TPTRP - The Sales and Use Tax Act and Tax Abolition and Conformity Act
The Sales and Use Tax Act & Tax Abolition and Conformity Act, Explained
Two companion acts turn the TPTRP constitutional amendment into a working Texas revenue system: one operates the new broad-base sales and use tax; the other ends the prior tax code while protecting bonds, public services, existing legal obligations, and essential administration.
Why Texas Needs Two Acts
One act runs the replacement system. The other retires the old one responsibly.
The TPTRP constitutional amendment supplies the permanent rules: local ad valorem property taxes are prohibited; the sales and use tax is the authorized replacement revenue system; rates are constitutionally limited; and taxpayer protections cannot be changed by ordinary legislation. The two companion acts do different statutory jobs under that framework. (Texas Property Tax Replacement Plan Constitutional Amendment, 2027)
HB A—the Sales and Use Tax Act—does the operating work. It establishes the Chapter 151-A system: which transactions are taxable, how a transaction is sourced, how the tax stack is calculated, how sellers collect it through one statewide permit system, how the Comptroller allocates it, and how local entities are held to rate, budget, disclosure, and debt rules. (TPTRP Sales and Use Tax Act, 2027)
HB C—the Tax Abolition and Conformity Act—does the legal cleanup. It repeals the taxes and chapters that the constitutional amendment and HB A supersede, preserves valid prior-law liabilities and enforcement, and rewrites cross-references so Texas agencies can continue to register vehicles, license businesses, regulate industries, protect consumers, administer bonds, and resolve pending disputes. It does not independently impose the new sales tax. (TPTRP Tax Abolition and Conformity Act, 2027)
HB A is the new engine. HB C removes the old engine without taking the wheels, steering, brakes, or passengers off the vehicle.
The 2028 Implementation Schedule
A three-month setup quarter followed by first-quarter collection and distribution.
If voters approve the constitutional amendment in 2027, the implementing package becomes effective in 2028. The Transition Board is constituted on January 2, 2028, beginning its six-year clock, and the Comptroller certifies each entity's Final Year Baseline on March 1, 2028. The first quarter of 2028 is the setup period for businesses, the Comptroller, taxing entities, and the transition system. Collections under the new sales and use tax begin in Q2 2028, and the first distributions occur at the end of that quarter.
| Period | What happens | What remains protected |
|---|---|---|
| November 2027 | Voters decide whether to adopt the constitutional amendment. | All current tax and public-service systems remain in force unless and until the amendment is adopted and enabling law takes effect. |
| January 2, 2028 | The Transition Board is constituted, and its six-year clock begins. | The Board exists before new collections begin, allowing it to plan and prepare for the transition. |
| March 1, 2028 | The Comptroller certifies each entity's Final Year Baseline. | The certified baseline establishes the transition funding reference for each entity, subject to the scheduled true-up at the first distribution after switch-on. |
| Q1 2028 | Implementation: permits, rate files, portal configuration, seller guidance, entity certification, and transition preparation. | Existing tax obligations, bonds, titles, registrations, and agency operations continue under prior law during the setup period. |
| Q2 2028 | First new Chapter 151-A collections begin. | Prior-law claims, liens, audits, refunds, and final-period liabilities remain enforceable under HB C savings provisions. |
| End of Q2 2028 | First Comptroller distributions to the five tiers and participating entities. | Bond-service components remain protected from withholding or interruption. |
Property taxation ends when the constitutional prohibition and replacement system take effect under the conformed schedule. But ending a tax does not erase an amount legally owed for a pre-transition tax year. HB C therefore preserves valid pre-transition liens, lawsuits, audits, penalties, refunds, and other liabilities until they are resolved under the law that applied when they arose. (TPTRP Tax Abolition and Conformity Act, 2027)
What the New Sales and Use Tax Covers
A broad, uniform transaction base with defined exclusions and citizen-focused exemptions.
HB A applies the new tax to a constitutional “taxable transaction”: a transfer, sale, lease, license, service, digital product, or other exchange for consideration in which a person receives a good, service, right, or other economic value. The architecture is deliberately broad: it covers business-to-business and consumer transactions, not merely retail sales. (TPTRP Sales and Use Tax Act, 2027)
| Category | General treatment | Examples |
|---|---|---|
| Taxable transactions | Included in the uniform sales and use tax base unless a valid TLES exemption applies. | Goods, services, commercial inputs, digital products, taxable insurance products, leases, and business purchases. |
| Definition Filter exclusions | Outside the base because no qualifying purchase/service exists or federal law bars direct taxation. | Federal-government transactions, mortgage principal and interest, dividends, gifts, claim payouts, internal transfers, grants, and pure exchanges of financial instruments. |
| Texas Living Exemption Set | Exempt only when the statutory cost-of-living standard and personal/family-use conditions are met. | Eligible personal necessities defined in the separate TLES Act; commercial use does not inherit a personal exemption. |
| Federal internet-access protection | Separately stated internet-access charges remain outside state taxing authority where federal law requires. | Internet access, as distinct from a taxable digital product or separately rendered service. |
The point-of-possession rule
Taxability follows where the buyer takes possession of a good or first receives a service—not the buyer’s residence and not the seller’s headquarters. A visitor who purchases an item in a Texas store takes possession in Texas. A Texan who takes possession outside Texas does not create a Texas taxable transaction merely because the buyer lives here. (Texas Property Tax Replacement Plan Constitutional Amendment, 2027)
The agent-transaction protection
HB A does not revive resale certificates or a manufacturing-input exemption. Instead, it protects against taxing the same dollar twice. When an agent buys an item for a principal, tax is collected once at the agent’s purchase; the documented reimbursement passes through without a second tax; and the agent’s separately billed labor, product, or fee is its own taxable transaction. (TPTRP Sales and Use Tax Act, 2027)
A contractor buys lumber and pays the tax at the lumberyard. The contractor later shows that material cost as a documented reimbursement on the customer invoice; that reimbursement is not taxed a second time. The contractor’s separately stated labor charge is a new service transaction and is taxed once.
One Tax Stack, Five Tiers, Hard Constitutional Limits
The rate is visible at the transaction, locally allocated, and capped at every address.
HB A begins the replacement system at a combined 3.25% rate. Each transaction is assigned the combined rate of the state, county, municipality if applicable, independent school district, and aggregate Tier 5 special-district share covering its sourced location. The total may never exceed 6.00% at any location. (TPTRP Sales and Use Tax Act, 2027)
| Tier | Entity class | Starting rate | Constitutional cap |
|---|---|---|---|
| 1 | State of Texas | 1.00% | 2.00% |
| 2 | Counties | 0.40% | 1.00% |
| 3 | Incorporated municipalities | 0.60% | 1.00% |
| 4 | Independent school districts | 1.20% | 1.50% |
| 5 | Special districts, aggregate at a location | 0.05% | 0.50% |
| All | Maximum tax stack | 3.25% | 6.00% |
The constitutional cap is a maximum, not a schedule that forces every county, city, school district, or special district to levy the same rate. The Legislature establishes the one-time starting rates. Thereafter, each entity operates independently within its tier’s ceiling, subject to the asymmetric rule: its governing body may reduce M&O, but an M&O increase requires voter approval. (Texas Property Tax Replacement Plan Constitutional Amendment, 2027)
Special districts overlap. Tier 5’s 0.50% is therefore an aggregate cap at an address, not a separate 0.50% authority for every overlapping district. HB A assigns the available share with bond service first, then replacement obligation and demonstrated need factors.
Who Collects the Tax, and Where the Money Goes
One statewide collection system; location-based allocation; quarterly local distribution.
Sellers collect the tax as one unified state tax through the existing sales-tax permit and remittance system. A seller does not need separate permits, returns, or payments for the state, a county, a city, an ISD, and special districts. The Comptroller uses sourcing and boundary data to allocate each transaction’s remittance among the entities whose rates apply at the sourced location. (TPTRP Sales and Use Tax Act, 2027)
Bond service is protected first
Every entity’s Interest and Sinking, or I&S, component is a Bond Service Levy. HB A makes that portion inviolable: it cannot be suspended, withheld, escrowed, offset, or delayed because of an audit, disclosure problem, dispute, or other enforcement issue. The bill also requires Comptroller pre-certification before an entity can put a new bond proposal before voters if the necessary I&S rate would exceed its constitutional cap. (TPTRP Sales and Use Tax Act, 2027)
Transparency is not optional
Every taxing entity must make its rates, budget, collections, fund balances, bond obligations, payoff dates, and other required information available through its own website and the Texas Sales and Use Tax Portal. Failure to meet publication rules can suspend the M&O portion of a distribution until compliance is restored—but never the Bond Service Levy. (TPTRP Sales and Use Tax Act, 2027)
What HB C Abolishes—and What It Preserves
The repeal act ends revenue instruments, not the ordinary functions Texas families depend on.
HB C repeals the statutory systems made inconsistent with the new constitutional structure. Its central repeal is Title 1 of the Tax Code—the Property Tax Code—along with the old statewide and local sales-tax chapters and the specified tax chapters that impose franchise, production, excise, gross-receipts, and related product-specific taxes. (TPTRP Tax Abolition and Conformity Act, 2027)
| Prior-law system | HB C action | Replacement or preserved function |
|---|---|---|
| Property Tax Code, Title 1, Tax Code | Repealed, subject to final-year savings and lien rules. | Property-tax revenue is replaced by the Chapter 151-A tiered system; valid older liabilities remain collectible. |
| Ch. 151; Chs. 321–323, Tax Code | Old state, municipal, county, and special-purpose sales-tax chapters repealed. | Chapter 151-A becomes the operative tax chapter; audit and enforcement continuity is preserved. |
| Chs. 171, 201, 202, 182, 156, 154–155, 162, 183, 181, Tax Code | Franchise, production, gross-receipts, hotel, tobacco, motor-fuel, mixed-beverage, and cement tax provisions repealed as specified. | Transactions enter the uniform framework when taxable; regulatory, federal, compact, and dedication rules are separately preserved or conformed. |
| Chs. 48–49, Education Code | Foundation School Program and recapture repealed. | ISDs receive Tier 4 transaction-based collections; school accountability, PSF/ASF, and bond-guarantee functions remain. |
| Local hotel, venue, and product-specific tax authorities | Repealed to the extent superseded. | Existing debt pledges are protected; lawful service and regulatory functions continue through the appropriate entity or successor system. |
“Abolishing a tax” is not the same as abolishing a title office, a licensing program, a bond contract, a regulatory agency, or a valid liability that arose before the change.How HB C is designed to work
What stays in place
HB C specifically preserves non-tax functions tied to motor vehicles, boats, aircraft, manufactured housing, insurance, tobacco, alcohol, fuel reporting, lotteries, public-fund investment, public safety, environmental regulation, and education accountability. For example, it carries forward motor-vehicle Standard Presumptive Value administration and title-transfer collection procedures while replacing the old motor-vehicle tax rate structure with Chapter 151-A treatment. (TPTRP Tax Abolition and Conformity Act, 2027)
A tax lien that legally attached before the implementation date remains attached until the liability is resolved. HB C protects pending audits, lawsuits, refunds, administrative hearings, and criminal cases for the full applicable limitations period.
Schools, Special Districts, and Local Services
Local services continue under a new revenue path and new accountability rules.
Independent school districts
HB A places ISDs in Tier 4. Each district receives collections generated by its own Tier 4 rate on taxable transactions sourced within the district. The act supersedes the Foundation School Program transfer and the recapture system, while retaining the Education Code’s governance, academic-accountability, financial-accountability, audit, sanction, conservatorship, management, and dissolution functions except where explicitly superseded. (TPTRP Sales and Use Tax Act, 2027)
An ISD’s board may reduce its M&O rate within the governing rules. Its voters must approve an increase. The district’s debt service remains protected through its I&S component, reserve structure, and bond backstop framework. Assistance is available only under the constitutional eligibility standard, which requires voter approval of the maximum available rate and a remaining shortfall against the certified baseline. (Texas Property Tax Replacement Plan Constitutional Amendment, 2027)
Special districts
HB A’s Tier 5 framework recognizes that many special-district boundaries overlap. The Transition Board during transition—and the permanent Monitoring Division afterward—apportion the 0.50% aggregate Tier 5 capacity at each affected location. Certified bond debt service receives first priority. A district that can fully fund its obligations from lawful user charges or other operating revenue can have its Tier 5 share reduced and may be reviewed for voter-approved absorption, consolidation, or dissolution. (TPTRP Sales and Use Tax Act, 2027)
A special district cannot be dissolved merely because it has been reviewed. HB A treats a sufficiency finding as a referral and planning tool; an actual dissolution, consolidation, or absorption still requires the applicable voter and legal process.
The Companion Acts This System Depends On
HB A cross-references specialized laws instead of duplicating them.
These five implementing acts are part of the operating framework. The summaries below explain their role in this article; each button opens the dedicated explainer in a new tab.
Texas Living Exemption Set Act
Defines and administers the qualified personal and family cost-of-living exemptions authorized by the constitutional standard, with permit-level residential-versus-commercial accounting under HB A.
Read the Texas Living Exemption Set explainer ↗Remote Seller and Foreign Entity Act
Applies economic-nexus, registration, collection, remittance, and market-access rules to sellers outside Texas and foreign entities that transact with Texas buyers.
Read the out-of-state and foreign seller explainer ↗Fund System Act
Establishes the stabilization, infrastructure, first-responder, I&S reserve, and citizen-dividend fund rules, along with the surplus waterfall.
Read the Fund System explainer ↗Bond Management Act
Implements the bond guarantee, reserve structure, backstop cascade, and Citizens First bond-sale rules referenced by HB A.
Read the Bond Management explainer ↗Transition Board Act
Creates the temporary Transition Board, the Transition Fund, the permanent Monitoring Division, assistance procedures, and the Texas Sales and Use Tax Portal.
Read the Transition Board explainer ↗An HD109 Address: How the Tax Stack Appears in Practice
An illustrative transaction at the statutory starting rates—not a prediction of a future local rate.
Consider a taxable purchase at an address in an incorporated HD109 municipality, within its county and independent school district, where the aggregate Tier 5 share applies. At the statutory starting rates, the transaction’s combined rate is 3.25%. The seller collects one amount. The Comptroller allocates it among the state and the local entities whose jurisdictions cover that address. (TPTRP Sales and Use Tax Act, 2027)
| Recipient tier | Starting rate | Share of $100 purchase |
|---|---|---|
| State | 1.00% | $1.00 |
| County | 0.40% | $0.40 |
| Municipality | 0.60% | $0.60 |
| Independent school district | 1.20% | $1.20 |
| Aggregate special-district share | 0.05% | $0.05 |
| Total sales and use tax | 3.25% | $3.25 |
The property owner does not receive another annual bill based on the appraised value of the home, and a taxing entity may not restore a property tax by relabeling it a fee, levy, surcharge, or assessment whose practical effect is to raise general revenue without complying with the constitutional restrictions.
The Citizen Protections in These Acts
The replacement system is designed to be visible, bounded, and enforceable.
- No local property tax: the constitutional amendment abolishes and prohibits ad valorem property taxation at every level.
- A visible rate: the applicable tax stack is the sum of clearly identified tier rates at the sourced location.
- A constitutional ceiling: no address may exceed 6.00%, and no tier cap can be raised without a constitutional amendment approved by voters.
- Voter control of increases: a governing body may reduce M&O; it cannot raise M&O without voter approval.
- Bondholder and taxpayer protection: debt service has a protected levy, reserve, backstop, and new-debt voter-approval rules.
- No special-interest base erosion: the Constitution defines the tax base and limits exemptions to the cost-of-living framework.
- Public accountability: rates, budgets, collections, funds, debt, and specified performance information are published through entity websites and the statewide portal.
- Continuity and due process: HB C preserves valid pre-transition liens, disputes, refunds, audits, and courts rather than leaving a legal void.
The core change is not simply swapping one tax bill for another. The constitutional amendment prohibits property taxation; HB A builds a single, transparent, bounded transaction-tax system; and HB C removes the statutes that would otherwise allow the former tax structure to continue or conflict with the new one. (Texas Property Tax Replacement Plan Constitutional Amendment, 2027)
References
Primary proposed-legislation sources and related TPTRP explanatory pages, organized by their principal use in this article.
Constitutional framework — Sections 1–10
Texas Property Tax Replacement Plan Constitutional Amendment. (2027). Consolidated House Joint Resolution, Version 8. https://www.willcampbellfortexas.com/tptrp-amendment
Primary proposed constitutional text. Used for the property-tax prohibition, taxable-transaction framework, rate ceilings, voter-control rules, assistance standard, and structural protections described throughout this article.
Sales and use tax operations — Sections 1–5, 7, and 9
TPTRP Sales and Use Tax Act. (2027). H.B. A, Version 6. https://www.willcampbellfortexas.com/tptrp-the-sales-and-use-tax-act
Primary proposed implementing bill creating Chapter 151-A, Tax Code. Used for the starting rates, taxable-transaction administration, sourcing, allocation, distribution, school-district and Tier 5 rules, portal, certification, and bond-service protections.
Repeal, continuity, and conformity — Sections 1, 2, 6, and 10
TPTRP Tax Abolition and Conformity Act. (2027). H.B. C, Version 2. https://www.willcampbellfortexas.com/tptrp-tax-abolition-and-conformity-act
Primary proposed repealer and conformity bill. Used for the map of repealed tax chapters, preserved administrative and regulatory functions, prior-law savings provisions, liens, audits, refunds, hearings, and cross-reference rules.