BILL ANALYSIS Senate Research Center S.B. 2774 89R6021 JBD-F By: Hinojosa, Adam Finance 4/8/2025 As Filed AUTHOR'S / SPONSOR'S STATEMENT OF INTENT Many companies engaged in the business of renting work uniforms are not properly classified for franchise tax purposes because the industry groups under which they operate are not expressly listed in the definition of "retail trade" in the Tax Code. This has resulted in an inequity, where businesses that functionally operate like retailers are excluded from the lower retail franchise tax rate simply because they rent, rather than sell, their goods. To correct this, S.B. 2774 seeks to amend Section 171.0001(12) of the Tax Code to include uniform rental activities classified under Industry 7213 and Industry 7218 of the 1987 Standard Industrial Classification Manual, as published by the federal Office of Management and Budget. The goal is to ensure fair tax treatment for industrial uniform and linen rental companies by aligning their classification with the nature of their business operations. As proposed, S.B. 2774 amends current law relating to the classification of certain entities as primarily engaged in retail trade for purposes of the franchise tax. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 171.0001(12), Tax Code, to include activities involving the rental of industrial uniforms, industrial garments, and industrial linen supplies that are classified as Industry 7213 or 7218 of the 1987 Standard Industrial Classification Manual published by the federal Office of Management and Budget in the definition of "retail trade." SECTION 2. Makes application of this Act prospective. SECTION 3. Effective date: January 1, 2027.
BILL ANALYSIS
Senate Research Center S.B. 2774
89R6021 JBD-F By: Hinojosa, Adam
Finance
4/8/2025
As Filed
Senate Research Center
S.B. 2774
89R6021 JBD-F
By: Hinojosa, Adam
Finance
4/8/2025
As Filed
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Many companies engaged in the business of renting work uniforms are not properly classified for franchise tax purposes because the industry groups under which they operate are not expressly listed in the definition of "retail trade" in the Tax Code. This has resulted in an inequity, where businesses that functionally operate like retailers are excluded from the lower retail franchise tax rate simply because they rent, rather than sell, their goods.
To correct this, S.B. 2774 seeks to amend Section 171.0001(12) of the Tax Code to include uniform rental activities classified under Industry 7213 and Industry 7218 of the 1987 Standard Industrial Classification Manual, as published by the federal Office of Management and Budget. The goal is to ensure fair tax treatment for industrial uniform and linen rental companies by aligning their classification with the nature of their business operations.
As proposed, S.B. 2774 amends current law relating to the classification of certain entities as primarily engaged in retail trade for purposes of the franchise tax.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 171.0001(12), Tax Code, to include activities involving the rental of industrial uniforms, industrial garments, and industrial linen supplies that are classified as Industry 7213 or 7218 of the 1987 Standard Industrial Classification Manual published by the federal Office of Management and Budget in the definition of "retail trade."
SECTION 2. Makes application of this Act prospective.
SECTION 3. Effective date: January 1, 2027.