The economic development sales tax was first created in 1989 to give smaller Texas communities the financial resources to attract primary jobs and create wealth. Today, the tax is the undisputed workhorse of local economic development efforts, serving as the backbone of economic development programs in more than 500 communities across the state.
During the 2007 Legislative Session, legislation passed which moved the law governing the use of the economic development sales tax from 5190.6 of Vernon’s Civil Statutes into chapters 501-505 of the Local Government Code. Although there continues to be two types of economic development corporations (and two types of economic development sales taxes), they are now generally referred to as “Type A” and “Type B” corporations (instead of “4A” and “4B” corporations or the “4A” or “4B” tax).
Type A Corporations
The tax is primarily intended for manufacturing and industrial development. Cities may use the money raised by this sales tax to acquire or pay for land, buildings, equipment, facilities expenditures, targeted infrastructure, and improvements.
Type B Corporations
The tax provides cities with a wider range of uses for the tax revenues because it is intended to give communities an opportunity to undertake a project for quality of life improvements, including economic development that will attract and retain primary employers. Cities may use money raised by this sales tax for a wide variety of projects including land, buildings, equipment, facilities expenditures and improvements related to certain projects.
Texas Economic Development Sales Tax
Economic Development Sales Tax Fact Sheet
Sales Tax for Economic Development in Texoma
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