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Financial Assistance 10


Texas should exempt the sales of United States flags, the Texas flag and the Prisoners of War/Missing in Action flag from the sales tax.


The state tax code should be amended to exempt United States, Texas and Prisoners of War/Missing in Action (P.O.W./M.I.A.) flags from the sales tax. The loss of revenue would be minimal and people would be encouraged to show their support for the United States and our troops abroad.

All three of these flags already have special statutory recognition. Federal statutes authorize the United States flag, specify its design and govern its use.[1] A Texas statute specifies the design of the Texas flag and additional statutes govern its display at the state capitol and on other state buildings.[2] The P.O.W./M.I.A. flag is recognized in a federal statute.[3] In addition, a Texas statute requires that the P.O.W./M.I.A. flag to be flown at state buildings on specified days.[4]

Other states exempt the sale of flags from their sales taxes. United States flags, but not the state flag, are exempt in Massachusetts.[5] California exempts the sale of U. S. flags by non-profit veterans organizations when the profits are used solely for the purposes of the non-profit organization.[6] Similarly, the sale of U.S. flags by and to federally tax-exempt veterans organizations is exempt from the Vermont sales tax.[7]

Both the United States flag and the flag of the state are exempt in Connecticut, Florida, New Jersey, New York, and Pennsylvania.[8] Tennessee partially exempts the sale of United States and Tennessee flags sold by non-profit organizations.[9] Virginia exempts the sale of official U.S., state, county, city, and town flags if sold by a government agency.[10] The United States flag, the flag of the state, and the P.O.W./M.I.A. flag are exempt in Maryland and Rhode Island.[11]

Thus, the proposed change that would exempt the U.S., Texas, and P.O.W./M.I.A. flags from the Texas sales tax would result in a policy similar to that of several other states.

Legislative Changes Required

Enactment would require an amendment to the Tax Code to add a section similar to those found in Tax Code § 151.312 to 151.318, stating that “United States flags, Texas flags, and P.O.W./M.I.A. flags are exempted from the taxes imposed by this Chapter.”

Fiscal Impact

The estimated cost to the General Revenue Fund to implement this proposal would be $50,000 per year.

[1] Title 4, U.S.C. §1 (2001).

[2] TEX. GOV’T CODE ANN. §3100.001-002. The flying of the U.S. and Texas flags at the Capitol is required in TEX. GOV’T CODE ANN. §443.024. The Government Code also states that the Texas flag should be displayed daily on or near the main administration building of each state institution (TEX. GOV’T CODE ANN. § 3100.051. Schools and educational institutions to which the Texas Education Code applies are required to fly the U.S. and Texas flags on school days, as per TEXAS EDUC. CODE ANN. §1.003.

[3] Title 36, U.S.C. § 902(2001).

[4] TEX. GOV’T CODE ANN. § 2165.006. Armed Forces Day (3rd Saturday in May); Memorial Day (last Monday in May); Flag Day (June 14th); Independence Day (July 4th); Veterans Day (November 11th); and National POW/MIA Recognition Day.

[5] Mass. Ann. Laws ch. 64H, § 6(w) (2001). See also Dept. of Revenue LR 92-3 (May 7, 1992),

[6] Cal. Rev. & Tax Code § 6359.3 (2001).

[7] Vermont Stat. Ann., 32 § 9741(33) (2001).

[8] Connecticut Gen. Stat., § 12-412(23) (2001); Fla. Stat. 212.08(7)(f)(2000); see also: Fla. Admin. Rule 12A-10001(18); N.J. Stat.§ 54:32B-8.26 (2001); New York CLS Tax Code § 1115(w) (2001); Pa. Stat. Ann. 72 § 7204(32) (2001).

[9] Tennessee Code Ann. § 67-6-329(b)(2001).

[10] Virginia §58.1-609.1(7) (2001).

[11] Maryland Tax-General Code Ann. § 11-205 (2001); Rhode Island Gen. Laws § 44-18-30(35)(2000).