percent of the registered voters in the city.

If the election to adopt or change the tax rate is by petition, the governing body has 30 days to determine if the petition is sufficient. If the petition is sufficient, the city must call for the election within 60 days after receiving the petition. The election will be held on the next uniform election date.

Combined Ballot Proposition

If a city wants to conduct an election to reduce or abolish its Type A sales tax (or any other special purpose municipal sales tax) and adopt a Type B sales tax, the two issues can be addressed in a single ballot proposition.

Only sales tax elections that may be called by the governing body of a city are eligible for combined ballot propositions. If a combined sales tax proposition is defeated, there would be no effect on any existing sales taxes already imposed.

Determining the Tax Period

A tax approved without a limit on its duration is effective until repealed by an election. A tax imposed for a specified period expires at the end of that period. A city imposing a tax for a specified period may extend the period or renew the tax after its expiration date only with voter approval.

A tax for a specific project expires when all debts related to the project and obligations from the tax proceeds have been paid in full. A tax imposed for a specific project may also be reimposed by an election. A Type A or Type B sales tax is effective until the city notifies the Comptroller's office to stop collecting the tax. A city must continue assessing the tax until all obligations incurred by the corporation, including principal and interest on bonds, are satisfied.

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Need Help?

For additional information, contact the Data Analysis and Transparency Division via email or at 844-519-5672.