QBfficeof tfy Bttornep dbmerat &ate of Qexae DAN MORALES April 26,1993 ATTORNEY GENERAL Honorable Tom Craddick Option No. DM-218 Chairman Committee on Public He&b Re: wllether an additional sales and use tax Texas House of Representatives under section 321.101(b) of the Tax Code may P.O. Box 2910 be used to finance a homestead exemption, Austin, Texas 78768-2910 whethex an eligible city may simultatlMusly adopt sales and use taxes under both sections 4A and 4B of V.T.C.S. article 5190.6, and dated questions (RQ-466)
DetKRepresentativecraddick:
On behalf of the city of Cedar Hill (the "city"), you have asked several questions about sales and use taxes. Pii you ask whether an additional sates and use tax under section 321.101(b) of the Tax Code may be- used to tlnance a homestead exemption instead of reducing the property tax rate.
Section 321.101(b) provides that certain municipalities"may, by a majority vote of the quahied voters. . . adopt an additional sales and use tax for the benefit of the mtmicipality in accordattm with this chapter... ."I The 1~ has expressly prescrii the use of revemre collected under section 321.101(b). Revenues from an additional sales and use tax under this chapter must first be used to reduce the property tax rate. See Tax Code 8 321.404(a) (mquking that a ballot in an election to adopt an ~dltionalsales~dwetaxJpecifythatthetaxwill"beusedtoreduccthepropcrtytax rate"); see also id. 5 321.507 (citing Tax Code. 58 26.04(c) and 26.041(d), and providing that excess funds must be deposited in an "excess sales tax revenue fund"and a "municipal sales tax debt service timd,"which may only be expended for limited purposes); 8 321.506 (goveming the use of any remain@ funds).2
p. 1144 Honorable Tom Craddick - Page. 2 (nu-218)
Whenagovaningbodylldoptsahomest~aanption,itacanptsfromrd u&rent taxation a prcmtqe of the appraised value of residence homesteads. See Tax Code 0 11.13. A homestead exemption does not reduce the prop@ tar rate. The memorandum submitted with your request suggests~that this distinction is immaterial because the purpose of the additional sales and use ULXunder section 321.101(b) is to reduce the tax burden on property owners. It contends that cities should have the authority to determine how to achieve that end, idding adopting a homestead exemption in lieu of redueing the property tax rate. We dimgree.
While a homestead exemption reduces the tax burden on residential property by exempting a portion of the appraised vahre of residences from taxation, it does not reduce the tax burden on non-residential property. See id. The legislature has specifically provided that the purpose ofthe additional sales and use tax under section 321.101(b) is to reduce the property tax rite, and has set fbrtb a number of provisions which explicitly govern the use of these revenues. See Tax Code, 5 321404(a); see CrLao id. $8 26.04(c). 26.041(d). 321.506, and 321.507. None of these provisions permits a city to use an additionalsalesanduse~toreduccthetaxbPlrdmofresideatialpropatyumilenot reducing the. tax burdem of non-residential proper@ Because a homestead exemption doesnotreducethepropatytaxnteasnquindbytheseprovisions,wecwclude~a municipalityisnotauthorizedtousean~~tio~saluMdusetaxundasection 321.101(b)oftheTaxCodetofinanceahomesteadexemption.
Second,youexplainthatin~~onto~o~aonahallcent~uMdusetax tmder section 4B of article 5190.6, V.T.C.S., e&et.& July 1. 1993, the city would also liLetoadoptacombined~hafcaapslesudurtraundasection4Aofthat~~e