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Financial Assistance 4


Recommendation

Texas should expand the current state tax holiday to cover all items priced under $100, purchased by family members of active military personnel during the tax holiday period.


Summary

The current three-day sales tax holiday, which occurs during the first weekend in August, exempts most clothing and footwear priced under $100 from the sales and use tax. During the second holiday held in August 2000, taxpayers saved an estimated $29.2 million in state sales taxes and another $7.8 million in local taxes.

The sales tax holiday for military personnel would occur at the same time as the current sales tax holiday but would be expanded to apply to all items priced under $100 purchased by family members of active military personnel. Active military personnel would include active duty personnel in the armed forces and members of the national guard or reserves who had been called back to duty.

Family members would have to present valid military identification verifying the status of the military personnel in order to receive the exemption during the holiday period. The expanded sales tax holiday for families of military personnel would only apply to the sales and use tax and would not apply to other taxes such as the motor vehicle sales tax.



Legislative Changes Required

Chapter 151 of the Tax Code would be amended to create the expanded sales tax holiday


Fiscal Impact

Assuming the expanded holiday would be implemented by the 78th Legislature and would occur in August 2003, the estimated cost to implement this proposal would be $3,144,000 to the General Revenue Fund and $6,000 to the State Highway Fund per year. There also would be a cost of $870,000 per year to units of local governments.