Relating to the inclusion of the costs of accepting credit and debit cards in the cost of goods sold for purposes of computing the franchise tax.
If enacted, HB358 is expected to have a positive effect on many businesses within Texas, especially small business owners who rely heavily on credit and debit card transactions. By allowing these costs to be factored into the cost of goods sold, the bill aims to alleviate some of the financial burdens associated with payment processing charges. This could enable these businesses to remain competitive by offering customers more payment options without the fear of negatively impacting their bottom line through added tax liabilities.
House Bill 358 proposes an amendment to Section 171.1012 of the Texas Tax Code. This legislation aims to include the costs associated with accepting credit and debit cards in the calculation of the cost of goods sold for franchise tax purposes. The intention behind the bill is to provide relief to businesses by allowing them to incorporate these financial transaction costs into their taxable income calculation, thereby potentially reducing their overall tax liability. This adjustment is seen as particularly beneficial for small businesses that may face higher transaction fees without sufficient means to offset these costs in their financial calculations.
While the bill seems to carry favorable implications for businesses, discussions may have included points of contention regarding its long-term effects on state tax revenues. Critics of similar proposals often raise concerns that by expanding the definition of deductible expenses, the state could face decreased revenues from franchise taxes, which play a crucial role in funding various public services. Stakeholders advocating for fiscal responsibility may argue against such amendments, emphasizing the need to maintain a balanced budget and ensure that essential services are sufficiently funded.