Texas House Bill HB3935

Texas 2009 - 81st Regular

Caption

Relating to the classification of certain entities as primarily engaged in retail or wholesale trade for purposes of the franchise tax.

Impact

If enacted, HB3935 will significantly impact the determination of franchise tax obligations for numerous businesses across Texas. By specifying the revenue criteria and adjusting what constitutes retail or wholesale trade, the bill may influence tax liabilities for many entities. Businesses that primarily operate under these classifications might find themselves benefiting from clearer guidelines that could affect their overall tax strategy and compliance. Furthermore, this adjustment aligns with ongoing efforts to refine tax regulations for better business clarity and accountability.

Summary

House Bill 3935 aims to clarify the criteria for classifying certain entities as primarily engaged in retail or wholesale trade for the purpose of the franchise tax in Texas. The bill proposes amendments to Section 171.002(c) of the Tax Code, establishing specific conditions under which an entity can be considered primarily engaged in retail or wholesale operations. The legislation seeks to ensure that the classification is based on a more precise calculation of revenue from retail or wholesale activities compared to other trades, involving a stipulation that less than 50 percent of a taxable entity’s revenue should derive from the sale of its produced products or those of affiliated groups.

Contention

Although the summary does not indicate any immediate points of contention within the text, changes to tax classifications typically provoke discussions regarding fairness and the economic burden on businesses. Critics may raise concerns about whether the revised revenue thresholds are appropriate and whether these changes could unduly advantage or disadvantage certain business types. Legislative debates may also focus on the implications for local economic conditions and the competitive landscape among businesses classified differently under franchise tax law.