Did a Fort Worth seller have to collect Abilene's new 1990 city and industrial-development sales taxes, and how did prior-contract relief vary for new local districts?

Plain-English summary

Abilene had approved two half-percent taxes effective January 1, 1990: an industrial-development-corporation tax and an additional city tax for property-tax relief. Together with the basic city tax, they raised the stated Abilene rate to 8%.

A seller whose place of business was in Fort Worth did not collect those Abilene taxes because all three were treated as city sales taxes. The Abilene taxes had prior-contract relief, generally limited to the first three years for longer contracts under Rule 3.319.

Hospital, emergency-service, and crime-control district taxes were administered like county sales taxes. Prior-contract relief varied: crime-control legislation allowed a period of relief, separate Parker and San Saba hospital-district laws allowed none, and the general hospital/emergency-district law used different three-year limits depending on existing county tax.

This was forward-looking 1989 guidance about local taxes then being created; the page does not present those jurisdictions or rates as current.

Common questions

Did the Fort Worth seller collect Abilene's taxes? No.

Did every special district have the same prior-contract rule? No.

Was the Abilene rate information current beyond 1990? The source does not establish that.

Citations and references

• 34 Tex. Admin. Code Rule 3.319

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8910L0962A01

Original ruling text

October 25, 1989

Dear ***:

I'd like to follow-up on our phone conversation with some additional
information.

As a result of 1989 legislative activity, local governments will be able to
create certain special purpose districts and fund them with a sales tax. For
example, the citizens of Tarrant County may vote to create a crime control
district. In addition, a number of counties may create hospital or emergency
service districts, and cities may create industrial development corporations.

At the moment none of these exist. However, the City of Abilene has voted to
create an industrial development corporation and levy a half percent sales tax.
In the same election, Abilene voters chose to impose an impose an additional
half percent city sales tax for property tax relief. These new taxes will be
effective as of January 1, 1990, and will raise the tax rate in Abilene to 8%.

Because your place of business is inside the city of Fort Worth, you will not
be required to collect either the additional half percent Abilene City Tax or
the half percent Abilene Industrial Development Corporation Tax. The reason is
the all three of these taxes, the basic city tax at 1%, the Industrial
Development Sales Tax at a half percent and property relief tax at a half
percent are all treated as city sales taxes.

I'd also like to point out that the legislature included a prior contract
exemption for both the additional city sales tax and the industrial development
corporation sales tax. The enclosed rule 3.319 gives guidelines for qualified
prior contract. Contracts that remain in effect more than three years from the
date the tax becomes effective will be exempt only for the first three years.

The legislature has determined that sales taxes imposed to support hospital
districts, emergency service districts and crime control districts will be
administered under the County Sales and Use Tax Act. And, as with city sales
tax, if you are required to collect county sales tax, you will not be required
to collect the tax for another county.

The bill allowing for creation of crime control districts also makes provision
for a period in which qualified prior contracts can be exempt from tax.
However, determining if a prior contract exemption will be allowed for newly
created hospital or emergency service districts will be more complex. I'd
recommend that you contact our tax assistance folks when you learn that on of
these districts has been created. That information will be available in our
brochure, "Sales Tax Rates In Texas."

There were separate bills to allow creation of hospital districts in Parker and
San Saba Counties. These bills disallowed any prior contract exemption for
hospital districts in these counties. The legislature also passed a more
general bill to allow the creation of hospital and/or emergency service
districts in other counties throughout Texas.

This bill allows a three year prior contract exemption for districts in
counties that do not have a separate county sales tax. But, if a district is
created in a county that imposes a county sales tax, the prior contract
exemption will be limited in time to within 3 years of the date the county tax
was imposed.

We have just updated the rule on security services to mention special purpose
districts. I'm enclosing copies of both the original and revised rules for
your reference.

Feel free to call or write me if you have questions. You can reach me by
calling toll free 800-531-5441 or FAX (512) 475-0900.

Sincerely,

Al Van Allen
Taxability Section
Legal Services Division