County Assistance District Sales Tax
November 2005
This publication is available as a PDF file.
96-1172 (PDF, 344 KB)Many smaller Texas counties have found it challenging when it comes to funding economic development programs. Recognizing this, the 79th Legislature passed House Bill 1937, which amended Chapter 387 of the Local Government Code, to enable smaller counties to create county assistance districts and to adopt a local sales tax.
Who is eligible?A county with a population of less than 45,000 is eligible to create a county assistance district if:
- the county does not contain a city that has a 4A or 4B development corporation or,
- the county contains territory of a transit authority created under Chapter 451 or 452 of the Texas Transportation Code.
The district may include any territory of the county that is not included within the boundaries of a transit authority created under Chapter 451 or 452 of the Texas Transportation Code. And, the rate imposed by the district when combined with the total rate of all other local sales taxes within the district cannot exceed 2 percent. The county also must hold an election to confirm the creation of the district and imposition of the sales tax.
How do you call for an election to create a county assistance district?The commissioners court of an eligible county may call an election for the creation of a county assistance district.
In addition to the elements that the Election Code requires, the election order must:
- define the boundaries of the district; and
- call the election to be held within those boundaries.
The county must hold the election on the first uniform election date 62 days or more after the election is ordered. For an election to be held on the date of the general election for state and county officers, the election must be ordered not later than the 70th day before election day.
According to Texas Election Code, §41.001, the uniform election dates are:
- the second Saturday in May; and
- the first Tuesday after the first Monday in November.
How is the district governed?The commissioners court of the county that creates the district is the governing body of the district. The members of the commissioners court are not entitled to compensation for service on the governing body of the district, but are entitled to reimbursement for actual and necessary expenses incurred in performance of their duties.
The district may contract with a public or private person to perform any act the district is authorized to perform.
A district may not levy an ad valorem tax.
How do you adopt the tax rate?
What is the permissible tax rate?The voters of the proposed district must approve this special dedicated tax—just like all other sales tax options.
A district may levy a sales tax to fund the district if authorized by a majority of the qualified voters in the creation election and if the total combined rate of all local sales and use taxes would not exceed 2 percent at any location within the district.
The permissible rates for the district sales tax are 1/8, 1/4, 3/8, or 1/2 of 1 percent.
When does imposition and administration of the tax begin?According to Texas Local Government Code, §387.012, after voter approval and proper notification to the Comptroller, one complete calendar quarter must elapse for the tax to become effective.
Example: If a county were to hold a successful election in May 2006 and properly notified the Comptroller by June 2006, the sales tax would take effect October 1, 2006. The district would begin receiving sales tax allocations from the Comptroller starting in December 2006.
How do you notify the Comptroller of the election results?If a majority of voters approve the district and adopt the sales tax, the commissioners court, by resolution entered in the minutes of its proceedings, must declare the results of the election.
In accordance with §323.405 of the Texas Tax Code, the order or the resolution should include statements showing:
- the date of the election;
- the proposition on which the vote was held;
- the total number of votes cast for and against the proposition; and
- the number of votes by which the proposition was approved.
If the election results change the application of the local sales tax, the county judge should send a certified copy of the order or the resolution, by U.S. certified or registered mail, to the Revenue Accounting, Tax Allocation Section of the Comptroller’s office. The order or resolution should also include a map showing the boundaries of the district.
If a majority of votes received at the election are against the creation of the district, another election on the question of creating a county assistance district may not be held in the county for one year from the date of the previous election.
How can the tax revenues be used?The district must use the sales tax revenues to perform the following functions of the district:
- the construction, maintenance, or improvement of roads or highways;
- the provision of law enforcement and detention services;
- the maintenance or improvement of libraries, museums, parks, or other recreational facilities;
- the provision of services that benefit the public welfare; or
- the promotion of economic development and tourism.
How do you increase or decrease the tax?The commissioners court, by order, may increase or decrease the tax or repeal the tax if the change or repeal is approved by a majority of the voters in the district.
A district may not adopt an increase in the tax if the adoption of the increase would result in a combined tax rate of all local sales and use taxes of more than 2 percent in any location in the district.
How can the district be expanded?After creation of the district, it can be expanded if the county commissioners court calls and holds an election for that purpose in the territory to be added to the district. A majority of voters in the territory to be added must approve the expansion. An election may not be held in an area that is included in an authority governed by Chapter 451 or 452 of the Transportation Code.
Need more information?For more information about the county assistance district sales tax, call the Comptroller’s Local Government Assistance Division toll free at 1-800-531-5441, extension 3-4679.
Ballot Language for County Assistance District Elections
At the election, the ballot must allow voters the choice of voting for or against the proposition.
- The ballot language required by Texas Local Government Code §387.003(c) to create the district and adopt the local sales tax is as follows:
“Authorizing the creation of the _______ County Assistance District (insert name of district) and the imposition of a sales and use tax at the rate of ______ of one percent (insert one-eighth, one-fourth, three-eights, or one-half, as appropriate) for the purpose of financing the operations of the district.”
- For a district to change the tax rate, the ballot language required by Texas Local Government Code §387.010(c) is as follows:
“The change of a sales and use tax for the ______County Assistance District (insert name of district) from the rate of ______ of one percent (insert one-fourth, three-eights, or one-half, as appropriate) to the rate of _______ of one percent (insert one-fourth, three-eights, or one-half, as appropriate).”
- For a district to abolish the tax rate, ballot language required by Texas Local Government Code §387.010(d) is as follows:
“The repeal of the sales and use tax for financing the __________ County Assistance District (insert name of district).”
