Texas Senate Bill SB412

Texas 2019 - 86th Regular

Caption

Relating to a franchise tax credit based on the ad valorem taxes paid by a taxable entity on certain inventory.

Impact

The implementation of SB 412 is expected to significantly affect the way franchise taxes are applied to retailers in Texas. By providing a credit based on actual inventory values, it encourages transparency and fairness in trademark taxation. Supporters of the bill argue that this will stimulate local economies by incentivizing retailers to maintain and grow their inventory, potentially leading to job creation and improved customer access to goods. Furthermore, the bill allows for a carryforward of unused tax credits for up to three years, providing businesses with flexibility in managing their tax liabilities.

Summary

Senate Bill 412 proposes the establishment of a tax credit for entities that pay ad valorem taxes on retail inventory in Texas. The bill specifically targets retailers who incur taxes on tangible personal property held for sale but not on real property or exempt inventory. The credit allows these taxable entities to apply for a rebate, which equals the difference between the ad valorem taxes paid on their retail inventory and a calculated amount based on their total annual sales, averaged out over a year. This initiative is designed to alleviate some of the financial burdens associated with existing tax structures on retail businesses.

Contention

Despite its intended benefits, SB 412 has faced some opposition. Critics argue that the bill may disproportionately benefit larger retailers with significant inventory levels, potentially exacerbating the market disparities between small and large businesses. There are also concerns regarding the administrative burden of applying for and managing these tax credits, as well as the implications of assigning or selling tax credits among various entities. This aspect of the bill may create additional complexity in tax administration, which could lead to confusion among eligible businesses.