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Texas Considers New Sales Tax Exemption


 Texas lawmakers ponder pros and cons of R&D exemption.

UPDATE, 6.20.13: Governor Rick Perry has signed HB 800 into law.

Texas lawmakers are considering a new sales tax exemption designed to encourage research and development activities. Manufacturers already benefit from a number of exemptions in Texas, and many other states allow an exemption for research and development activities. (Texas Tribune).

HB 800 would:

  • "Make Texas economically competitive in the field of research and development.
  • "Reduce the tax burden on research and development activities in Texas and encourage new investments in this state;
  • Promote the creation of new, highly skilled, high-paying jobs in Texas;
  • Complement [Texas] manufacturing industries by encouraging innovation and efficiency in applying new technologies and producing new products."

According to a report issued earlier this year by Texans for Innovation, the passage of HB 800 could lead to "approximately $5.6 billion in annual R&D activity…." Close to 100,000 new jobs could stem from the incentives, adding approximately $4.5 billion to Texas annual wages.

Not all lawmakers are in favor of the incentives. The Texas Tribune reports that some Democrats "expressed concern that the tax credit would not be reviewed and would remain in place even if it doesn't successfully bring expected business and revenue to the state." Representatve Sylvester Turner (D-Houston) cautioned, "there is no free money for individuals, and there is no free money for business and corporations."

The legislation would amend Section 151.3182 of the Tax Code. If adopted as written, the exemption would explore on December 31, 2026. A similar exemption expired at the end of 2006.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.