The Texas Living Exemption Set
Thirteen categories of essential household spending removed from the TPTRP tax base under a constitutional Cost of Living Standard — so no Texas family pays a transaction tax on the irreducible minimum cost of life in Texas.
Part I — Framework
- Section 1 — The Texas Living Exemption Set: What It Is and Why It Exists
- Section 2 — Built Into the Base, Not Bolted On After
- Section 3 — Tax Base Construction
- Section 4 — Visible at the Register and Invisible in Every Price
- Section 5 — Constitutional Architecture
- Section 6 — Universal Administration
- Section 7 — If the Amendment Fails: The Standalone TLES Act
Part II — The Thirteen TLES Exemptions
- TLES-1 — Groceries (Food at Home)
- TLES-2 — Residential Rent
- TLES-3 — Residential Utilities and Home Fuel
- TLES-4 — Prescription Drugs
- TLES-5 — Medical Care and Individual Health Premiums
- TLES-6 — Education (Credential-Resulting)
- TLES-7 — Motor Fuel — Gasoline and Diesel (Personal Use)
- TLES-8 — Childcare and Early Childhood Education
- TLES-9 — Primary Residence Home Purchase
- TLES-10 — Residential Property Insurance
- TLES-11 — Personal Auto Insurance
- TLES-12 — Individual Life Insurance
- TLES-13 — Primary Personal Vehicle Purchase or Lease
Part III — Summary, Legislation & References
The Texas Living Exemption Set
What it is, why it exists, and the thirteen categories that define it
The Texas Property Tax Replacement Plan (TPTRP) replaces every property tax in Texas, most state-level taxes, and all local sales taxes with a single TPTRP sales and use tax applied to transactions across the Texas economy, including business-to-business transactions that are exempt today.
At the center of that structure is the Texas Living Exemption Set (TLES) — thirteen categories of essential household spending removed from the tax base before any rate is set. Together they remove $906.0 billion a year of household spending from the base (see the TLES Values tab).
“The thirteen categories of spending that no Texas family should ever pay a transaction tax on — because they are the irreducible minimum cost of basic human life in Texas.”— TLES Design Principle
The TLES is not a political concession. It is the structural guarantee that a broad-base transaction tax remains fair — not through a rebate, not through an administrative process, but by simply never charging the rate on the things every Texas family must buy to live.
Who Bears the Most — Texas Households by Income Fifth
Texas has 11,449,769 households, about 2.29 million in each income fifth. Measured against income, today’s Texas tax system falls hardest on the households with the least. The lowest fifth pays an average of $5,462 a year in Texas state and local taxes — 31.7% of its income, or 16.5 weeks of work (see the Burden by Fifth tab). The top fifth pays 8.7% of its income. Nearly half of the lowest fifth’s burden (48%) comes through taxes it never sees, built into rent and prices.
The MIT Living Wage Context
The MIT Living Wage Calculator sets the pre-tax income a family needs to cover basic needs without public assistance. Households in the lowest fifth average $17,223, below every MIT family budget. The second fifth ($48,725) falls below every budget that includes children. The middle fifth ($81,206) sits near the Texas budget for a family of four with one earner ($77,772). For these families, the TLES categories — groceries, rent, utilities, medicine, childcare, fuel and a way to get to work — are most of what the budget is (see the MIT Budgets tab).
| # | Category | Annual Texas value | Share of TLES | Primary source and method |
|---|---|---|---|---|
| TLES-1 | Groceries (Food at Home) | $115.99B | 12.8% | BEA Texas 2025: food and nonalcoholic beverages for home, including soft drinks and candy |
| TLES-2 | Residential Rent | $70.05B | 7.7% | BEA Texas 2025: tenant rent (space rent, utilities excluded) |
| TLES-3 | Residential Utilities and Home Fuel | $46.66B | 5.2% | BEA Texas 2025: electricity $26.35B, natural gas $4.78B, water, sewer and trash $13.86B, fuel oil and other fuels $1.67B |
| TLES-4 | Prescription Drugs | $56.62B | 6.2% | BEA Texas 2025 pharmaceutical products × U.S. prescription share (82.5%) |
| TLES-5 | Medical Care and Individual Health Premiums | $287.88B | 31.8% | BEA Texas 2025 health care services $263.01B + CMS individual-market premiums $24.88B |
| TLES-6 | Education (Credential-Resulting) | $27.18B | 3.0% | BEA Texas 2025: higher education, K–12 and vocational schools |
| TLES-7 | Motor Fuel — Gasoline and Diesel (Personal Use) | $37.13B | 4.1% | BEA Texas 2025: household motor fuel |
| TLES-8 | Childcare and Early Childhood Education | $5.26B | 0.6% | BEA Texas 2025: child care and preschool |
| TLES-9 | Primary Residence Home Purchase | $118.05B | 13.0% | Texas REALTORS 2025 sales volume × 83% primary-use share (NAR Realtors Confidence Index) |
| TLES-10 | Residential Property Insurance | $19.75B | 2.2% | Texas Department of Insurance, CY2025 homeowners multiple peril |
| TLES-11 | Personal Auto Insurance | $35.42B | 3.9% | Texas Department of Insurance, CY2025 private passenger auto |
| TLES-12 | Individual Life Insurance | $12.57B | 1.4% | ACLI 2025, Texas life premiums × U.S. individual share |
| TLES-13 | Primary Personal Vehicle Purchase or Lease | $73.44B | 8.1% | BEA Texas 2025 new and used vehicles and motorcycles × 89.5% primary share = $68.53B, plus personal leases $4.91B (both deduced) |
| Total | All 13 TLES categories | $906.0B | 100.0% | Removed from the tax base before any rate is set |
| Income fifth | Households | Mean income | Texas taxes per household | Share of income | Paid directly | Passed through | Weeks of income |
|---|---|---|---|---|---|---|---|
| Q1 | 2,289,954 | $17,223 | $5,462 | 31.7% | $2,842 | $2,620 | 16.5 |
| Q2 | 2,289,954 | $48,725 | $7,650 | 15.7% | $4,148 | $3,502 | 8.2 |
| Q3 | 2,289,954 | $81,206 | $10,337 | 12.7% | $5,697 | $4,640 | 6.6 |
| Q4 | 2,289,954 | $128,146 | $13,616 | 10.6% | $7,947 | $5,669 | 5.5 |
| Q5 | 2,289,954 | $290,434 | $25,250 | 8.7% | $15,094 | $10,156 | 4.5 |
| Texas, all | 11,449,769 | $113,147 | $12,463 | 11.0% | $7,146 | $5,317 | 5.7 |
| Dallas County, all | 982,737 | $113,864 | $12,615 | 11.1% | $7,223 | $5,392 | 5.8 |
| HD109, all | 63,170 | $97,456 | $11,656 | 12.0% | $6,609 | $5,046 | 6.2 |
| Family | Texas: pre-tax budget | Texas taxes | Share | Dallas County (HD109): pre-tax budget | Texas taxes | Share |
|---|---|---|---|---|---|---|
| 1 adult, 0 children | $45,290 | $7,902 | 17.4% | $48,489 | $7,672 | 15.8% |
| 1 adult, 1 child | $74,391 | $9,933 | 13.4% | $78,832 | $10,206 | 12.9% |
| 1 adult, 2 children | $93,487 | $11,386 | 12.2% | $99,239 | $11,830 | 11.9% |
| 2 adults (1 working), 0 children | $61,036 | $8,896 | 14.6% | $64,034 | $9,157 | 14.3% |
| 2 adults (1 working), 2 children | $77,772 | $10,144 | 13.0% | $80,866 | $10,319 | 12.8% |
| 2 adults (both working), 2 children | $101,697 | $12,011 | 11.8% | $107,251 | $12,400 | 11.6% |
Built Into the Base, Not Bolted On After
The structural answer to regressivity — and what the household data shows
Texas has no income tax. That is a feature, not a bug — but it means the state must fund government through transaction taxes. The structural challenge with any broad-base transaction tax is regressivity: lower-income families spend a higher share of income than wealthier families, so a flat rate on all spending hits them proportionally harder.
The TLES solves this problem structurally — not through rebates or administrative means, but at the source. By removing thirteen essential living categories from the taxable base before any rate is applied, the TPTRP ensures that the tax applies only to spending beyond the basic cost of living.
The household data shows why that matters. TLES categories make up 53% of what the lowest-income fifth spends, against 31% for the top fifth. Every dollar a family spends in a TLES category is a dollar the TPTRP never taxes at the register.
| Income fifth | Mean income | All spending | Spending in TLES categories | TLES share of spending |
|---|---|---|---|---|
| Q1 | $17,223 | $37,045 | $19,510 | 53% |
| Q2 | $48,725 | $51,419 | $20,235 | 39% |
| Q3 | $81,206 | $59,627 | $25,552 | 43% |
| Q4 | $128,146 | $82,879 | $31,826 | 38% |
| Q5 | $290,434 | $140,351 | $43,567 | 31% |
| All households | — | $75,328 | $28,410 | 38% |
Tax Base Construction
What each TLES category removes from the tax base
The TPTRP builds its tax base from every taxable transaction in Texas, then removes the TLES before any rate is set. The TLES is not a credit or a refund applied after the fact; the transactions it covers are simply never part of the base the rate is applied to.
Together the thirteen categories remove $906.0 billion a year — about $79,128 for every Texas household.
| # | Category | Removed from the base | Share of TLES | Per Texas household |
|---|---|---|---|---|
| TLES-1 | Groceries (Food at Home) | $115.99B | 12.8% | $10,130 |
| TLES-2 | Residential Rent | $70.05B | 7.7% | $6,118 |
| TLES-3 | Residential Utilities and Home Fuel | $46.66B | 5.2% | $4,075 |
| TLES-4 | Prescription Drugs | $56.62B | 6.2% | $4,945 |
| TLES-5 | Medical Care and Individual Health Premiums | $287.88B | 31.8% | $25,143 |
| TLES-6 | Education (Credential-Resulting) | $27.18B | 3.0% | $2,374 |
| TLES-7 | Motor Fuel — Gasoline and Diesel (Personal Use) | $37.13B | 4.1% | $3,243 |
| TLES-8 | Childcare and Early Childhood Education | $5.26B | 0.6% | $459 |
| TLES-9 | Primary Residence Home Purchase | $118.05B | 13.0% | $10,310 |
| TLES-10 | Residential Property Insurance | $19.75B | 2.2% | $1,725 |
| TLES-11 | Personal Auto Insurance | $35.42B | 3.9% | $3,094 |
| TLES-12 | Individual Life Insurance | $12.57B | 1.4% | $1,098 |
| TLES-13 | Primary Personal Vehicle Purchase or Lease | $73.44B | 8.1% | $6,414 |
| Total | All 13 categories | $906.0B | 100.0% | $79,128 |
Visible at the Register and Invisible in Every Price
What Texans actually pay today — the direct taxes and the three layers built into prices
Texas state and local governments collected $192.35 billion in taxes in 2025 (hotel occupancy taxes excluded). Households pay part of that directly — the property tax on a home, the sales tax at the register, the motor vehicle tax at titling. Businesses pay the larger part first, $110.53 billion or 57.5%, and recover it through prices, wages and returns. Of that business-paid amount, $60.88 billion comes back to Texas households, and $49.65 billion is borne by people and owners outside Texas.
Renters pay property tax too, inside the rent. For Texas apartments, property tax takes 14.4% of every rent dollar (National Apartment Association, 2025). Rented houses and townhomes, which get no homestead exemption, carry the owner’s full tax bill, about 32% of the rent. The Texas Apartment Association told the Senate Finance Committee that about 20% of every rent dollar goes to property taxes.
Layer 1: Commercial Property Tax Pass-Through
Businesses pay $52.33 billion of the $89.45 billion in Texas property taxes first. Using the Comptroller’s incidence shares, $26.45 billion of that reaches Texas households through higher prices, lower wages and lower returns at every stage of the supply chain — the farm, the processor, the distributor, the retailer.
Layer 2: Business Personal Property (Inventory) Tax
Texas’s January 1 lien date taxes the market value of business personal property — including inventory on store shelves, in warehouses and on production floors. The Baker Institute (February 2025) identified the inventory tax as a cost that raises consumer prices. The TPTRP abolishes it completely on Day 1.
Layer 3: Franchise Tax Pyramiding
Texas charges 0.375% of taxable margin on retail and wholesale businesses and 0.75% on most other entities above the no-tax-due threshold ($2.47 million for 2024–25 reports; $2.65 million for 2026–27). Franchise and other business taxes total $9.28 billion, all paid first by businesses; $5.85 billion of it reaches Texas households. The TPTRP abolishes the franchise tax in full.
For each category: what Texas households spend, the Texas tax charged at purchase today, and the part of that tax the TLES removes, for Texas by income fifth, Dallas County and House District 109.
| Tax family | Collected | Paid first by businesses | Business share | Passed to Texas households | Borne outside Texas |
|---|---|---|---|---|---|
| Property taxes | $89.45B | $52.33B | 58.5% | $26.45B | $25.88B |
| Sales and use taxes | $63.59B | $26.35B | 41.4% | $13.49B | $12.87B |
| Motor vehicle taxes | $7.65B | $3.21B | 42.0% | $2.61B | $0.60B |
| Motor fuel taxes | $3.92B | $1.74B | 44.4% | $1.10B | $0.63B |
| Franchise and business taxes | $9.28B | $9.28B | 100.0% | $5.85B | $3.43B |
| Insurance taxes | $4.51B | $4.51B | 100.0% | $4.03B | $0.47B |
| Oil and gas production taxes | $8.00B | $8.00B | 100.0% | $2.85B | $5.15B |
| Tobacco and alcohol taxes | $2.93B | $2.08B | 71.0% | $2.08B | $0.00B |
| Utility and other taxes | $3.03B | $3.03B | 100.0% | $2.42B | $0.61B |
| All taxes | $192.35B | $110.53B | 57.5% | $60.88B | $49.65B |
| Level of government | Collected | Share | Borne per Texas household |
|---|---|---|---|
| State | $85.55B | 44.5% | $5,700 |
| County | $18.21B | 9.5% | $1,146 |
| City | $28.19B | 14.7% | $1,835 |
| School district | $41.65B | 21.7% | $2,585 |
| Special district | $18.74B | 9.7% | $1,197 |
| All levels | $192.35B | 100.0% | $12,463 |
Constitutional Architecture
Why the TLES cannot be weaponized — and can be enforced by every citizen
Why This Matters Before We Walk Through Each Exemption
Understanding the two-layer design that governs the TLES is essential context before examining each of the thirteen categories, because it answers the most important question a constituent can ask: “What stops future politicians from quietly expanding the exemption list to hand out favors — or stripping out protections to raise more revenue?”
The answer is the Texas Constitution — and every citizen’s standing to go directly to court to enforce it.
Layer 1 — The Constitutional Foundation: The Cost of Living Standard
The constitutional amendment implementing the TPTRP does not enumerate the thirteen TLES items directly. Instead, it establishes the governing rule — the Cost of Living Standard — that permanently defines what the Legislature may and may not exempt, now and in any future session.
“The Legislature may exempt from the sales and use tax imposed under this article only those transaction classes that directly and primarily affect the cost of living of individual Texas citizens and their immediate families. No exemption may be granted for any transaction the primary purpose or primary economic effect of which is commercial, business-to-business, income-producing, or profit-oriented, nor for any transaction class defined by the industry, profession, or commercial activity of the parties. Every exemption must apply uniformly to all Texas citizens and their families without distinction as to race, color, creed, religion, national origin, sex, income, or wealth. An exemption that fails this Standard is void.”
This single constitutional rule accomplishes three things simultaneously:
- It defines the only valid basis for an exemption. If a transaction cannot honestly be described as something that directly affects how much it costs a Texas family to live, it cannot be exempted. Groceries, rent, utilities, medicine — these are the irreducible cost of being alive in Texas. A manufacturer’s raw materials, a data center’s equipment, an oil company’s drilling infrastructure — these fail the test. The purchase of stocks, bonds, equity shares, or business ownership interests fails Definition 1 entirely; those transactions are structurally outside the tax base.
- It permanently closes the special-interest exemption pipeline. Under the current Texas sales tax system, the Legislature has created more than 100 specific exemptions, worth $51.16 billion in FY2025 (Texas Comptroller, 2025) — the product of decades of industry lobbying. The TPTRP’s Cost of Living Standard makes that entire category of legislative activity unconstitutional. The only path to any new exemption is a legitimate, citizen-facing, cost-of-living argument that survives constitutional scrutiny.
- It requires absolute uniformity. Any exemption the Legislature creates must apply to every Texas citizen equally — no means-tested exemptions, no income-limited exemptions. The TLES is a floor of protection for all Texans, not a targeted benefit program.
Layer 2 — The Starting TLES: Set by Legislation, Governed by the Constitution
The initial TLES — the thirteen categories exempt on Day 1 — is established by the Texas Legislature through the implementing statute. The Legislature may add or remove categories over time, but only subject to the constitutional Cost of Living Standard test. No entity below the Legislature — no city council, no county commissioners court, no school board — has any authority to modify the TLES. Any citizen may challenge any modification in court, and a prevailing plaintiff is entitled to attorney’s fees.
Under the TPTRP, commercial exemption-seeking is unconstitutional from Day 1. The Cost of Living Standard provides a clear, judicially enforceable test that any citizen may invoke — directly, without depending on the Comptroller, the Governor, or a legislative majority. No lobbyist can obtain an exemption for their client that wouldn’t pass the same test applied to a parent buying groceries.
TLES-13 and the Standard. A licensed driver’s one vehicle is how most Texans get to work, school, the grocery store and the doctor, so one personal-use vehicle per licensed driver, bought or leased, meets the Cost of Living Standard. Every additional vehicle, and every business vehicle, stays taxable.
If the amendment does not pass. The Standalone Edition of the TLES Act writes the same Cost of Living Standard into statute and makes the same thirteen categories the only sales and use tax exemptions under today’s Tax Code (Section 7).
Why Each TLES Item Passes the Standard — The Test Applied to Life Insurance
Life insurance is the clearest example of how the Cost of Living Standard works in practice. For lower- and middle-income families, a life insurance policy is the primary, often the only, financial instrument that protects their children and spouse from destitution if the breadwinner dies. The Cost of Living Standard test: “Does this directly affect the cost of living of individual Texas citizens and their immediate families?” For a family of four living at or below the MIT survival floor, the answer is unambiguously yes. This is the analysis applied to every TLES item, and to any future legislative proposal to add or remove one.
Universal Administration
How all 13 TLES categories are registered, certified, and enforced through one Comptroller mechanism
The thirteen TLES categories are administered through the Texas sales tax permit — a requirement already imposed on every Texas business that sells taxable goods or services. When a business files for its Texas sales tax permit under the TPTRP, the Comptroller’s permit application includes a designated TLES Certification Schedule listing each of the thirteen enacted TLES categories. Each business certifies under oath which of its products or services fall within a TLES-exempt category.
Mixed-transaction businesses that sell both TLES-exempt and non-exempt products track at the transaction level. A pharmacy selling TLES-4 exempt prescription drugs alongside non-exempt OTC products applies the TPTRP to the OTC sale only.
Household-Only, Not Category-Wide: Why Commercial Fuel, Utilities, and Insurance Still Pay
Every TLES exemption applies only to the household, cost-of-living portion of a category — never to the category as a whole. This distinction is established by Section 5A of the TLES Act, the provision that operationalizes the entire TLES architecture at the permit level. Commercial, industrial, agricultural, and government purchases of the same goods and services remain fully taxable under the TPTRP Sales and Use Tax Act, even when an individual household’s purchase of the identical product is TLES-exempt.
The Comptroller implements this through permit-level accounting: a business that sells into both markets — a utility serving both homes and factories, an insurer writing both personal and commercial lines, a gas station selling to both commuters and delivery fleets — must certify and track the residential share of its sales separately from the commercial share, using per-transaction certification, aggregate share reporting, or a hybrid method, depending on the category.
For the TLES categories that touch a constitutional funding dedication under Article VIII, Section 7-a (motor fuels) or Section 7-c (motor vehicles) of the Texas Constitution, or Section 2.02(e) of the constitutional amendment (medical services and insurance) — TLES-3 (Utilities), TLES-5 (Medical Care), TLES-7 (Motor Fuel), TLES-10 (Residential Property Insurance), TLES-11 (Personal Auto Insurance) and TLES-13 (Primary Personal Vehicle) — the commercial share of sales remains a taxable transaction and continues to fund that dedication directly. Only the household share is ever exempted; the dedicated funding stream itself is untouched.
This closes an obvious line of attack before it starts: critics might otherwise claim the TLES “guts” dedicated funding streams — like motor-fuel-funded road maintenance or insurance-premium-funded programs — when in fact only the household portion of that spending is ever removed from the tax base, and every dollar of commercial activity in that category keeps paying into the same dedication it always has.
Two certificates. Two TLES categories turn on a buyer’s own statement. A buyer claiming TLES-9 files the Primary Residence Certificate (Section 6A of the TLES Act) at closing. A driver claiming TLES-13 files the Primary Personal Vehicle Certificate (Section 6B) at titling or lease signing, attesting that the vehicle is the person’s only personal-use vehicle. Both are sworn, both are part of the public record, and both carry recapture and penalties for a false attestation.
Home fuel is a primary-residence item. Utility service billed by a utility (electric, gas, water, sewer, trash) is exempt at any residential property. Fuel the buyer purchases directly — propane, heating oil, kerosene, firewood — is exempt only for the buyer’s primary residence. Fuel for vehicles, farms, businesses or other property stays taxable. Commercial and fleet vehicles stay taxable too, and keep funding the motor vehicle highway dedication.
The TLES is enforced through four independent and concurrent channels:
- Comptroller permit enforcement — Annual permit renewal and periodic audit. False certification is a Class A misdemeanor (first offense) and third-degree felony (subsequent).
- Private right of action — Any person harmed by a business falsely claiming TLES exemption may sue in district court. Attorney’s fees awarded to a prevailing plaintiff.
- Comptroller whistleblower program — Confidential tips resulting in successful enforcement earn the tipster 10% of recovered taxes, penalties, and interest.
- Ordinary criminal law — Tax fraud under the TPTRP is prosecuted under existing Texas Penal Code provisions for theft by deception and fraudulent filing.
When a constituent asks “What stops businesses from cheating the TLES?” the answer is: all four of these simultaneously, without coordination required between channels.
If the Amendment Fails: The Standalone TLES Act
The same thirteen categories, enacted under today’s Tax Code
The TLES Act is written to take effect with the constitutional amendment. If voters do not approve the amendment, the TLES does not have to wait. The Standalone Edition of the TLES Act sets the same thirteen categories as the only exemptions from the sales and use tax under the Tax Code as it stands today. If voters do approve the amendment, the parts of the Standalone Edition that amend today’s sales and motor vehicle tax chapters expire on the implementation date, and the TLES continues under the new sales and use tax.
What it does
- Writes the Cost of Living Standard, and the amendment’s definitions of a taxable transaction, an agent transaction and the Definition Filter, into statute.
- Makes every service taxable except the services in a TLES category, such as medical care, education and childcare.
- Rewrites today’s food, prescription, water and utility exemptions to the TLES text, so soft drinks and candy, home fuel and owner-paid residential utilities become exempt.
- Repeals the other exemptions: the sale-for-resale rules and 66 other exemption sections of the sales tax chapter, and 13 sections of the motor vehicle tax chapter.
- Adds the primary-vehicle exemption to the motor vehicle sales tax, whether the vehicle is bought from a dealer or a private seller, or leased.
- Bars every level of government from taxing a TLES purchase, including the local option some cities use today to tax residential gas and electricity.
What stays outside the tax
Transactions that federal law or the U.S. Constitution protect stay outside the tax: purchases by the federal government, food bought with SNAP benefits, internet access and goods shipped out of state. Four structural rules that prevent the same item from being taxed twice stay as definitions, and so do the Texas Constitution’s bans on taxing real estate transfers and securities trades (Art. VIII, §§29 and 30).
What it does not do
It sets no tax rate, and it does not decide how any new revenue is used; both are left to the Legislature. The motor fuel, insurance premium and other excise taxes stay in place. Without the amendment, a later Legislature could change the statute, so the bill requires any new exemption to amend it expressly. It takes effect September 1, 2027.
| Item | FY2025 value |
|---|---|
| Exemptions repealed (Comptroller values known) | $17.15B |
| Services made taxable (selected list) | $10.52B |
| Current exemptions kept, rewritten to the TLES text | $6.87B |
| New TLES items: soft drinks and candy (upper bound) | $1.10B |
| New TLES item: home fuel other than natural gas | $0.10B |
| New TLES item: primary vehicle (dealer purchases) | $4.28B |
The full bill text is in the second tab of the Proposed Legislation section below.
Each section below details what is covered, what Texans spend and pay in tax at purchase today, and what the TLES changes.
Groceries (Food at Home)
Annual Texas Value: $115.99B • U.S. Bureau of Economic Analysis, Texas 2025
TLES-1 exempts food and nonalcoholic beverages bought for home consumption, whoever sells them — a grocery store, a supermarket, a farmers market or a convenience store. It carries forward the existing Texas sales tax exemption for food under Tax Code §151.314 and closes its gaps: soft drinks and candy, taxed at the register today, are exempt under TLES-1.
- Food and food ingredients for preparation and consumption at home
- Fresh produce, meat, poultry, seafood, dairy, eggs, bread
- Soft drinks, juices, milk drinks and other nonalcoholic beverages
- Candy and confectionery
- Bottled and jug drinking water for home use
- Baby formula and infant food
- Restaurant meals and food prepared for immediate consumption, eaten in or taken out
- Alcoholic beverages
- Ice
- Tobacco products
- Vitamins, supplements and over-the-counter drugs (prescriptions are TLES-4)
- Non-food items (household supplies, paper goods, personal care)
Texas charges no sales tax on most groceries today, but it does tax soft drinks and candy at up to 8.25% (Tax Code §151.314(c); Comptroller Publication 96-280), and grocery prices still carry the property, inventory and franchise taxes paid along the farm-to-shelf supply chain (Section 4). Under the TPTRP those business taxes are repealed, and TLES-1 keeps the new tax off the grocery bill entirely.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $3,051 | 8.2% | $35 | $35 |
| Q2 | $48,725 | $3,455 | 6.7% | $46 | $46 |
| Q3 | $81,206 | $4,442 | 7.4% | $61 | $61 |
| Q4 | $128,146 | $5,699 | 6.9% | $70 | $70 |
| Q5 | $290,434 | $7,751 | 5.5% | $99 | $99 |
| Texas, all households | — | $4,914 | 6.5% | $63 | $63 |
| Dallas County, all households | — | $4,832 | 6.6% | $62 | $62 |
| HD109, all households | — | $4,655 | 6.8% | $60 | $60 |
Residential Rent
Annual Texas Value: $70.05B • U.S. Bureau of Economic Analysis, Texas 2025 (tenant rent)
TLES-2 exempts monthly rent paid by Texas tenants for a primary residential dwelling — apartments, houses, duplexes and mobile homes. The value is space rent only; utilities are counted in TLES-3, so the two do not overlap.
- Monthly rent on an apartment, house, duplex or mobile home that is the tenant’s primary residence
- Rent paid with Section 8 vouchers or in public housing
- Manufactured-home lot rent for a primary residence
- Short-term and vacation rentals (Airbnb, VRBO, hotel stays)
- Commercial leases and office space
- Rentals of property that is not the tenant’s primary residence
- Storage unit rentals
Rent carries no sales tax today, but it does carry property tax. The landlord’s property tax bill is recovered in the rent: about 14% of the rent for an apartment and about a third of the rent for a rented house, which gets no homestead exemption. Across all Texas renters, property tax is about 21% of rent, or $3,315 a year per renter household. TLES-2 keeps rent out of the new tax; the property tax inside the rent is ended by the plan’s repeal of property taxes, not by the TLES.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $6,133 | 16.6% | $0 | $0 |
| Q2 | $48,725 | $6,790 | 13.2% | $0 | $0 |
| Q3 | $81,206 | $5,560 | 9.3% | $0 | $0 |
| Q4 | $128,146 | $6,215 | 7.5% | $0 | $0 |
| Q5 | $290,434 | $4,363 | 3.1% | $0 | $0 |
| Texas, all households | — | $5,791 | 7.7% | $0 | $0 |
| Dallas County, all households | — | $5,820 | 7.9% | $0 | $0 |
| HD109, all households | — | $5,957 | 8.7% | $0 | $0 |
| Area | Rental home | Renter households | Contract rent per month | Property tax inside rent per year | Share of rent |
|---|---|---|---|---|---|
| Texas | Single-family home or townhome | 1,337,525 | $1,434 | $5,541 | 32.2% |
| Texas | Small multifamily (2–4 units) | 533,998 | $1,090 | $3,049 | 23.3% |
| Texas | Apartment building (5+ units) | 2,260,516 | $1,303 | $2,257 | 14.4% |
| Texas | All renters | 4,314,892 | $1,299 | $3,315 | 21.3% |
| Dallas County | All renters | 483,826 | $1,428 | $3,383 | 19.7% |
| HD109 | All renters | 18,580 | $1,436 | $4,002 | 23.2% |
Residential Utilities and Home Fuel
Annual Texas Value: $46.66B • U.S. Bureau of Economic Analysis, Texas 2025
TLES-3 exempts utility service — electricity, natural gas, water, wastewater, trash and recycling collection and similar services — provided to any residential property, whether the bill goes to the occupant or to the owner. It also exempts any fuel a household buys for use at its primary residence: propane, heating oil, kerosene and firewood. Utility service and fuel for commercial, industrial or agricultural property stay taxable.
Household-only note: Under Section 5A of the TLES Act, utility providers certify residential versus commercial service at the permit level. Only the residential share is exempt; the commercial share stays taxable.
- Electricity, natural gas, water, wastewater, trash and recycling service at any residential property
- Service billed to the owner of a residential property, including a landlord or an apartment company, and vacant units offered for rent
- Propane, heating oil, kerosene and firewood for the buyer’s primary residence, for any use in the home
- Utility service to commercial, industrial or agricultural property
- Commercial waste and recycling contracts
- Fuel for a vehicle, a farm, ranch or business, or a property that is not the buyer’s primary residence
Texas Weather Makes Utilities Non-Optional
The February 2021 winter storm caused 246 deaths in Texas, most from hypothermia, according to the Texas Department of State Health Services. Summer heat sends Texans to emergency rooms every year. Residential utilities are not discretionary spending. For rural Texans who heat and cook with propane, TLES-3 covers the fuel delivered to the tank as well as the utility bill. Today, residential electricity, natural gas and water are already free of state sales tax, but propane, heating oil and firewood are taxed at up to 8.25%, because the Comptroller reads the residential exemption for “gas” as natural gas only.
BEA puts Texas household spending on these delivered fuels at about $1.7 billion a year. The Energy Information Administration’s narrower residential estimate is about $0.5 billion; the TLES value uses BEA.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $2,700 | 7.3% | $3 | $3 |
| Q2 | $48,725 | $3,125 | 6.1% | $2 | $2 |
| Q3 | $81,206 | $3,740 | 6.3% | $4 | $4 |
| Q4 | $128,146 | $3,913 | 4.7% | $3 | $3 |
| Q5 | $290,434 | $5,129 | 3.7% | $3 | $3 |
| Texas, all households | — | $3,750 | 5.0% | $3 | $3 |
| Dallas County, all households | — | $3,709 | 5.0% | $3 | $3 |
| HD109, all households | — | $3,617 | 5.3% | $3 | $3 |
| Utility or fuel | Spending | Current tax at purchase | Current tax removed by the TLES | Tax today |
|---|---|---|---|---|
| Electricity (home) | $2,350 | $0 | $0 | State sales tax exempt (§151.317); some cities tax residential use (§321.105) |
| Natural gas (home) | $396 | $0 | $0 | State sales tax exempt (§151.317); some cities tax residential use (§321.105) |
| Water, sewer and trash | $969 | $0 | $0 | Exempt (§151.315); residential trash not taxed |
| Propane, heating oil, kerosene, firewood | $35 | $3 | $3 | Sales tax up to 8.25% (only natural gas is exempt today) |
Prescription Drugs
Annual Texas Value: $56.62B • U.S. Bureau of Economic Analysis, Texas 2025 × U.S. prescription share
TLES-4 exempts prescription medications dispensed with a valid prescription, prescription medical devices (insulin pumps, CPAP machines, prescribed orthotics, hearing aids) and home infusion therapy services. The Texas value applies the national prescription share of pharmaceutical spending (82.5%) to BEA’s Texas figure.
- All prescription medications dispensed with a valid prescription
- Insulin and prescription diabetic supplies
- Prescribed medical devices: insulin pumps, CPAP/BiPAP, prescribed orthotics, hearing aids
- Home infusion therapy services
- Compounded medications prepared by a licensed pharmacy per prescription
- Over-the-counter medications
- Vitamins and supplements (non-prescription)
- Cosmetic pharmaceuticals
- Non-prescription medical devices and personal care appliances
Texas already exempts prescription drugs from sales tax (Tax Code §151.313), but that exemption is a statute any Legislature can repeal. Under the TPTRP, TLES-4 is protected by the constitutional Cost of Living Standard and enforceable by any citizen. Over-the-counter drugs, exempt today, are not a TLES item.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $416 | 1.1% | $0 | $0 |
| Q2 | $48,725 | $427 | 0.8% | $0 | $0 |
| Q3 | $81,206 | $476 | 0.8% | $0 | $0 |
| Q4 | $128,146 | $470 | 0.6% | $0 | $0 |
| Q5 | $290,434 | $723 | 0.5% | $0 | $0 |
| Texas, all households | — | $504 | 0.7% | $0 | $0 |
| Dallas County, all households | — | $502 | 0.7% | $0 | $0 |
| HD109, all households | — | $481 | 0.7% | $0 | $0 |
Medical Care and Individual Health Premiums
Annual Texas Value: $287.88B • U.S. Bureau of Economic Analysis, Texas 2025; CMS 2024
TLES-5 exempts payments for licensed medical and dental services provided directly to individual patients: physician visits, hospital care, outpatient services, laboratory and imaging, dental, vision and mental health care, physical therapy, home health, hospice, palliative care, skilled nursing and licensed personal-care attendant services. Health and dental insurance premiums paid by individual policyholders or family units are included, because health insurance is the financial mechanism that makes medical care accessible.
Household-only note: Group premiums paid by an employer are a business-to-business transaction and stay taxable to the employer under Section 5A of the TLES Act.
- All physician, hospital and outpatient services
- Dental, vision and mental health services
- Physical therapy, home health, hospice and palliative care
- Health and dental insurance premiums paid by individual policyholders or families
- Licensed personal-care attendant and skilled nursing services
- Cosmetic procedures without medical necessity
- Elective spa and wellness services
- Veterinary services for non-service animals
- Group premiums paid by an employer
Medical services carry no sales tax today, but health insurance premiums carry the insurance premium tax of 1.75% (Insurance Code §222.003). Under the TPTRP that tax is repealed, and TLES-5 keeps the new tax off both care and individual premiums. TLES-5 is the largest category: $263.01 billion in care and $24.88 billion in individual-market premiums. No one should be taxed for going to the doctor.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $2,369 | 6.4% | $33 | $33 |
| Q2 | $48,725 | $3,734 | 7.3% | $53 | $53 |
| Q3 | $81,206 | $3,838 | 6.4% | $54 | $54 |
| Q4 | $128,146 | $5,463 | 6.6% | $76 | $76 |
| Q5 | $290,434 | $7,994 | 5.7% | $106 | $106 |
| Texas, all households | — | $4,745 | 6.3% | $65 | $65 |
| Dallas County, all households | — | $4,644 | 6.3% | $64 | $64 |
| HD109, all households | — | $4,413 | 6.4% | $61 | $61 |
Education (Credential-Resulting)
Annual Texas Value: $27.18B • U.S. Bureau of Economic Analysis, Texas 2025
TLES-6 exempts education services that result in a credential, certification, course-completion record or license, when bought by or for an individual Texas resident for the person’s own education or career: private K–12 tuition, college and university tuition, vocational and trade schools, professional certification and licensing exams, workforce training and online courses that issue a completion record.
- K–12 tuition at accredited private and parochial schools
- Public and private college and university tuition and fees
- Vocational and trade school programs
- Professional certification and licensing exam fees
- Test preparation and online courses that issue a completion record
- Hobby and recreational classes with no credential
- Sports camps and recreational programs
- Corporate training bought by an employer for employees
Education services carry no sales tax today, and TLES-6 keeps it that way when every other service becomes part of the base. The path out of poverty runs through a credential — not a tax bill.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $235 | 0.6% | $0 | $0 |
| Q2 | $48,725 | $194 | 0.4% | $0 | $0 |
| Q3 | $81,206 | $644 | 1.1% | $0 | $0 |
| Q4 | $128,146 | $900 | 1.1% | $0 | $0 |
| Q5 | $290,434 | $2,257 | 1.6% | $0 | $0 |
| Texas, all households | — | $869 | 1.2% | $0 | $0 |
| Dallas County, all households | — | $831 | 1.1% | $0 | $0 |
| HD109, all households | — | $715 | 1.0% | $0 | $0 |
Motor Fuel — Gasoline and Diesel (Personal Use)
Annual Texas Value: $37.13B • U.S. Bureau of Economic Analysis, Texas 2025 (household motor fuel)
TLES-7 exempts gasoline and diesel bought at retail pumps for a personal, non-commercial vehicle, including a primary personal vehicle under TLES-13 and any other vehicle used for commuting and personal transportation. Commercial fleet fuel, agricultural fuel and aviation fuel stay taxable. In a state as large as Texas, with little public transit outside the major metro cores, a car and the fuel to run it are how most Texans get to work.
Household-only note: Motor fuel touches a constitutional funding dedication (Art. VIII, Sec. 7-a). Under Section 5A of the TLES Act, fuel retailers certify personal versus commercial and fleet sales; only the personal-use share is exempt, and every commercial gallon keeps funding the dedication.
- Gasoline and diesel for a personal vehicle
- Fuel for commuting, school and medical trips
- Fuel for a primary personal vehicle under TLES-13
- Commercial trucking and freight fuel
- Fleet fuel for company vehicles
- Agricultural fuel
- Aviation fuel
- Fuel bought for resale
Today Texas taxes motor fuel at 20 cents a gallon for gasoline and diesel (Tax Code Ch. 162), on top of the federal tax (18.4 cents a gallon for gasoline). Under the TPTRP the state motor fuel tax is repealed, and TLES-7 keeps the new tax off the personal fill-up. At the 2025 Texas average price of $2.762 a gallon (EIA), the state tax is about 7% of the pump price.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $1,576 | 4.3% | $114 | $114 |
| Q2 | $48,725 | $2,005 | 3.9% | $145 | $145 |
| Q3 | $81,206 | $2,681 | 4.5% | $194 | $194 |
| Q4 | $128,146 | $3,017 | 3.6% | $218 | $218 |
| Q5 | $290,434 | $3,543 | 2.5% | $257 | $257 |
| Texas, all households | — | $2,588 | 3.4% | $187 | $187 |
| Dallas County, all households | — | $2,547 | 3.5% | $184 | $184 |
| HD109, all households | — | $2,515 | 3.7% | $182 | $182 |
Childcare and Early Childhood Education
Annual Texas Value: $5.26B • U.S. Bureau of Economic Analysis, Texas 2025 (child care and preschool)
TLES-8 exempts payments to licensed childcare providers: daycare centers, licensed home-based providers, pre-kindergarten programs, before- and after-school care and licensed summer programs.
- Licensed daycare centers (full-day and part-time)
- Licensed home-based childcare providers
- Pre-kindergarten at licensed providers
- Before- and after-school care
- Licensed summer care programs
- Adult eldercare services
- Tutoring beyond the scope of licensed childcare
- Unlicensed informal arrangements
Child Care Aware of America reports that center-based infant care in Texas averaged $11,349 a year in 2024. Childcare carries no sales tax today; TLES-8 keeps it untaxed when other services become part of the base. Any tax on childcare is a tax on a parent’s ability to work.
The TLES value of $5.26 billion is BEA’s measure of what Texas households themselves spend on child care and preschool; care paid for by subsidies or employers is not household spending and is not counted.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $102 | 0.3% | $0 | $0 |
| Q2 | $48,725 | $136 | 0.3% | $0 | $0 |
| Q3 | $81,206 | $112 | 0.2% | $0 | $0 |
| Q4 | $128,146 | $571 | 0.7% | $0 | $0 |
| Q5 | $290,434 | $748 | 0.5% | $0 | $0 |
| Texas, all households | — | $342 | 0.5% | $0 | $0 |
| Dallas County, all households | — | $322 | 0.4% | $0 | $0 |
| HD109, all households | — | $298 | 0.4% | $0 | $0 |
Primary Residence Home Purchase
Annual Texas Value: $118.05B • Texas REALTORS 2025 sales volume × 83% primary-use share
TLES-9 exempts the purchase price of a home the buyer designates and actually occupies as a primary residence — a first home, a move-up or lateral purchase, or a relocation. Investment purchases, second homes and commercial real estate stay in the taxable base.
- Purchase price of a primary, owner-occupied residence
- New construction bought for primary occupancy
- Manufactured or mobile home bought as a permanent primary residence
- Investment property purchases
- Vacation and second-home purchases
- Commercial real estate transactions
- Land purchases without a residence
The value starts from Texas REALTORS’ 2025 sales volume and applies an 83% primary-use share; the National Association of Realtors’ Realtors Confidence Index reports that 15% to 21% of 2025 buyers bought for non-primary use.
| Item | Annual Texas value | Tax today | Under the TLES |
|---|---|---|---|
| Purchase of a primary residence | $118.05B | No sales tax on a home purchase; the Texas Constitution bars a tax on the transfer of a home (Art. VIII, §29) | Stays untaxed |
| Property tax on the home after purchase | — | Property tax paid every year by the owner | Not changed by the TLES; property tax is ended by the plan’s repeal |
The Primary Residence Certificate: Section 6A
TLES-9 is administered at closing through the Primary Residence Certificate, established by Section 6A of the TLES Act. The Certificate is a plain-language document that a buyer claiming the TLES-9 exemption signs and files under penalty of perjury, attesting to primary-occupancy intent and, where applicable, to the qualifying-occupancy conditions on any prior residence being retained.
Two features of the Section 6A framework strengthen the Certificate beyond a simple sworn statement:
- Full text printed on the Certificate. The Certificate itself prints the complete text of the TLES-9(b), (c), and (d) conditions — the short-occupancy rule, the six-year qualifying occupancy rule, and the investment-purchase exclusion — directly on the document. Every buyer, seller, and closing agent has actual notice of the law at the moment of signing, which materially strengthens any later enforcement action against a false attestation.
- Texas Sales and Use Tax Portal integration. The Comptroller integrates receipt and indexing of Primary Residence Certificates directly into the Texas Sales and Use Tax Portal (Section 490.073, Government Code), coordinating with closing agents, title companies, and county recorders. A filed Certificate also satisfies the residential-versus- commercial certification otherwise required under Section 151A.702, Tax Code — so buyers and closing agents are not required to complete a duplicate certification for the same transaction.
The Certificate is filed with the deed and becomes part of the public property record, publicly accessible to any Texas citizen. Any citizen who discovers a violation of the attested conditions has standing to sue, with a prevailing plaintiff entitled to recover back taxes, penalties, interest, and reasonable attorney’s fees.
Residential Property Insurance
Annual Texas Value: $19.75B • Texas Department of Insurance, CY2025 homeowners multiple peril
TLES-10 exempts premiums on homeowners, renters, flood, and condominium or cooperative owners’ insurance for a primary residence. Texas faces hurricanes, tornadoes, hail, winter storms and flooding; property insurance is required by every mortgage lender and is the only protection most families have against catastrophic loss.
Household-only note: Under Section 5A of the TLES Act, insurers certify personal-lines versus commercial-lines premiums; only personal policyholder premiums on a primary residence are exempt, and commercial and landlord policies stay taxable.
- Homeowners insurance on a primary residence
- Renters insurance on a primary rental unit
- Condominium and cooperative owners’ insurance
- Flood insurance on a primary residence (NFIP and private)
- Investment and rental property insurance
- Vacation and second-home insurance
- Commercial property insurance
- Landlord policies
Today these premiums carry the 1.6% property and casualty insurance premium tax (Insurance Code §221.002). Under the TPTRP that tax is repealed, and TLES-10 keeps the new tax off the premium.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $1,340 | 3.6% | $21 | $21 |
| Q2 | $48,725 | $1,157 | 2.3% | $19 | $19 |
| Q3 | $81,206 | $1,227 | 2.1% | $20 | $20 |
| Q4 | $128,146 | $1,453 | 1.8% | $23 | $23 |
| Q5 | $290,434 | $3,335 | 2.4% | $53 | $53 |
| Texas, all households | — | $1,725 | 2.3% | $28 | $28 |
| Dallas County, all households | — | $1,694 | 2.3% | $27 | $27 |
| HD109, all households | — | $1,521 | 2.2% | $24 | $24 |
Personal Auto Insurance
Annual Texas Value: $35.42B • Texas Department of Insurance, CY2025 private passenger auto
TLES-11 exempts personal auto insurance premiums on personal, non-commercial vehicles, including the minimum liability coverage every registered vehicle must carry (Transportation Code §601.072) and comprehensive, collision, uninsured motorist and personal injury protection coverage. A tax on a purchase the law requires is a tax on obeying the law.
Household-only note: Under Section 5A of the TLES Act, insurers certify personal versus commercial-fleet premiums; only personal-vehicle premiums are exempt, and fleet and trucking policies stay taxable.
- Personal auto liability insurance (state minimum and above)
- Collision and comprehensive coverage
- Uninsured and underinsured motorist coverage
- Personal injury protection
- Motorcycle insurance for personal use
- Commercial fleet insurance
- Trucking insurance
- Business-use and for-hire vehicle coverage
Today auto premiums carry the 1.6% property and casualty insurance premium tax (Insurance Code §221.002). Under the TPTRP that tax is repealed, and TLES-11 keeps the new tax off the premium.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $1,024 | 2.8% | $16 | $16 |
| Q2 | $48,725 | $1,535 | 3.0% | $25 | $25 |
| Q3 | $81,206 | $1,993 | 3.3% | $32 | $32 |
| Q4 | $128,146 | $2,476 | 3.0% | $40 | $40 |
| Q5 | $290,434 | $3,138 | 2.2% | $50 | $50 |
| Texas, all households | — | $2,059 | 2.7% | $33 | $33 |
| Dallas County, all households | — | $2,016 | 2.7% | $32 | $32 |
| HD109, all households | — | $1,966 | 2.9% | $31 | $31 |
Individual Life Insurance
Annual Texas Value: $12.57B • ACLI 2025, Texas life premiums × U.S. individual share
TLES-12 exempts premiums on personal life insurance policies held by a natural person for the benefit of the person’s immediate family — term, whole, universal, indexed universal and indexed whole life — including any cash-accumulation component. Life insurance is the primary protection Texas families have against the loss of a working parent’s income.
- Individual term life premiums
- Individual whole and universal life premiums
- Indexed universal and indexed whole life premiums
- Policies held by the insured for the immediate family
- Corporate-owned life insurance
- Key-person policies
- Other business-owned life insurance
Life Insurance Is Not Investment Income — It Is Family Protection
When a 35-year-old Texas father buys a 20-year term policy, he is buying the guarantee that if he dies, his children will not lose their home and his spouse will not have to choose between rent and groceries while grieving. That act of financial responsibility is exempt from the TPTRP tax.
The value starts from ACLI’s 2025 Texas life premiums and applies the U.S. share of life premiums paid on individual policies, so group and business-owned coverage is not counted. Today life premiums carry the 1.75% insurance premium tax (Insurance Code §222.003); under the TPTRP that tax is repealed, and TLES-12 keeps the new tax off the premium.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $141 | 0.4% | $2 | $2 |
| Q2 | $48,725 | $220 | 0.4% | $4 | $4 |
| Q3 | $81,206 | $361 | 0.6% | $6 | $6 |
| Q4 | $128,146 | $449 | 0.5% | $8 | $8 |
| Q5 | $290,434 | $764 | 0.5% | $13 | $13 |
| Texas, all households | — | $394 | 0.5% | $7 | $7 |
| Dallas County, all households | — | $383 | 0.5% | $7 | $7 |
| HD109, all households | — | $357 | 0.5% | $6 | $6 |
Primary Personal Vehicle Purchase or Lease
Annual Texas Value: $73.44B • BEA Texas 2025 vehicles × 89.5% primary share, plus personal leases (deduced)
TLES-13 exempts one personal-use vehicle per licensed Texas driver — a car, pickup, van or SUV up to 10,000 pounds, or a motorcycle — new or used, whether it is bought or leased for more than 180 days. The test is the person’s only means of vehicular transportation: every vehicle after the first is taxed. Each licensed driver in a household may designate one vehicle.
Household-only note: Vehicles titled or registered to a business, or used mainly for business, farm or for-hire purposes, stay taxable and keep funding the motor vehicle highway dedication (Art. VIII, Sec. 7-c).
- One personal-use vehicle per licensed driver, new or used, bought from a dealer or a private seller
- A replacement at any time, if it is the person’s only personal-use vehicle after the transaction (including a trade-in)
- Lease payments on a personal lease of more than 180 days for the person’s only vehicle
- Motorcycles
- Every additional vehicle
- Short-term rentals (180 days or less)
- Business-titled or commercially registered vehicles
- A dealer’s or leasing company’s own purchase for resale or lease
- Parts, accessories, service contracts and repairs
How it is claimed. The buyer or lessee files the Primary Personal Vehicle Certificate (Section 6B of the TLES Act) at the sale or lease signing and at titling, attesting that the vehicle is the person’s only personal-use vehicle. If the vehicle moves to a business or commercial use within 12 months, the exemption is forfeited and the tax is due with interest. Any citizen has standing to enforce it.
How the value is built. BEA reports Texas household spending of $48.40 billion on new vehicles and $26.19 billion on used vehicles in 2025. BEA publishes motorcycles only nationally, so the Texas figure ($1.97 billion) applies the national motorcycle share of the recreational-vehicle line, a deduction from two official tables. The primary share, 89.5%, is Texas licensed drivers (FHWA) divided by household vehicles (ACS) plus registered motorcycles (FHWA). It assumes primary vehicles account for the same share of purchase dollars as of the vehicles on the road, an approximation. Personal leases add $4.91 billion, also deduced from BEA’s national leasing share. Total: $73.44 billion.
Today Texas taxes vehicle purchases at 6.25% under the motor vehicle sales tax (Tax Code Ch. 152). Under the TPTRP that tax is repealed, and TLES-13 keeps the new tax off a household’s primary vehicles.
| Households | Mean income | Spending per household | Share of all spending | Current tax at purchase | Current tax removed by the TLES |
|---|---|---|---|---|---|
| Q1 | $17,223 | $3,511 | 9.5% | $219 | $196 |
| Q2 | $48,725 | $1,473 | 2.9% | $92 | $82 |
| Q3 | $81,206 | $4,710 | 7.9% | $294 | $263 |
| Q4 | $128,146 | $6,670 | 8.0% | $417 | $373 |
| Q5 | $290,434 | $12,984 | 9.3% | $812 | $726 |
| Texas, all households | — | $5,990 | 8.0% | $374 | $335 |
| Dallas County, all households | — | $5,749 | 7.8% | $359 | $322 |
| HD109, all households | — | $5,192 | 7.6% | $324 | $290 |
All thirteen TLES categories side by side for Texas, Dallas County and House District 109; the two proposed bills; and the annotated bibliography.
What the TLES Means for Every Texas Family
Every category side by side, for Texas, Dallas County and House District 109
The TLES removes $906.0 billion a year of household spending from the tax base. For a family, that means the groceries, the rent, the utility bill, the prescriptions, the doctor, the school, the gas tank, the childcare, the home, the insurance and the primary vehicle all carry no TPTRP tax at the register.
The All Categories tab shows every category in the household budget that contains a TLES item: what Texas households spend on it, the Texas tax charged at purchase today, and the part of that tax the TLES removes. On average, that is $721 a year per Texas household, $701 in Dallas County and $659 in House District 109. Taxes built into prices — property taxes passed through rent and prices, inventory and franchise taxes — are not counted here.
“The thirteen exemptions of the Texas Living Exemption Set are not a favor granted by the Legislature. They are a boundary on the state’s taxing authority — a permanent declaration that the cost of living in Texas is beneath the reach of the government that serves you.”— TPTRP Policy Foundation Statement
| Spending category | TLES category | Texas spending | Current tax at purchase (Texas) | Current tax removed by the TLES: Texas | Dallas County | HD109 | What the TLES changes |
|---|---|---|---|---|---|---|---|
| Food at home (groceries) | TLES-1 | $4,914 | $63 | $63 | $62 | $60 | Soft drinks and candy become exempt; ice stays taxable |
| Rent (tenant) | TLES-2 | $5,791 | $0 | $0 | $0 | $0 | Rent stays untaxed |
| Homeowners and renters insurance | TLES-10 | $1,725 | $28 | $28 | $27 | $24 | Premium tax ends; no replacement tax on the premium |
| Electricity (home) | TLES-3 | $2,350 | $0 | $0 | $0 | $0 | No tax at any level of government |
| Natural gas (home) | TLES-3 | $396 | $0 | $0 | $0 | $0 | No tax at any level of government |
| Water, sewer and trash | TLES-3 | $969 | $0 | $0 | $0 | $0 | No change: still untaxed |
| Propane, heating oil, kerosene, firewood | TLES-3 | $35 | $3 | $3 | $3 | $3 | Exempt for the primary residence |
| Childcare (personal services) | TLES-8 | $342 | $0 | $0 | $0 | $0 | Stays untaxed |
| Vehicle purchases | TLES-13 (one per licensed driver) | $5,990 | $374 | $335 | $322 | $290 | Primary vehicle exempt; additional vehicles taxed |
| Gasoline and motor fuel | TLES-7 | $2,588 | $187 | $187 | $184 | $182 | Personal-use fuel exempt |
| Vehicle rental, leases and licenses | Partly TLES-13 (personal lease of the primary vehicle) | $555 | Mixed | — | — | — | Primary-vehicle lease exempt |
| Vehicle insurance | TLES-11 | $2,059 | $33 | $33 | $32 | $31 | Premium tax ends; no replacement tax on the premium |
| Health insurance | TLES-5 | $3,731 | $65 | $65 | $64 | $61 | Premium tax ends; no replacement tax on the premium |
| Medical services | TLES-5 | $1,014 | $0 | $0 | $0 | $0 | Stays untaxed |
| Drugs (prescription and over-the-counter) | TLES-4 (prescriptions only) | $504 | $0 | $0 | $0 | $0 | Prescriptions stay untaxed; over-the-counter drugs are not a TLES item |
| Medical supplies | Partly TLES-4 (prescription devices) | $194 | Mixed | — | — | — | Prescription devices stay untaxed |
| Education | TLES-6 | $869 | $0 | $0 | $0 | $0 | Stays untaxed |
| Individual life insurance | TLES-12 | $394 | $7 | $7 | $7 | $6 | Premium tax ends; no replacement tax on the premium |
| Total | $721 | $701 | $659 |
| Area | All households | Q1 | Q2 | Q3 | Q4 | Q5 |
|---|---|---|---|---|---|---|
| Texas | $721 | $421 | $376 | $635 | $812 | $1,308 |
| Dallas County | $701 | $420 | $377 | $611 | $789 | $1,308 |
| HD109 | $659 | $417 | $399 | $617 | $773 | $1,087 |
| Measure | HD109 | Dallas County | Texas |
|---|---|---|---|
| Households | 63,170 | 982,737 | 11,449,769 |
| Mean household income | $97,456 | $113,864 | $113,147 |
| Texas taxes per household | $11,656 | $12,615 | $12,463 |
| Share of income | 12.0% | 11.1% | 11.0% |
| Lowest fifth: share of income | 30.0% | 31.2% | 31.7% |
| Combined property tax rate on a rented home | 2.367% | 2.227% | 2.190% |
| Current tax at purchase removed by the TLES, per household | $659 | $701 | $721 |
Texas Living Exemption Set — Proposed Legislation
Two bills set the same thirteen TLES categories: one takes effect with the constitutional amendment; the Standalone Edition works under today’s Tax Code if the amendment does not pass.
By: ___________________ H.B. No. _____
A BILL TO BE ENTITLED
AN ACT
relating to the designation of essential household living expenditures as exempt transactions under the sales and use tax imposed under the TPTRP Sales and Use Tax Act; providing a mechanism for the Comptroller of Public Accounts to administer and enforce those exemptions; establishing citizen enforcement standing for wrongful exemption claims and wrongful tax collection.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. FINDINGS AND PURPOSE.
(a) The Legislature finds that:
(1) the Texas Constitution authorizes the Legislature to designate as exempt from the sales and use tax imposed under the TPTRP Sales and Use Tax Act only those categories of transactions that directly and primarily affect the cost of living of individual Texas citizens and their immediate families;
(2) the categories designated in this Act represent the Legislature's determination, at the time of enactment, of the essential household expenditure categories that meet the constitutional Cost of Living Standard, and the Legislature retains full authority to add or remove categories by statute at any time, subject to that Standard;
(3) these exemptions must apply uniformly to all individual Texas citizens and their families without distinction as to income, wealth, or other personal characteristics; and
(4) clear, constitutionally grounded, and citizen-enforceable definitions are necessary to prevent the corruption and special-interest exemption pipeline that has characterized prior Texas sales tax law, and citizens have standing under this Act to challenge in court any exemption added by the Legislature that does not meet the constitutional Cost of Living Standard.
(b) The purpose of this Act is to establish the Texas Living Exemption Set — the statutory designation of the transaction categories that the Legislature votes to exempt from the TPTRP sales and use tax that meet the constitutional Cost of Living Standard.
SECTION 2. DEFINITIONS.
In this Act:
(1) "Comptroller" means the Comptroller of Public Accounts of the State of Texas.
(2) "Cost of Living Standard" means the constitutional standard for exemption of essential household living transactions established by Article VIII, Section 1-r(a), of the Texas Constitution, which provides:
"The Legislature may exempt from the sales and use tax imposed under this article only those transaction classes that directly and primarily affect the cost of living of individual Texas citizens and their immediate families. No exemption may be granted for any transaction the primary purpose or primary economic effect of which is commercial, business-to-business, income-producing, or profit-oriented, nor for any transaction class defined by the industry, profession, or commercial activity of the parties. Every exemption must apply uniformly to all Texas citizens and their families without distinction as to race, color, creed, religion, national origin, sex, income, or wealth. An exemption that fails this Standard is void."
A category of transaction qualifies for exemption under this Act only if it satisfies the Cost of Living Standard as further elaborated in Article VIII, Section 1-r, Subsections (b) through (h), of the Texas Constitution.
(3) "TLES" means the Texas Living Exemption Set established by this Act, as may be amended from time to time by the Legislature.
(4) "TPTRP tax" means the sales and use tax imposed under the TPTRP Sales and Use Tax Act and the constitutional amendment implementing the Texas Property Tax Replacement Plan.
(5) "Primary residence" means the property that the taxpayer and, if applicable, the taxpayer's immediate family actually occupy as their principal place of residence, determined at the time of a qualifying transaction by the taxpayer's intent and subsequent conduct.
(6) "Immediate family" means the taxpayer's spouse, children, stepchildren, and any other person for whom the taxpayer is the legal guardian or primary financial provider.
(7) "Personal policyholder" means a natural person who holds an insurance policy primarily for the protection of the person's immediate family, as distinguished from a business entity that holds insurance for commercial purposes.
(8) "Sales tax permit" means the permit issued under Section 151A.611, Tax Code, which serves as the mechanism for TLES certification.
(9) "Qualifying occupancy period" means the period of not less than six continuous years during which a natural person and, if applicable, the person's immediate family actually occupied a property as their primary residence prior to a subsequent purchase of a new primary residence.
(10) "Personal-use motor vehicle" means:
(A) a passenger car, as defined by Section 541.201, Transportation Code;
(B) a pickup truck, van, or sport utility vehicle that has a manufacturer's gross vehicle weight rating of 10,000 pounds or less; or
(C) a motorcycle, as defined by Section 541.201, Transportation Code;
that is not registered under an apportioned, commercial, farm, or for-hire registration under Chapter 502, Transportation Code.
(11) "Primary personal vehicle" means the one personal-use motor vehicle, purchased or leased, that a natural person has designated under TLES-13 of Section 4 and Section 6B of this Act as the vehicle the person uses primarily for the person's own personal, household, or family transportation.
(12) "Motor vehicle seller" means a person engaged in the business of selling motor vehicles, including a dealer licensed under Chapter 2301, Occupations Code, a person who sells motor vehicles remotely for delivery in this state, and a lessor that leases personal-use motor vehicles in the course of business.
(13) "Personal lease" means an agreement, other than a rental, by the owner of a personal-use motor vehicle to give a natural person exclusive use of the vehicle for longer than 180 days for consideration. An agreement to give exclusive use of a motor vehicle for 180 days or less is a rental and is not a personal lease.
SECTION 3. GENERAL RULE.
(a) The categories of transactions constituting the Texas Living Exemption Set are exempt from the TPTRP tax when the transaction is made by or on behalf of an individual Texas citizen or family for personal, household, or family use.
(b) Except as provided by TLES-3(e) of Section 4, a transaction that would otherwise qualify under a TLES category does not qualify if the primary purpose or primary economic effect of the transaction is commercial, business-to-business, income-producing, or profit-oriented.
(c) Each TLES category must be administered uniformly. No exemption within the TLES applies to fewer than all individual Texas citizens and their families.
SECTION 4. THE TEXAS LIVING EXEMPTION SET.
The following categories are the Texas Living Exemption Set as enacted by this Legislature. The Legislature may by statute add or remove categories subject to the constitutional Cost of Living Standard and Section 7 of this Act:
TLES-1: GROCERIES (FOOD AT HOME)
(a) Exempt: Purchases of food and nonalcoholic beverages for home consumption, regardless of the seller, including:
(1) food and food ingredients sold for preparation and consumption at home;
(2) carbonated and noncarbonated soft drinks, juices, milk and milk-based drinks, and other nonalcoholic beverages;
(3) candy and confectionery; and
(4) drinking water sold in bottles, jugs, or other containers or dispensed for home consumption.
(b) Not exempt: Meals and prepared food sold by a restaurant, food service, or other seller for immediate consumption, whether eaten on the premises or taken out; alcoholic beverages; ice; tobacco products; and drugs, medicines, vitamins, and dietary supplements, which are governed by TLES-4 if dispensed by prescription.
TLES-2: RESIDENTIAL RENT
(a) Exempt: Monthly rent payments made by Texas tenants for a primary residential dwelling, including apartments, houses, duplexes, and mobile homes.
(b) Not exempt: Short-term rentals, vacation rentals, commercial leases, and residential rentals of property that is not the tenant's primary residence.
TLES-3: RESIDENTIAL UTILITIES AND HOME FUEL
(a) Exempt: Payments for electricity, natural gas, water, wastewater, solid-waste and recycling collection, and similar utility services provided to any residential property, including an apartment, condominium, townhome, single-family dwelling, multifamily dwelling, or manufactured home, whether the service is billed to the occupant or to the owner of the property, and whether the owner is a natural person or an entity.
(b) Not exempt: Utility service to commercial, industrial, or agricultural property; non-residential solid-waste or recycling contracts; and fuel purchased for use in a motor vehicle, for a farm, ranch, or business, or at a property that is not the purchaser's primary residence. Motor fuel for a personal vehicle is governed by TLES-7.
(c) Water delivered to a residence through a public or private water system is a residential utility under this category. Drinking water purchased at retail for home consumption is a grocery item under TLES-1.
(d) Exempt — home fuel: Any fuel, including heating oil, propane and other liquefied petroleum gas, kerosene, and firewood, purchased for use at a residential property that is the purchaser's primary residence, regardless of its use in the residence. A seller may rely on the delivery address and the purchaser's written attestation that the address is the purchaser's primary residence.
(e) Residential utility service as household use: Utility service under Subsection (a) is a transaction for the personal and family use of the household that occupies or will occupy the residential property, and its primary economic effect is the cost of living of that household, regardless of who is billed or whether the owner holds the property for income. Notwithstanding Sections 3(b) and 5A(a) of this Act, the exemption under Subsection (a) applies to an owner who purchases the service for a residential property, including a vacant unit offered for residential occupancy. The purchase of residential property for rental or investment remains taxable as provided by TLES-9(d).
TLES-4: PRESCRIPTION DRUGS
(a) Exempt: All purchases of prescription medications dispensed pursuant to a valid prescription; prescription medical devices; and home infusion therapy services.
(b) Not exempt: Over-the-counter medications that do not require a prescription are non-prescription retail goods and are part of the general taxable base.
TLES-5: MEDICAL CARE
(a) Exempt: All payments for licensed medical and dental services provided directly to individual patients, including physician visits, hospital care, outpatient services, laboratory and imaging, dental care, vision care, mental health services, physical therapy, home health, hospice, palliative care, skilled nursing facility services, and licensed personal-care attendant services. Health and dental insurance premiums paid by individual policyholders or family units are included within this exemption.
(b) Not exempt: Cosmetic procedures without medical necessity, elective spa or wellness services, veterinary services for non-service animals, and group employer premium payments, which are taxable business-to-business transactions.
TLES-6: EDUCATION
(a) Exempt: Education services that result in a credential, certification, course-completion record, or license, when purchased by or on behalf of an individual Texas resident for the person's own education or career development, including private K-12 tuition, college and university tuition, vocational and trade school programs, professional certification programs, licensing exam fees, workforce training resulting in a completion certificate, standardized test preparation programs, and online courses that issue a completion record.
(b) Not exempt: Hobby and recreational classes that produce no credential, license, or completion record. Corporate training purchased by an employer for employees is a business-to-business transaction and is taxable.
(c) Mixed-transaction reporting: Education providers that offer both exempt and non-exempt programs shall identify the exempt and non-exempt portions on their sales tax permit application. Exemption certification at the transaction level is governed by Section 5 of this Act.
TLES-7: MOTOR FUEL — GASOLINE AND DIESEL (CONSUMER PERSONAL USE)
(a) Exempt: Consumer purchases of gasoline and diesel fuel at retail pumps for use in a personal, non-commercial vehicle, including a primary personal vehicle under TLES-13 and any other vehicle used for commuting and personal transportation.
(b) Not exempt: Commercial fleet fuel purchases, agricultural fuel, and aviation fuel.
TLES-8: CHILDCARE AND EARLY CHILDHOOD EDUCATION
(a) Exempt: All payments for licensed childcare facilities, including daycare centers, licensed home-based childcare providers, pre-kindergarten programs, before- and after-school care, and summer care programs operated by licensed childcare providers.
(b) Not exempt: Adult eldercare services and tutoring services beyond the scope of licensed childcare.
TLES-9: PRIMARY RESIDENCE HOME PURCHASE
(a) Exempt: The purchase price of any home that the buyer designates and actually occupies as the buyer's primary residence. This is a primary residence exemption, not a first-home exemption. The exemption applies to:
(1) first-time home purchases;
(2) move-up or lateral purchases where the buyer intends to occupy the new property as a primary residence; and
(3) relocation purchases where a buyer acquires a new primary home in advance of selling or vacating the current primary residence — the new purchase is exempt because it will serve as the buyer's primary residence, without regard to any transitional overlap period.
(b) Property retention — short qualifying occupancy period (fewer than six years): If a buyer has occupied the prior primary residence for fewer than six continuous years at the time of purchasing a new primary residence, the prior property must be actively listed for sale and not retained for rental or investment purposes for the TLES-9 exemption on the new purchase to apply. During any period in which the prior property is listed for sale and a buyer has not yet been found, the owner may rent the prior property on a month-to-month or short-term basis for a period not to exceed two years from the date of the new primary-residence purchase. If the prior property has not been sold within two years and is not actively listed for sale, the TLES-9 exemption on the new purchase is forfeited and the tax becomes immediately due, together with applicable penalties and interest.
(c) Property retention — qualifying occupancy period of six or more years: A buyer who has occupied the prior primary residence as their primary residence for not less than six continuous years prior to purchasing a new primary home may retain the prior property for any lawful purpose, including making it available for rent or lease, without disqualifying the TLES-9 exemption on the new purchase. This provision recognizes that long-term residential equity is a foundation of family financial stability and generational wealth in Texas, and the Legislature expressly encourages that outcome.
(d) Not exempt — investment purchases: The purchase of a residential property where the buyer's intent at closing is rental income or capital appreciation, and the buyer does not intend to occupy the property as a primary residence for any period of time, does not qualify for the TLES-9 exemption. The governing test is the buyer's intent at the time of closing, evidenced by the Primary Residence Certificate required under Section 6 of this Act.
(e) Citizen standing: Any Texas citizen has standing to bring a civil enforcement action against a buyer who fraudulently obtained a TLES-9 exemption. A prevailing plaintiff is entitled to require the buyer to pay all taxes due on the original purchase, plus penalties and interest, and is entitled to recover reasonable attorney's fees and court costs from the defendant. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(f) Administration: TLES-9 is administered at closing through the Primary Residence Certificate established in Section 6 of this Act.
TLES-10: RESIDENTIAL PROPERTY INSURANCE
(a) Exempt: Premiums on homeowners insurance, renters insurance, flood insurance, and condominium or cooperative owners' insurance — all for primary residential use. The 1.6 percent insurance premium tax on property and casualty insurers under Section 221.002, Insurance Code, is abolished under the TPTRP; residential property insurance premiums are TLES-10 exempt, resulting in an effective state rate of zero on those premiums.
(b) Not exempt: Commercial property insurance, landlord policies on investment or rental properties, and insurance on vacation homes or second homes.
TLES-11: PERSONAL AUTO INSURANCE
(a) Exempt: Personal auto insurance premiums on personal, non-commercial vehicles, including motor vehicle liability coverage meeting the minimum amounts required by Section 601.072, Transportation Code, and comprehensive, collision, uninsured or underinsured motorist, and personal injury protection coverages. The 1.6 percent insurance premium tax on property and casualty insurers under Section 221.002, Insurance Code, is abolished under the TPTRP; personal auto insurance premiums are TLES-11 exempt, resulting in an effective state rate of zero on those premiums.
(b) Not exempt: Commercial fleet insurance, trucking insurance, and specialty vehicle insurance.
TLES-12: INDIVIDUAL LIFE INSURANCE
(a) Exempt: Premiums paid on personal life insurance policies held by a natural person for the benefit of the person's immediate family, including individual term life, whole life, universal life, indexed universal life, and indexed whole life policies. The exemption covers the full premium, including any cash-accumulation component.
(b) Not exempt — fully taxable: Commercial life insurance of any kind, including corporate-owned life insurance (COLI), key-man policies, and similar business instruments. These are selective business expenses purchased by businesses for business financial management — not transactions necessary for any individual Texan to live in Texas. Commercial life insurance products are taxable under the TPTRP as business expenditures, with no exemption or definition-filter carve-out of any kind.
(c) Governing test: If the policyholder is a natural person and the beneficiaries are that person's immediate family, the policy is personal and TLES-12 applies. If the policyholder is a business entity and the policy serves a business purpose, it is a commercial transaction and is fully taxable.
TLES-13: PRIMARY PERSONAL VEHICLE PURCHASE OR LEASE
(a) Exempt: The sales price of one personal-use motor vehicle, new or used, that a natural person purchases from a motor vehicle seller and designates as the person's primary personal vehicle, and the periodic payments, down payment, and capitalized cost reduction under a personal lease of a personal-use motor vehicle that the lessee designates as the lessee's primary personal vehicle. The exemption is available to each eligible person independently, so that each eligible member of a household may designate one primary personal vehicle.
(b) Eligibility: A person may designate a primary personal vehicle only if the person:
(1) is a resident of this state;
(2) holds a driver's license issued under Chapter 521, Transportation Code; and
(3) is the owner of the vehicle, alone or jointly with a member of the person's immediate family, as shown on the title issued under Chapter 501, Transportation Code, or is the lessee of the vehicle under a personal lease.
(c) One vehicle per person: A person may have only one primary personal vehicle at a time, whether purchased or leased. A newly purchased or leased vehicle may be designated at any time if, on completion of the transaction, it is the only personal-use motor vehicle the person owns or leases, other than a vehicle designated as another person's primary personal vehicle, including when the person's prior vehicle is traded in or returned as part of the transaction. Designating a vehicle ends the designation of any vehicle the person previously designated. A vehicle may be designated by only one person at a time.
(d) Not exempt: The following purchases, leases, and rentals are taxable:
(1) a vehicle titled or registered to a business entity, trust, or governmental entity;
(2) a vehicle registered under an apportioned, commercial, farm, or for-hire registration, or used primarily for a business, commercial, agricultural, for-hire, or income-producing purpose;
(3) a vehicle acquired while the person owns or leases another personal-use motor vehicle, other than a vehicle described by the exception in Subsection (c);
(4) a vehicle purchased for resale, lease, or rental, including a lessor's purchase of a vehicle that is the subject of a personal lease;
(5) parts, accessories, service contracts, warranties, and repairs, which remain taxable unless another category of this Act applies; and
(6) a rental of a motor vehicle for 180 days or less.
(e) Change of use: If, within 12 months after the date of purchase or the beginning of a personal lease, a vehicle for which the exemption was claimed is transferred to a business entity, is registered under a registration described by Subsection (d)(2), or is used primarily for a commercial purpose, the exemption is forfeited and the TPTRP tax on the original sales price or on the lease payments, plus interest, becomes due from the purchaser or lessee.
(f) Private-party sales: A sale of a used motor vehicle by an individual to another individual that is not made in the course of a trade or business is an occasional sale excluded from the TPTRP tax under the TPTRP Sales and Use Tax Act and does not require a designation under this category.
(g) Citizen standing: Any Texas citizen has standing to bring a civil enforcement action against a purchaser or lessee who fraudulently obtained a TLES-13 exemption. A prevailing plaintiff is entitled to require the purchaser or lessee to pay all taxes due on the original purchase or lease, plus penalties and interest, and is entitled to recover reasonable attorney's fees and court costs from the defendant. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(h) Administration: TLES-13 is administered at the time of sale or lease signing, and at titling or registration, through the Primary Personal Vehicle Certificate established in Section 6B of this Act.
SECTION 5. COMPTROLLER ADMINISTRATION AND PERMIT MECHANISM.
(a) The Comptroller shall administer the exemptions established by Section 4 of this Act through the existing Texas sales tax permit system, as amended to encompass the TPTRP tax. Every business operating in Texas is required by law to hold a sales tax permit. The permit application process is the universal mechanism through which businesses certify their TLES status and governs all TLES categories equally. This is not a new administrative concept — it mirrors the multi-category reporting already required under current Texas sales tax law for businesses that sell a mix of taxable and exempt goods.
(b) The sales tax permit application shall include a designated section listing all currently enacted TLES-eligible transaction categories. Each permit applicant shall select, under oath, which of the applicant's products or services fall within a TLES-exempt category, certifying that those transaction types will not have the TPTRP tax collected at the point of sale. The permit, once issued, binds the holder to those certifications. A permit holder is not required to apply for a new or amended permit solely because the Legislature has added or removed a TLES category; however:
(1) When the Legislature removes a TLES category, the Comptroller shall promptly notify all affected sales tax permit holders in writing of the removal and the effective date on which the previously exempt transactions become taxable. Permit holders must begin collecting the TPTRP tax on those transactions on the effective date of the change, regardless of whether they have received updated permit documentation.
(2) When the Legislature adds a TLES category, a permit holder whose transactions qualify under the new exemption may submit an amended permit application to certify those transactions as TLES-exempt. Until an amended permit is issued, the permit holder must continue collecting the TPTRP tax on those transactions. No permit holder is required to claim a new exemption; the decision to apply for the exemption is voluntary.
(c) Enforcement. TLES exemption compliance is enforceable through four independent channels:
(1) Comptroller audit authority: The Comptroller has audit authority over every sales tax permit holder. A business found to be exempting non-qualifying transactions is liable for all back taxes, penalties, and interest. A business found to have collected the TPTRP tax on a transaction that qualifies under a TLES category is liable for a full refund of all amounts wrongfully collected, plus interest.
(2) District attorney and attorney general authority: District attorneys and the Office of the Attorney General of Texas each retain independent authority to pursue criminal prosecution and civil back-tax collection from businesses found to have fraudulently claimed TLES status or wrongfully collected the TPTRP tax on an exempt transaction. The attorney general may bring suit on behalf of the state; a district attorney may bring suit on behalf of the state within the district attorney's jurisdiction. These authorities are concurrent and non-exclusive.
(3) Citizen standing — wrongful exemption claim: Any Texas citizen has standing to bring a civil enforcement action against a business that improperly claims a TLES exemption on a non-qualifying transaction. A prevailing plaintiff is entitled to reasonable attorney's fees and court costs. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(4) Citizen standing — wrongful tax collection: Any Texas citizen who has been charged the TPTRP tax on a transaction that qualifies under a TLES category has standing to bring a civil enforcement action against the business that collected the tax. A prevailing plaintiff is entitled to a full refund of the wrongfully collected tax, plus reasonable attorney's fees and court costs. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(d) Mixed-transaction businesses: A business that sells both TLES-exempt and non-exempt products or services shall collect the TPTRP tax on non-exempt transactions and shall not collect it on TLES-certified transactions, tracking at the transaction level.
(e) The Comptroller shall adopt rules necessary to implement this section, including rules defining the categories in Section 4 with sufficient precision for permit certification purposes, and rules establishing the notification procedures required under Subsection (b)(1).
SECTION 5A. COMMERCIAL-VERSUS-RESIDENTIAL PERMIT-LEVEL ACCOUNTING.
(a) Except as provided by TLES-3(e) of Section 4, the exemptions established by this Act apply only to transactions in which the ultimate purchaser is a household purchasing for a cost-of-living purpose. Commercial, industrial, agricultural, government, and other non-household purchases of goods and services in the categories designated by this Act remain taxable transactions under the TPTRP Sales and Use Tax Act.
(b) The Comptroller shall administer the exemption through the sales tax permit system by:
(1) designing permit categories that identify the goods and services each permit-holder sells across the categories of the Texas Living Exemption Set;
(2) requiring each permit-holder to certify, at initial application and at each renewal, the residential-versus-commercial customer share of its sales in each Texas Living Exemption Set category in which it operates;
(3) prescribing the accounting method for each category (per-transaction certification, aggregate share, or a hybrid) based on the nature of the goods or services and the practicalities of buyer identification;
(4) establishing audit protocols, misclassification penalties, and appeal procedures for permit-holders operating across residential and commercial customer classes; and
(5) coordinating with the Primary Residence Certificate mechanism established under Section 6A for the administration of the Texas Living Exemption Set category for the purchase of a primary residence, and with the Primary Personal Vehicle Certificate mechanism established under Section 6B for the purchase or lease of a primary personal vehicle.
(c) The commercial share of sales in each Texas Living Exemption Set category that touches a constitutional dedication under Article VIII, Section 7-a or 7-c, of the Texas Constitution, or Section 2.02(e) of the constitutional amendment implementing the Texas Property Tax Replacement Plan — including sales of motor fuels, motor vehicles, utilities, medical services, and insurance — remains a taxable transaction under the TPTRP Sales and Use Tax Act and continues to fund the applicable constitutional dedication. The permit-level accounting established under this Section is the operative mechanism for maintaining that dedication.
(d) The specific permit categories, certification procedures, audit protocols, and coordination with the TPTRP Sales and Use Tax Act's implementing article on permit-level accounting are established by the Comptroller by rule under the TPTRP Sales and Use Tax Act. This Section imposes the substantive standard; the TPTRP Sales and Use Tax Act contains the administrative mechanism.
(e) This section implements Article VIII, Section 1-r, of the Texas Constitution.
SECTION 6. PRIMARY RESIDENCE CERTIFICATE — CROSS-REFERENCE.
The Primary Residence Certificate framework is established by Section 6A of this Act. A reference in this Act to the Certificate is a reference to Section 6A.
SECTION 6A. PRIMARY RESIDENCE CERTIFICATE; PORTAL COORDINATION.
(a) The Comptroller shall establish and administer a Primary Residence Certificate (the "Certificate") to be used in connection with TLES-9 exemptions under Section 4 of this Act. The Certificate shall be a plain-language document that, in addition to the attestations required under Subsection (b), sets forth the full text of the exemption conditions under Section 4 TLES-9(b), (c), and (d) so that all parties to the transaction may read, understand, and attest to the applicable rules at closing. The purpose of printing those conditions on the Certificate is to ensure that every buyer, seller, and closing agent has actual notice of the law at the moment of the transaction, further supporting any subsequent enforcement action should the buyer falsely attest to compliance.
(b) At closing, a buyer claiming a TLES-9 exemption shall sign and file the Certificate under penalty of perjury, attesting that:
(1) the property being purchased will serve as the buyer's principal place of residence;
(2) the buyer's intent at the time of closing is primary occupancy and not the generation of rental income or capital appreciation as the primary purpose;
(3) if the buyer is retaining a prior primary residence and has not yet completed a qualifying occupancy period of six continuous years in that prior property, the buyer understands and agrees that:
(A) the prior property must be actively listed for sale;
(B) the buyer may rent the prior property on a transitional basis for a period not to exceed two years while seeking a buyer; and
(C) if the prior property is not sold within two years and is not actively listed for sale, the TLES-9 exemption on the current purchase is forfeited and all taxes, penalties, and interest become immediately due; and
(4) if the buyer has completed a qualifying occupancy period of six or more continuous years in a prior primary residence, the buyer understands that retention of the prior property for any lawful purpose, including rental, does not disqualify this exemption.
(c) The Certificate shall be filed with the deed and becomes part of the public property record, and is publicly accessible to any Texas citizen.
(d) A buyer who obtains the TLES-9 exemption through a fraudulent Certificate is liable for all taxes due on the original purchase, plus penalties and interest, and may be subject to criminal prosecution for filing a false sworn instrument under applicable Texas law.
(e) Any Texas citizen has standing to bring a civil enforcement action against a buyer upon discovering a violation of the conditions attested to in the Certificate. A prevailing plaintiff is entitled to require the buyer to pay all taxes, penalties, and interest due, and is entitled to recover reasonable attorney's fees and court costs. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(f) The Comptroller shall coordinate with closing agents, title companies, and county recorders to receive Primary Residence Certificates as evidence of TLES-9 exemption eligibility, and shall integrate the receipt and indexing of Primary Residence Certificates into the Texas Sales and Use Tax Portal established under Section 490.073, Government Code.
(g) A Primary Residence Certificate filed under this section satisfies, for the transaction to which it relates, the certification otherwise required of a permit-holder under Section 151A.702, Tax Code, and no separate residential-versus-commercial certification is required for that transaction.
(h) The comptroller may adopt rules governing the form, filing method, retention, revocation, and audit of Primary Residence Certificates under this section, and may prescribe an electronic filing method integrated with the Texas Sales and Use Tax Portal.
(i) This section is enacted in coordination with Section 151A.705, Tax Code, which retains a cross-reference to this section to preserve the sourcing and permit-holder framework of the TPTRP Sales and Use Tax Act.
(j) This section implements Article VIII, Section 1-r, of the Texas Constitution.
SECTION 6B. PRIMARY PERSONAL VEHICLE CERTIFICATE.
(a) The Comptroller, in coordination with the Texas Department of Motor Vehicles, shall establish and administer a Primary Personal Vehicle Certificate (the "Vehicle Certificate") to be used in connection with TLES-13 exemptions under Section 4 of this Act. The Vehicle Certificate shall be a plain-language document that sets forth the full text of TLES-13(b) through (e) of Section 4 so that the purchaser or lessee and the motor vehicle seller have actual notice of the conditions at the time of sale or lease signing.
(b) A purchaser or lessee claiming a TLES-13 exemption shall sign the Vehicle Certificate under penalty of perjury at the time of sale or lease signing, attesting that:
(1) the person is a resident of this state who holds a driver's license issued under Chapter 521, Transportation Code, and stating the license number;
(2) the vehicle will be the person's primary personal vehicle, used primarily for the person's own personal, household, or family transportation;
(3) the vehicle will not be titled or registered to a business entity or under a registration described by TLES-13(d)(2);
(4) on completion of the transaction, the vehicle will be the only personal-use motor vehicle the person owns or leases, other than a vehicle designated as another person's primary personal vehicle, and the person has identified, by vehicle identification number, any vehicle traded in, returned, or previously disposed of, and any vehicle the person previously designated; and
(5) the person understands that the exemption is forfeited under TLES-13(e) if the vehicle is converted to commercial use within 12 months.
(c) The motor vehicle seller shall retain the Vehicle Certificate and submit it with the application for title under Chapter 501, Transportation Code, or, for a leased vehicle, with the application for registration under Chapter 502, Transportation Code. The county tax assessor-collector shall record the designation in the title and registration record maintained by the Texas Department of Motor Vehicles, and that record shall identify, for each person, the vehicle currently designated as the person's primary personal vehicle.
(d) A Vehicle Certificate filed under this section satisfies, for the transaction to which it relates, the certification otherwise required of a permit-holder under Section 151A.702, Tax Code.
(e) A purchaser or lessee who obtains the TLES-13 exemption through a fraudulent Vehicle Certificate is liable for all taxes due on the original purchase or lease, plus penalties and interest, and may be subject to criminal prosecution for filing a false sworn instrument under applicable Texas law.
(f) The Comptroller shall integrate the receipt and indexing of Vehicle Certificates into the Texas Sales and Use Tax Portal established under Section 490.073, Government Code.
(g) The Comptroller and the Texas Department of Motor Vehicles may adopt rules governing the form, electronic filing, retention, revocation, and audit of Vehicle Certificates.
(h) This section implements Article VIII, Section 1-r, of the Texas Constitution.
SECTION 7. LEGISLATIVE MODIFICATION OF THE TLES.
(a) The Legislature may, by statute, add or remove categories from the Texas Living Exemption Set at any time. No additional legal requirement beyond enactment by the Legislature is required to remove a category from the TLES.
(b) The Legislature may add a category to the TLES only if the category satisfies the constitutional Cost of Living Standard. A category that does not directly and primarily affect the cost of living of individual Texas citizens and their immediate families, or that does not apply uniformly to all such citizens, may not be added.
(c) No entity below the Legislature has authority to modify, expand, or restrict the TLES.
(d) Any Texas citizen has standing to bring a civil action challenging a legislative addition to the TLES on the ground that the added category fails to satisfy the constitutional Cost of Living Standard. A prevailing plaintiff is entitled to have the exemption invalidated and to recover reasonable attorney's fees and court costs. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff. Citizens do not have standing under this Act to challenge the removal of a category from the TLES; that remedy lies with the electorate through the selection of representatives.
SECTION 8. RELATIONSHIP TO OTHER TPTRP IMPLEMENTING LEGISLATION.
This Act is intended to operate in conjunction with: (1) the constitutional amendment implementing the Texas Property Tax Replacement Plan; (2) the TPTRP Sales and Use Tax Act; and (3) any other TPTRP implementing legislation. If a conflict exists between this Act and another TPTRP implementing Act, the provision more specifically applicable to the TLES governs. If the TPTRP Texas Living Exemption Set Act — Standalone Edition is also enacted, this Act governs on and after the implementation date of the constitutional amendment, the two Acts shall be construed as establishing the same Texas Living Exemption Set, and Articles 5, 6, and 7 of the Standalone Edition expire as provided by Section 8.01 of that Act.
SECTION 9. TRANSITION.
This Act applies to all TPTRP tax transactions occurring on or after the effective date of this Act. Any transaction occurring before the effective date is governed by the law in effect on the date of that transaction, and the former law is continued in effect for that purpose.
SECTION 10. SEVERABILITY.
If any provision of this Act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are declared to be severable.
SECTION 11. EFFECTIVE DATE.
This Act takes effect on the same date that the constitutional amendment implementing the Texas Property Tax Replacement Plan takes effect. If that amendment does not take effect, this Act has no effect.
By: ___________________ H.B. No. _____
A BILL TO BE ENTITLED
AN ACT
relating to the designation of the Texas Living Exemption Set as the exclusive set of exemptions from state and local sales and use taxes and from the motor vehicle sales and use tax for a primary personal vehicle; defining taxable transactions and agent transactions; repealing other sales and use tax exemptions; providing for administration and citizen enforcement; and providing for coordination with the constitutional amendment implementing the Texas Property Tax Replacement Plan.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. GENERAL PROVISIONS
SECTION 1.01. SHORT TITLE.
This Act may be cited as the TPTRP Texas Living Exemption Set Act — Standalone Edition.
SECTION 1.02. FINDINGS AND PURPOSE.
(a) The Legislature finds that:
(1) the sales and use tax laws of this state contain more than 100 exemptions, most of which benefit particular industries, organizations, or classes of sellers rather than the cost of living of individual Texans;
(2) the transaction categories designated in this Act represent the Legislature's determination of the essential household expenditure categories that directly and primarily affect the cost of living of individual Texas citizens and their immediate families;
(3) these exemptions must apply uniformly to all individual Texas citizens and their families without distinction as to income, wealth, or other personal characteristics;
(4) a sales and use tax applied once to every exchange of goods and services, with a single set of household exemptions, is more transparent and less susceptible to special-interest carve-outs than a tax with many exemptions; and
(5) this Act operates under the sales and use tax laws in effect on its effective date and, if the constitutional amendment is approved by the voters, under the sales and use tax imposed under that amendment, without further amendment.
(b) The purpose of this Act is to establish the Texas Living Exemption Set as the exclusive set of exemptions from the covered tax, to define the transactions subject to the covered tax, and to repeal every other exemption from the covered tax except as required by federal law or the United States Constitution.
SECTION 1.03. DEFINITIONS.
In this Act:
(1) "Agent transaction" has the meaning assigned by Section 2.02 of this Act.
(2) "Comptroller" means the comptroller of public accounts.
(3) "Constitutional amendment" means the constitutional amendment implementing the Texas Property Tax Replacement Plan proposed by the 90th Legislature, Regular Session, 2027.
(4) "Cost of Living Standard" means the standard established by Section 1.04 of this Act.
(5) "Covered tax" means:
(A) the sales and use tax imposed by Chapter 151, Tax Code;
(B) for TLES-13 only, the tax imposed by Chapter 152, Tax Code;
(C) a local sales and use tax imposed under Chapter 321, 322, or 323, Tax Code, or under any other law that authorizes a political subdivision of this state to impose a sales and use tax; and
(D) on and after the TPTRP implementation date, the sales and use tax imposed by Chapter 151A, Tax Code.
(6) "Immediate family" means the taxpayer's spouse, children, stepchildren, and any other person for whom the taxpayer is the legal guardian or primary financial provider.
(7) "Motor vehicle seller" means a person engaged in the business of selling motor vehicles, including a dealer licensed under Chapter 2301, Occupations Code, a person who sells motor vehicles remotely for delivery in this state, and a lessor that leases personal-use motor vehicles in the course of business.
(8) "Personal lease" means an agreement, other than a rental, by the owner of a personal-use motor vehicle to give a natural person exclusive use of the vehicle for longer than 180 days for consideration. An agreement to give exclusive use of a motor vehicle for 180 days or less is a rental and is not a personal lease.
(9) "Personal policyholder" means a natural person who holds an insurance policy primarily for the protection of the person's immediate family, as distinguished from a business entity that holds insurance for commercial purposes.
(10) "Personal-use motor vehicle" means:
(A) a passenger car, as defined by Section 541.201, Transportation Code;
(B) a pickup truck, van, or sport utility vehicle that has a manufacturer's gross vehicle weight rating of 10,000 pounds or less; or
(C) a motorcycle, as defined by Section 541.201, Transportation Code;
that is not registered under an apportioned, commercial, farm, or for-hire registration under Chapter 502, Transportation Code.
(11) "Primary personal vehicle" means the one personal-use motor vehicle, purchased or leased, that a natural person has designated under TLES-13 of Section 3.01 and Section 4.04 of this Act as the vehicle the person uses primarily for the person's own personal, household, or family transportation.
(12) "Primary residence" means the property that the taxpayer and, if applicable, the taxpayer's immediate family actually occupy as their principal place of residence, determined at the time of a qualifying transaction by the taxpayer's intent and subsequent conduct.
(13) "Qualifying occupancy period" means the period of not less than six continuous years during which a natural person and, if applicable, the person's immediate family actually occupied a property as their primary residence prior to a subsequent purchase of a new primary residence.
(14) "Sales tax permit" means a permit issued under Subchapter F, Chapter 151, Tax Code, or, after the TPTRP implementation date, Section 151A.611, Tax Code, which serves as the mechanism for TLES certification.
(15) "Taxable transaction" has the meaning assigned by Section 2.01 of this Act.
(16) "TLES" means the Texas Living Exemption Set established by Section 3.01 of this Act, as amended by the Legislature.
(17) "TPTRP implementation date" means the implementation date of the constitutional amendment, if the constitutional amendment is approved by the voters.
SECTION 1.04. COST OF LIVING STANDARD.
(a) The Legislature may exempt from the covered tax only those transaction classes that directly and primarily affect the cost of living of individual Texas citizens and their immediate families. No exemption may be granted for any transaction the primary purpose or primary economic effect of which is commercial, business-to-business, income-producing, or profit-oriented, nor for any transaction class defined by the industry, profession, or commercial activity of the parties. Every exemption must apply uniformly to all Texas citizens and their families without distinction as to race, color, creed, religion, national origin, sex, income, or wealth.
(b) No exemption may be granted on the basis of the identity of the seller, the industry to which a transaction belongs, or the commercial purpose asserted by the buyer. An exemption authorized under this Act attaches to the transaction made by the citizen, not to the person or entity that sells the exempt product or service.
(c) This section is adapted from Article VIII, Section 1-r(a) and (b), of the constitutional amendment. If the constitutional amendment takes effect, Article VIII, Section 1-r, of the Texas Constitution governs, and this section shall be construed consistently with it.
SECTION 1.05. GENERAL RULE.
(a) The categories of transactions constituting the Texas Living Exemption Set are exempt from the covered tax when the transaction is made by or on behalf of an individual Texas citizen or family for personal, household, or family use.
(b) Except as provided by TLES-3(e) of Section 3.01 of this Act, a transaction that would otherwise qualify under a TLES category does not qualify if the primary purpose or primary economic effect of the transaction is commercial, business-to-business, income-producing, or profit-oriented.
(c) Each TLES category must be administered uniformly. No exemption within the TLES applies to fewer than all individual Texas citizens and their families.
ARTICLE 2. TAXABLE TRANSACTIONS, AGENT TRANSACTIONS, AND THE DEFINITION FILTER
SECTION 2.01. TAXABLE TRANSACTION.
(a) A transaction is a taxable transaction subject to the covered tax when a clear product is being purchased or a service is being rendered as part of the exchange or sale. This definition applies at every point in the supply chain, including:
(1) business-to-business transactions at every stage of production, distribution, and delivery;
(2) business-to-consumer transactions for goods, services, digital products, and any other item of economic value;
(3) transactions in which goods or services are delivered remotely, electronically, digitally, or through any other medium, where the buyer is located in this state or receives the economic benefit of the transaction in this state;
(4) transactions in which a seller is located outside this state, in another state of the United States or in a foreign country, where the buyer is located in this state or the economic benefit of the transaction is received in this state; and
(5) transactions in which the seller knew or reasonably should have known, at the time of contracting or delivery, that the goods or services would be used, consumed, or primarily benefiting operations or persons located in this state.
(b) The point at which the buyer takes possession of the good, receives the service, or otherwise obtains the right to use, consume, or enjoy the taxable good or service governs whether a transaction is subject to the covered tax. A transaction in which the buyer takes possession of the good or first receives the service in this state is subject to the covered tax, regardless of where the buyer is domiciled or resides. A transaction in which the buyer takes possession of the good or first receives the service outside this state is not subject to the covered tax, regardless of where the seller is located. Where a good or service is delivered remotely, electronically, digitally, or by common carrier, possession is deemed taken at the location to which the good is delivered or at which the service is first received by the buyer, and Subdivisions (a)(3), (4), and (5) continue to govern taxability where a Texas buyer receives the good or service or the economic benefit of the transaction in this state.
(c) The following are not taxable transactions, as required by the Texas Constitution:
(1) the conveyance of fee simple title to real property, in accordance with Article VIII, Section 29, of the Texas Constitution; and
(2) a securities transaction described by Article VIII, Section 30, of the Texas Constitution, except to the extent that Section 30(c) of that article permits a sales and use tax on tangible personal property or services.
(d) The compensation paid by an employer to an employee for services performed by the employee in the course of employment is not a taxable transaction. This subsection does not apply to a service provided by an independent contractor or by one legal entity to another.
SECTION 2.02. AGENT TRANSACTION.
(a) An agent transaction occurs when a person acting as an agent on behalf of a principal purchases a product or service on the principal's behalf and separately renders the agent's own labor or product to the principal. In an agent transaction:
(1) products or services purchased by the agent on behalf of the principal are taxed once at the point of purchase by the agent and are passed through to the principal at the documented reimbursement amount without additional tax;
(2) the agent's own labor, product, or service rendered to the principal is a separate taxable transaction, taxed once at the point of the agent's billing to the principal; and
(3) no single dollar of economic value is taxed more than once.
(b) A product or service purchased by an agent on behalf of a principal whose transaction is exempt under the TLES is exempt to the same extent.
(c) The comptroller shall adopt rules for documenting agent transactions. The agent-transaction rule replaces the sale-for-resale exemption, resale certificates, and the manufacturing-input exemption repealed by Article 5 of this Act. The comptroller may not reinstate a resale certificate system, manufacturing-input exemption, or intercorporate services exemption by rule.
SECTION 2.03. DEFINITION FILTER.
The following categories of transactions are excluded from the covered tax base:
(1) Category G-1 — Federal Government Transactions. Transactions in which the federal government of the United States is the buyer or principal are excluded. Transactions in which a federal contractor is the buyer for its own account, not as an agent of the federal government, are taxable transactions and are not excluded by this category.
(2) Category F — Financial Flows. The following financial flows are excluded because they do not constitute the purchase of a product or the rendition of a service:
(A) mortgage principal and interest payments on real estate loans;
(B) interest income credited on personal deposit accounts, savings accounts, and certificates of deposit;
(C) dividend distributions from a corporation to its shareholders;
(D) insurance claim payouts and loss reimbursements paid in satisfaction of a covered loss. A premium paid for a policy of insurance is not a financial flow under this paragraph, and an exemption for a policy of personal insurance may be granted only as part of the TLES;
(E) purchases and sales of equity interests, partnership interests, membership units, bonds, notes, and other financial instruments representing ownership or debt interests;
(F) intra-family and personal gift transfers made for non-commercial purposes, including inheritances and personal charitable contributions;
(G) personal inter-account fund transfers representing the movement of existing value between accounts of the same person or entity; and
(H) government grants, entitlement payments, welfare disbursements, and other transfer payments from a governmental entity to an individual or organization where no product is purchased and no service is rendered.
(3) Category I-1 — Intra-Company Transfers. Internal ledger entries, inter-divisional accounting transfers, and other internal financial movements between departments or divisions of the same legal entity that do not involve the purchase of a product or the rendition of a service by one legal entity to another are excluded.
(4) Category IA — Internet Access Service. Internet access service, including any directly bundled telecommunications service used to provide the access connection, is excluded to the extent required by the Internet Tax Freedom Act (47 U.S.C. Section 151 note). Content, applications, and services delivered over the Internet are not Internet access service.
(5) Category CP — Pure Currency and Payment-Medium Exchanges. A transaction consisting solely of the exchange of one form of money, legal tender, or digital payment medium for another, without the purchase of a separate product or service, is excluded. The use of any payment medium to purchase a taxable product or service does not exclude the underlying taxable transaction.
SECTION 2.04. STRUCTURAL DEFINITIONS.
(a) Credit for tax previously paid. A taxable item is not subject to the covered tax to the extent that the covered tax, or a sales or use tax of another state or political subdivision of another state, was legally due and paid on the same item, as provided by Section 151.303, Tax Code, as amended by this Act. No item is taxed more than once by this state.
(b) Occasional sale. An occasional sale, as defined by Section 151.304, Tax Code, as amended by this Act, is not a taxable transaction. A person engaged in business in selling taxable items is not making an occasional sale.
(c) Transfer of common interests. A transfer of a common interest in property described by Section 151.306, Tax Code, is not a sale.
(d) Coordination with other taxes. While a tax imposed by a chapter listed in Section 151.308, Tax Code, as amended by this Act, is in effect, an item subject to that tax is not subject to the tax imposed by Chapter 151, Tax Code. When another law repeals the tax imposed by a listed chapter, this subsection ceases to apply to items subject to that tax on the effective date of the repeal, and the items become subject to the covered tax under the definitions then in effect.
(e) Each definition in this section applies only while the provision of the Tax Code it describes is in effect, and does not limit a later act of the Legislature that applies different transaction definitions to the covered tax.
SECTION 2.05. FEDERAL LAW.
(a) The covered tax does not apply to a transaction to the extent that federal law or the United States Constitution prohibits this state from taxing the transaction, as provided by Section 151.307, Tax Code.
(b) The covered tax does not apply to food or food products purchased with benefits under the supplemental nutrition assistance program or the special supplemental nutrition program for women, infants, and children, as provided by Section 151.3141, Tax Code, to the extent required for this state's participation in those programs under 7 U.S.C. Section 2013(a) and related federal law.
(c) The covered tax does not apply to a transaction by or with an Indian tribe to the extent provided by Section 151.337, Tax Code, and federal law.
SECTION 2.06. EXCLUSIVITY; NO RECLASSIFICATION.
(a) The only exemptions from the covered tax are the TLES categories established by Section 3.01 of this Act. The exclusions in Sections 2.01(c) and (d), 2.03, 2.04, and 2.05 of this Act are not exemptions; they define transactions that are not part of the covered tax base.
(b) No law, rule, or administrative determination may create a class-wide exemption, exclusion, deduction, or special treatment from the covered tax for:
(1) business inputs, manufacturing inputs, business purchases for resale, or business-to-business services;
(2) intercorporate or affiliated-group services;
(3) data processing, information services, cloud computing, digital automation, call-center operations, accounting, legal support, engineering support, or other outsourced services; or
(4) any product or service based solely on the identity, industry, organizational form, domicile, or political influence of the buyer or seller.
(c) A financial flow, intra-company transfer, or federal-government transaction excluded by Section 2.03 may not be reclassified as a taxable product or service by rule.
(d) A law enacted after the effective date of this Act that creates an exemption from the covered tax other than by amending Section 3.01 of this Act is effective only if the law expressly states that it amends or overrides this section.
(e) Section 151.423 (reimbursement to taxpayer for tax collections) and Section 151.424 (discount for prepayments), Tax Code, are compensation to sellers for collecting the covered tax and are not exemptions.
ARTICLE 3. THE TEXAS LIVING EXEMPTION SET
SECTION 3.01. THE TEXAS LIVING EXEMPTION SET.
The following categories are the Texas Living Exemption Set as enacted by this Legislature. The Legislature may by statute add or remove categories subject to the Cost of Living Standard under Section 1.04 and Section 4.05 of this Act:
TLES-1: GROCERIES (FOOD AT HOME)
(a) Exempt: Purchases of food and nonalcoholic beverages for home consumption, regardless of the seller, including:
(1) food and food ingredients sold for preparation and consumption at home;
(2) carbonated and noncarbonated soft drinks, juices, milk and milk-based drinks, and other nonalcoholic beverages;
(3) candy and confectionery; and
(4) drinking water sold in bottles, jugs, or other containers or dispensed for home consumption.
(b) Not exempt: Meals and prepared food sold by a restaurant, food service, or other seller for immediate consumption, whether eaten on the premises or taken out; alcoholic beverages; ice; tobacco products; and drugs, medicines, vitamins, and dietary supplements, which are governed by TLES-4 if dispensed by prescription.
TLES-2: RESIDENTIAL RENT
(a) Exempt: Monthly rent payments made by Texas tenants for a primary residential dwelling, including apartments, houses, duplexes, and mobile homes.
(b) Not exempt: Short-term rentals, vacation rentals, commercial leases, and residential rentals of property that is not the tenant's primary residence.
TLES-3: RESIDENTIAL UTILITIES AND HOME FUEL
(a) Exempt: Payments for electricity, natural gas, water, wastewater, solid-waste and recycling collection, and similar utility services provided to any residential property, including an apartment, condominium, townhome, single-family dwelling, multifamily dwelling, or manufactured home, whether the service is billed to the occupant or to the owner of the property, and whether the owner is a natural person or an entity.
(b) Not exempt: Utility service to commercial, industrial, or agricultural property; non-residential solid-waste or recycling contracts; and fuel purchased for use in a motor vehicle, for a farm, ranch, or business, or at a property that is not the purchaser's primary residence. Motor fuel for a personal vehicle is governed by TLES-7.
(c) Water delivered to a residence through a public or private water system is a residential utility under this category. Drinking water purchased at retail for home consumption is a grocery item under TLES-1.
(d) Exempt — home fuel: Any fuel, including heating oil, propane and other liquefied petroleum gas, kerosene, and firewood, purchased for use at a residential property that is the purchaser's primary residence, regardless of its use in the residence. A seller may rely on the delivery address and the purchaser's written attestation that the address is the purchaser's primary residence.
(e) Residential utility service as household use: Utility service under Subsection (a) is a transaction for the personal and family use of the household that occupies or will occupy the residential property, and its primary economic effect is the cost of living of that household, regardless of who is billed or whether the owner holds the property for income. Notwithstanding Sections 1.05(b) and 4.02(a) of this Act, the exemption under Subsection (a) applies to an owner who purchases the service for a residential property, including a vacant unit offered for residential occupancy. The purchase of residential property for rental or investment remains taxable as provided by TLES-9(d).
TLES-4: PRESCRIPTION DRUGS
(a) Exempt: All purchases of prescription medications dispensed pursuant to a valid prescription; prescription medical devices; and home infusion therapy services.
(b) Not exempt: Over-the-counter medications that do not require a prescription are non-prescription retail goods and are part of the general taxable base.
TLES-5: MEDICAL CARE
(a) Exempt: All payments for licensed medical and dental services provided directly to individual patients, including physician visits, hospital care, outpatient services, laboratory and imaging, dental care, vision care, mental health services, physical therapy, home health, hospice, palliative care, skilled nursing facility services, and licensed personal-care attendant services. Health and dental insurance premiums paid by individual policyholders or family units are included within this exemption.
(b) Not exempt: Cosmetic procedures without medical necessity, elective spa or wellness services, veterinary services for non-service animals, and group employer premium payments, which are taxable business-to-business transactions.
TLES-6: EDUCATION
(a) Exempt: Education services that result in a credential, certification, course-completion record, or license, when purchased by or on behalf of an individual Texas resident for the person's own education or career development, including private K-12 tuition, college and university tuition, vocational and trade school programs, professional certification programs, licensing exam fees, workforce training resulting in a completion certificate, standardized test preparation programs, and online courses that issue a completion record.
(b) Not exempt: Hobby and recreational classes that produce no credential, license, or completion record. Corporate training purchased by an employer for employees is a business-to-business transaction and is taxable.
(c) Mixed-transaction reporting: Education providers that offer both exempt and non-exempt programs shall identify the exempt and non-exempt portions on their sales tax permit application. Exemption certification at the transaction level is governed by Section 4.01 of this Act.
TLES-7: MOTOR FUEL — GASOLINE AND DIESEL (CONSUMER PERSONAL USE)
(a) Exempt: Consumer purchases of gasoline and diesel fuel at retail pumps for use in a personal, non-commercial vehicle, including a primary personal vehicle under TLES-13 and any other vehicle used for commuting and personal transportation.
(b) Not exempt: Commercial fleet fuel purchases, agricultural fuel, and aviation fuel.
(c) This category applies to the covered tax. It does not affect a tax imposed by Chapter 162, Tax Code.
TLES-8: CHILDCARE AND EARLY CHILDHOOD EDUCATION
(a) Exempt: All payments for licensed childcare facilities, including daycare centers, licensed home-based childcare providers, pre-kindergarten programs, before- and after-school care, and summer care programs operated by licensed childcare providers.
(b) Not exempt: Adult eldercare services and tutoring services beyond the scope of licensed childcare.
TLES-9: PRIMARY RESIDENCE HOME PURCHASE
(a) Exempt: The purchase price of any home that the buyer designates and actually occupies as the buyer's primary residence. This is a primary residence exemption, not a first-home exemption. The exemption applies to:
(1) first-time home purchases;
(2) move-up or lateral purchases where the buyer intends to occupy the new property as a primary residence; and
(3) relocation purchases where a buyer acquires a new primary home in advance of selling or vacating the current primary residence — the new purchase is exempt because it will serve as the buyer's primary residence, without regard to any transitional overlap period.
(b) Property retention — short qualifying occupancy period (fewer than six years): If a buyer has occupied the prior primary residence for fewer than six continuous years at the time of purchasing a new primary residence, the prior property must be actively listed for sale and not retained for rental or investment purposes for the TLES-9 exemption on the new purchase to apply. During any period in which the prior property is listed for sale and a buyer has not yet been found, the owner may rent the prior property on a month-to-month or short-term basis for a period not to exceed two years from the date of the new primary-residence purchase. If the prior property has not been sold within two years and is not actively listed for sale, the TLES-9 exemption on the new purchase is forfeited and the tax becomes immediately due, together with applicable penalties and interest.
(c) Property retention — qualifying occupancy period of six or more years: A buyer who has occupied the prior primary residence as their primary residence for not less than six continuous years prior to purchasing a new primary home may retain the prior property for any lawful purpose, including making it available for rent or lease, without disqualifying the TLES-9 exemption on the new purchase. This provision recognizes that long-term residential equity is a foundation of family financial stability and generational wealth in Texas, and the Legislature expressly encourages that outcome.
(d) Not exempt — investment purchases: The purchase of a residential property where the buyer's intent at closing is rental income or capital appreciation, and the buyer does not intend to occupy the property as a primary residence for any period of time, does not qualify for the TLES-9 exemption. The governing test is the buyer's intent at the time of closing, evidenced by the Primary Residence Certificate required under Section 4.03 of this Act.
(e) Citizen standing: Any Texas citizen has standing to bring a civil enforcement action against a buyer who fraudulently obtained a TLES-9 exemption. A prevailing plaintiff is entitled to require the buyer to pay all taxes due on the original purchase, plus penalties and interest, and is entitled to recover reasonable attorney's fees and court costs from the defendant. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(f) Administration: TLES-9 is administered at closing through the Primary Residence Certificate established in Section 4.03 of this Act.
TLES-10: RESIDENTIAL PROPERTY INSURANCE
(a) Exempt: Premiums on homeowners insurance, renters insurance, flood insurance, and condominium or cooperative owners' insurance — all for primary residential use.
(b) Not exempt: Commercial property insurance, landlord policies on investment or rental properties, and insurance on vacation homes or second homes.
(c) TLES-10, TLES-11, and TLES-12 apply to the covered tax. They do not affect a tax imposed by Title 3, Insurance Code.
TLES-11: PERSONAL AUTO INSURANCE
(a) Exempt: Personal auto insurance premiums on personal, non-commercial vehicles, including motor vehicle liability coverage meeting the minimum amounts required by Section 601.072, Transportation Code, and comprehensive, collision, uninsured or underinsured motorist, and personal injury protection coverages.
(b) Not exempt: Commercial fleet insurance, trucking insurance, and specialty vehicle insurance.
TLES-12: INDIVIDUAL LIFE INSURANCE
(a) Exempt: Premiums paid on personal life insurance policies held by a natural person for the benefit of the person's immediate family, including individual term life, whole life, universal life, indexed universal life, and indexed whole life policies. The exemption covers the full premium, including any cash-accumulation component.
(b) Not exempt — fully taxable: Commercial life insurance of any kind, including corporate-owned life insurance (COLI), key-man policies, and similar business instruments. These are selective business expenses purchased by businesses for business financial management — not transactions necessary for any individual Texan to live in Texas. Commercial life insurance products are not exempt under this Act, with no exemption or definition-filter carve-out of any kind.
(c) Governing test: If the policyholder is a natural person and the beneficiaries are that person's immediate family, the policy is personal and TLES-12 applies. If the policyholder is a business entity and the policy serves a business purpose, it is a commercial transaction and is fully taxable.
TLES-13: PRIMARY PERSONAL VEHICLE PURCHASE OR LEASE
(a) Exempt: The sales price of one personal-use motor vehicle, new or used, that a natural person purchases from a motor vehicle seller or from any other person and designates as the person's primary personal vehicle, and the periodic payments, down payment, and capitalized cost reduction under a personal lease of a personal-use motor vehicle that the lessee designates as the lessee's primary personal vehicle. The exemption is available to each eligible person independently, so that each eligible member of a household may designate one primary personal vehicle.
(b) Eligibility: A person may designate a primary personal vehicle only if the person:
(1) is a resident of this state;
(2) holds a driver's license issued under Chapter 521, Transportation Code; and
(3) is the owner of the vehicle, alone or jointly with a member of the person's immediate family, as shown on the title issued under Chapter 501, Transportation Code, or is the lessee of the vehicle under a personal lease.
(c) One vehicle per person: A person may have only one primary personal vehicle at a time, whether purchased or leased. A newly purchased or leased vehicle may be designated at any time if, on completion of the transaction, it is the only personal-use motor vehicle the person owns or leases, other than a vehicle designated as another person's primary personal vehicle, including when the person's prior vehicle is traded in or returned as part of the transaction. Designating a vehicle ends the designation of any vehicle the person previously designated. A vehicle may be designated by only one person at a time.
(d) Not exempt: The following purchases, leases, and rentals are taxable:
(1) a vehicle titled or registered to a business entity, trust, or governmental entity;
(2) a vehicle registered under an apportioned, commercial, farm, or for-hire registration, or used primarily for a business, commercial, agricultural, for-hire, or income-producing purpose;
(3) a vehicle acquired while the person owns or leases another personal-use motor vehicle, other than a vehicle described by the exception in Subsection (c);
(4) a vehicle purchased for resale or rental, and a lessor's purchase of a vehicle for lease other than a purchase described by Subsection (f-1);
(5) parts, accessories, service contracts, warranties, and repairs, which remain taxable unless another category of this Act applies; and
(6) a rental of a motor vehicle for 180 days or less.
(e) Change of use: If, within 12 months after the date of purchase or the beginning of a personal lease, a vehicle for which the exemption was claimed is transferred to a business entity, is registered under a registration described by Subsection (d)(2), or is used primarily for a commercial purpose, the exemption is forfeited and the covered tax on the original sales price or on the lease payments, plus interest, becomes due from the purchaser or lessee.
(f) Private-party purchases: The exemption under Subsection (a) applies to a purchase from an individual who is not a motor vehicle seller in the same manner as a purchase from a motor vehicle seller. The purchaser shall file the Vehicle Certificate with the application for title. A private-party purchase that is not designated under this category remains subject to the tax imposed by Chapter 152, Tax Code, while that chapter is in effect.
(f-1) Lessor's purchase as agent transaction: A lessor's purchase of a personal-use motor vehicle for a personal lease to a natural person who designates the vehicle as the lessee's primary personal vehicle is an agent transaction made on behalf of the lessee under Section 2.02 of this Act. The lessor's purchase and the lease payments are exempt under Subsection (a). The lessor's own separately stated charges for services, if any, remain taxable.
(g) Citizen standing: Any Texas citizen has standing to bring a civil enforcement action against a purchaser or lessee who fraudulently obtained a TLES-13 exemption. A prevailing plaintiff is entitled to require the purchaser or lessee to pay all taxes due on the original purchase or lease, plus penalties and interest, and is entitled to recover reasonable attorney's fees and court costs from the defendant. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(h) Administration: TLES-13 is administered at the time of sale or lease signing, and at titling or registration, through the Primary Personal Vehicle Certificate established in Section 4.04 of this Act.
ARTICLE 4. ADMINISTRATION AND ENFORCEMENT
SECTION 4.01. COMPTROLLER ADMINISTRATION AND PERMIT MECHANISM.
(a) The Comptroller shall administer the exemptions established by Section 3.01 of this Act through the sales tax permit system under Subchapter F, Chapter 151, Tax Code, and, after the TPTRP implementation date, Chapter 151A, Tax Code. Every seller engaged in business in this state is required by law to hold a sales tax permit. The permit application process is the universal mechanism through which businesses certify their TLES status and governs all TLES categories equally. This is not a new administrative concept — it mirrors the multi-category reporting already required under current Texas sales tax law for businesses that sell a mix of taxable and exempt goods.
(b) The sales tax permit application shall include a designated section listing all currently enacted TLES-eligible transaction categories. Each permit applicant shall select, under oath, which of the applicant's products or services fall within a TLES-exempt category, certifying that those transaction types will not have the covered tax collected at the point of sale. The permit, once issued, binds the holder to those certifications. A permit holder is not required to apply for a new or amended permit solely because the Legislature has added or removed a TLES category; however:
(1) When the Legislature removes a TLES category, the Comptroller shall promptly notify all affected sales tax permit holders in writing of the removal and the effective date on which the previously exempt transactions become taxable. Permit holders must begin collecting the covered tax on those transactions on the effective date of the change, regardless of whether they have received updated permit documentation.
(2) When the Legislature adds a TLES category, a permit holder whose transactions qualify under the new exemption may submit an amended permit application to certify those transactions as TLES-exempt. Until an amended permit is issued, the permit holder must continue collecting the covered tax on those transactions. No permit holder is required to claim a new exemption; the decision to apply for the exemption is voluntary.
(c) Enforcement. TLES exemption compliance is enforceable through four independent channels:
(1) Comptroller audit authority: The Comptroller has audit authority over every sales tax permit holder. A business found to be exempting non-qualifying transactions is liable for all back taxes, penalties, and interest. A business found to have collected the covered tax on a transaction that qualifies under a TLES category is liable for a full refund of all amounts wrongfully collected, plus interest.
(2) District attorney and attorney general authority: District attorneys and the Office of the Attorney General of Texas each retain independent authority to pursue criminal prosecution and civil back-tax collection from businesses found to have fraudulently claimed TLES status or wrongfully collected the covered tax on an exempt transaction. The attorney general may bring suit on behalf of the state; a district attorney may bring suit on behalf of the state within the district attorney's jurisdiction. These authorities are concurrent and non-exclusive.
(3) Citizen standing — wrongful exemption claim: Any Texas citizen has standing to bring a civil enforcement action against a business that improperly claims a TLES exemption on a non-qualifying transaction. A prevailing plaintiff is entitled to reasonable attorney's fees and court costs. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(4) Citizen standing — wrongful tax collection: Any Texas citizen who has been charged the covered tax on a transaction that qualifies under a TLES category has standing to bring a civil enforcement action against the business that collected the tax. A prevailing plaintiff is entitled to a full refund of the wrongfully collected tax, plus reasonable attorney's fees and court costs. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(d) Mixed-transaction businesses: A business that sells both TLES-exempt and non-exempt products or services shall collect the covered tax on non-exempt transactions and shall not collect it on TLES-certified transactions, tracking at the transaction level.
(e) The Comptroller shall adopt rules necessary to implement this section, including rules defining the categories in Section 3.01 with sufficient precision for permit certification purposes, and rules establishing the notification procedures required under Subsection (b)(1). The comptroller shall adopt the initial rules not later than the 90th day after the effective date of this Act.
SECTION 4.02. COMMERCIAL-VERSUS-RESIDENTIAL PERMIT-LEVEL ACCOUNTING.
(a) Except as provided by TLES-3(e) of Section 3.01, the exemptions established by this Act apply only to transactions in which the ultimate purchaser is a household purchasing for a cost-of-living purpose. Commercial, industrial, agricultural, government, and other non-household purchases of goods and services in the categories designated by this Act remain taxable transactions under the law imposing the covered tax.
(b) The Comptroller shall administer the exemption through the sales tax permit system by:
(1) designing permit categories that identify the goods and services each permit-holder sells across the categories of the Texas Living Exemption Set;
(2) requiring each permit-holder to certify, at initial application and at each renewal, the residential-versus-commercial customer share of its sales in each Texas Living Exemption Set category in which it operates;
(3) prescribing the accounting method for each category (per-transaction certification, aggregate share, or a hybrid) based on the nature of the goods or services and the practicalities of buyer identification;
(4) establishing audit protocols, misclassification penalties, and appeal procedures for permit-holders operating across residential and commercial customer classes; and
(5) coordinating with the Primary Residence Certificate mechanism established under Section 4.03 for the administration of the Texas Living Exemption Set category for the purchase of a primary residence, and with the Primary Personal Vehicle Certificate mechanism established under Section 4.04 for the purchase or lease of a primary personal vehicle.
(c) The commercial share of sales in each Texas Living Exemption Set category, including sales of motor vehicles, utilities, medical services, and insurance, remains a taxable transaction under the law imposing the covered tax and continues to fund any dedication of that revenue under Article VIII, Section 7-c, 7-d, or 7-e, of the Texas Constitution or other law. The permit-level accounting established under this section is the operative mechanism for maintaining that dedication. The permit-level accounting established under this Section is the operative mechanism for maintaining that dedication.
(d) The specific permit categories, certification procedures, and audit protocols are established by the comptroller by rule under Chapter 151, Tax Code, and, after the TPTRP implementation date, Chapter 151A, Tax Code. This section imposes the substantive standard; the law imposing the covered tax contains the administrative mechanism.
SECTION 4.03. PRIMARY RESIDENCE CERTIFICATE.
(a) The Comptroller shall establish and administer a Primary Residence Certificate (the "Certificate") to be used in connection with TLES-9 exemptions under Section 3.01 of this Act. The Certificate shall be a plain-language document that, in addition to the attestations required under Subsection (b), sets forth the full text of the exemption conditions under TLES-9(b), (c), and (d) of Section 3.01 so that all parties to the transaction may read, understand, and attest to the applicable rules at closing. The purpose of printing those conditions on the Certificate is to ensure that every buyer, seller, and closing agent has actual notice of the law at the moment of the transaction, further supporting any subsequent enforcement action should the buyer falsely attest to compliance.
(b) At closing, a buyer claiming a TLES-9 exemption shall sign and file the Certificate under penalty of perjury, attesting that:
(1) the property being purchased will serve as the buyer's principal place of residence;
(2) the buyer's intent at the time of closing is primary occupancy and not the generation of rental income or capital appreciation as the primary purpose;
(3) if the buyer is retaining a prior primary residence and has not yet completed a qualifying occupancy period of six continuous years in that prior property, the buyer understands and agrees that:
(A) the prior property must be actively listed for sale;
(B) the buyer may rent the prior property on a transitional basis for a period not to exceed two years while seeking a buyer; and
(C) if the prior property is not sold within two years and is not actively listed for sale, the TLES-9 exemption on the current purchase is forfeited and all taxes, penalties, and interest become immediately due; and
(4) if the buyer has completed a qualifying occupancy period of six or more continuous years in a prior primary residence, the buyer understands that retention of the prior property for any lawful purpose, including rental, does not disqualify this exemption.
(c) The Certificate shall be filed with the deed and becomes part of the public property record, and is publicly accessible to any Texas citizen.
(d) A buyer who obtains the TLES-9 exemption through a fraudulent Certificate is liable for all taxes due on the original purchase, plus penalties and interest, and may be subject to criminal prosecution for filing a false sworn instrument under applicable Texas law.
(e) Any Texas citizen has standing to bring a civil enforcement action against a buyer upon discovering a violation of the conditions attested to in the Certificate. A prevailing plaintiff is entitled to require the buyer to pay all taxes, penalties, and interest due, and is entitled to recover reasonable attorney's fees and court costs. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff.
(f) The Comptroller shall coordinate with closing agents, title companies, and county recorders to receive Primary Residence Certificates as evidence of TLES-9 exemption eligibility, and shall integrate the receipt and indexing of Primary Residence Certificates into the comptroller's electronic filing system and, after the TPTRP implementation date, the Texas Sales and Use Tax Portal established under Section 490.073, Government Code.
(g) A Primary Residence Certificate filed under this section satisfies, for the transaction to which it relates, the certification otherwise required of a permit-holder under Section 151.155, Tax Code, or, after the TPTRP implementation date, Section 151A.702, Tax Code, and no separate residential-versus-commercial certification is required for that transaction.
(h) The comptroller may adopt rules governing the form, filing method, retention, revocation, and audit of Primary Residence Certificates under this section, and may prescribe an electronic filing method integrated with the Texas Sales and Use Tax Portal.
SECTION 4.04. PRIMARY PERSONAL VEHICLE CERTIFICATE.
(a) The Comptroller, in coordination with the Texas Department of Motor Vehicles, shall establish and administer a Primary Personal Vehicle Certificate (the "Vehicle Certificate") to be used in connection with TLES-13 exemptions under Section 3.01 of this Act. The Vehicle Certificate shall be a plain-language document that sets forth the full text of TLES-13(b) through (e) of Section 3.01 so that the purchaser or lessee and the motor vehicle seller have actual notice of the conditions at the time of sale or lease signing.
(b) A purchaser or lessee claiming a TLES-13 exemption shall sign the Vehicle Certificate under penalty of perjury at the time of sale or lease signing, attesting that:
(1) the person is a resident of this state who holds a driver's license issued under Chapter 521, Transportation Code, and stating the license number;
(2) the vehicle will be the person's primary personal vehicle, used primarily for the person's own personal, household, or family transportation;
(3) the vehicle will not be titled or registered to a business entity or under a registration described by TLES-13(d)(2);
(4) on completion of the transaction, the vehicle will be the only personal-use motor vehicle the person owns or leases, other than a vehicle designated as another person's primary personal vehicle, and the person has identified, by vehicle identification number, any vehicle traded in, returned, or previously disposed of, and any vehicle the person previously designated; and
(5) the person understands that the exemption is forfeited under TLES-13(e) if the vehicle is converted to commercial use within 12 months.
(c) The motor vehicle seller, or, for a private-party purchase, the purchaser, shall retain the Vehicle Certificate and submit it with the application for title under Chapter 501, Transportation Code, or, for a leased vehicle, with the application for registration under Chapter 502, Transportation Code. The county tax assessor-collector shall record the designation in the title and registration record maintained by the Texas Department of Motor Vehicles, and that record shall identify, for each person, the vehicle currently designated as the person's primary personal vehicle.
(d) A Vehicle Certificate filed under this section satisfies, for the transaction to which it relates, the certification otherwise required of a permit-holder under Section 151.155, Tax Code, or, after the TPTRP implementation date, Section 151A.702, Tax Code.
(e) A purchaser or lessee who obtains the TLES-13 exemption through a fraudulent Vehicle Certificate is liable for all taxes due on the original purchase or lease, plus penalties and interest, and may be subject to criminal prosecution for filing a false sworn instrument under applicable Texas law.
(f) The Comptroller shall integrate the receipt and indexing of Vehicle Certificates into the comptroller's electronic filing system and, after the TPTRP implementation date, the Texas Sales and Use Tax Portal established under Section 490.073, Government Code.
(g) The Comptroller and the Texas Department of Motor Vehicles shall adopt rules governing the form, electronic filing, retention, revocation, and audit of Vehicle Certificates.
SECTION 4.05. LEGISLATIVE MODIFICATION OF THE TLES.
(a) The Legislature may, by statute, add or remove categories from the Texas Living Exemption Set at any time. No additional legal requirement beyond enactment by the Legislature is required to remove a category from the TLES.
(b) The Legislature may add a category to the TLES only if the category satisfies the Cost of Living Standard under Section 1.04 of this Act. A category that does not directly and primarily affect the cost of living of individual Texas citizens and their immediate families, or that does not apply uniformly to all such citizens, may not be added.
(c) No entity below the Legislature has authority to modify, expand, or restrict the TLES.
(d) Any Texas citizen has standing to bring a civil action challenging a legislative addition to the TLES on the ground that the added category fails to satisfy the Cost of Living Standard under Section 1.04 of this Act. A prevailing plaintiff is entitled to have the exemption invalidated and to recover reasonable attorney's fees and court costs. A defendant who prevails against a frivolous or unfounded action is entitled to recover reasonable attorney's fees and court costs from the plaintiff. Citizens do not have standing under this Act to challenge the removal of a category from the TLES; that remedy lies with the electorate through the selection of representatives.
ARTICLE 5. AMENDMENTS TO CHAPTER 151, TAX CODE
SECTION 5.01. Section 151.010, Tax Code, is amended to read as follows:
Sec. 151.010. TAXABLE ITEM. "Taxable item" means tangible personal property and every service, including a taxable service under Section 151.0101, rendered for consideration in a taxable transaction as defined by Section 2.01 of the TPTRP Texas Living Exemption Set Act — Standalone Edition.
SECTION 5.02. Section 151.0101, Tax Code, is amended to read as follows:
Sec. 151.0101. TAXABLE SERVICES. (a) "Taxable services" means every service performed for consideration, including the services described by this chapter before September 1, 2027, except:
(1) a service exempt under the Texas Living Exemption Set established by Section 3.01 of the TPTRP Texas Living Exemption Set Act — Standalone Edition; and
(2) a transaction excluded by Article 2 of that Act.
(b) A reference in this chapter or in another law to a particular taxable service includes that service as described by this section.
SECTION 5.03. Section 151.313, Tax Code, is amended to read as follows:
Sec. 151.313. PRESCRIPTION DRUGS AND DEVICES. The following are exempted from the taxes imposed by this chapter as provided by TLES-4 of the TPTRP Texas Living Exemption Set Act — Standalone Edition: a drug or medicine dispensed pursuant to a valid prescription, a prescription medical device, and home infusion therapy services. Over-the-counter drugs, medicines, vitamins, and dietary supplements are not exempt.
SECTION 5.04. Section 151.314, Tax Code, is amended to read as follows:
Sec. 151.314. FOOD AND BEVERAGES FOR HOME CONSUMPTION. Food and nonalcoholic beverages for home consumption are exempted from the taxes imposed by this chapter as provided by TLES-1 of the TPTRP Texas Living Exemption Set Act — Standalone Edition, including soft drinks and candy. Meals and prepared food sold for immediate consumption, alcoholic beverages, ice, tobacco products, and drugs, medicines, vitamins, and dietary supplements are not exempt under this section.
SECTION 5.05. Section 151.315, Tax Code, is amended to read as follows:
Sec. 151.315. RESIDENTIAL WATER. Water delivered through a public or private water system to a residential property is exempted from the taxes imposed by this chapter as a residential utility under TLES-3 of the TPTRP Texas Living Exemption Set Act — Standalone Edition. Water delivered to commercial, industrial, or agricultural property is not exempt. Drinking water sold at retail for home consumption is governed by Section 151.314.
SECTION 5.06. Section 151.317, Tax Code, is amended to read as follows:
Sec. 151.317. RESIDENTIAL UTILITIES AND HOME FUEL. (a) Electricity, natural gas, water, wastewater, solid-waste and recycling collection, and similar utility services provided to any residential property, whether billed to the occupant or to the owner and whether the owner is a natural person or an entity, are exempted from the taxes imposed by this chapter as provided by TLES-3 of the TPTRP Texas Living Exemption Set Act — Standalone Edition.
(b) Any fuel, including heating oil, propane and other liquefied petroleum gas, kerosene, and firewood, purchased for use at a residential property that is the purchaser's primary residence is exempted from the taxes imposed by this chapter. A seller may rely on the delivery address and the purchaser's written attestation that the address is the purchaser's primary residence.
(c) Utility service and fuel for commercial, industrial, agricultural, manufacturing, mining, or timber use are not exempt.
SECTION 5.07. Section 151.303, Tax Code, is amended by adding Subsection (h) to read as follows:
(h) This section is a structural definition under Section 2.04(a) of the TPTRP Texas Living Exemption Set Act — Standalone Edition and is not an exemption.
SECTION 5.08. Section 151.304, Tax Code, is amended by adding Subsection (f) to read as follows:
(f) This section is a structural definition under Section 2.04(b) of the TPTRP Texas Living Exemption Set Act — Standalone Edition and is not an exemption. A sale of a motor vehicle remains governed by Chapter 152.
SECTION 5.09. Section 151.308, Tax Code, is amended by adding Subsection (d) to read as follows:
(d) This section is a coordination rule under Section 2.04(d) of the TPTRP Texas Living Exemption Set Act — Standalone Edition and is not an exemption. Each item listed in Subsection (a) is excluded from the tax imposed by this chapter only while the tax imposed by the law listed for that item is in effect.
SECTION 5.10. Subchapter H, Chapter 151, Tax Code, is amended by adding Section 151.3001 to read as follows:
Sec. 151.3001. EXCLUSIVE EXEMPTIONS. (a) The only exemptions from the taxes imposed by this chapter are the categories of the Texas Living Exemption Set established by Section 3.01 of the TPTRP Texas Living Exemption Set Act — Standalone Edition, as implemented by Sections 151.313, 151.314, 151.315, and 151.317.
(b) Sections 151.303, 151.304, 151.306, 151.307, 151.308, 151.3141, 151.330, and 151.337 define transactions that are not part of the tax base or that this state may not tax under federal law, and are not exemptions.
(c) A law enacted after September 1, 2027, that creates an exemption from the taxes imposed by this chapter other than by amending the TPTRP Texas Living Exemption Set Act — Standalone Edition is effective only if the law expressly states that it amends or overrides this section.
SECTION 5.11. The following provisions of the Tax Code are repealed:
(1) Section 151.006 (Sale for resale);
(2) Section 151.151 (Resale certificate);
(3) Section 151.152 (Resale certificate: form);
(4) Section 151.153 (Resale certificate: commingled fungible goods);
(5) Section 151.154 (Resale certificate: liability of purchaser);
(6) Section 151.427 (Deduction for property on which the tax is paid and held for resale);
(7) Section 151.302 (Sales for resale);
(8) Section 151.3021 (Packaging supplies and wrapping);
(9) Section 151.305 (Coin-operated machine sales);
(10) Section 151.3051 (Sales through certain vending machines);
(11) Section 151.3071 (Installation of certain equipment for export);
(12) Section 151.309 (Governmental entities);
(13) Section 151.310 (Religious, educational, and public service organizations);
(14) Section 151.3101 (Amusement services exemptions);
(15) Section 151.3102 (Sale by nonprofit organization at county fair);
(16) Section 151.3105 (Bingo equipment purchased by certain organizations);
(17) Section 151.311 (Taxable items incorporated into or used for improvement of realty of an exempt entity);
(18) Section 151.3111 (Services on certain exempted personal property);
(19) Section 151.312 (Periodicals and writings of religious, philanthropic, charitable, historical, scientific, and similar organizations);
(20) Section 151.3131 (Firearm safety equipment);
(21) Section 151.3132 (Feminine hygiene products);
(22) Section 151.3133 (Maternity clothing);
(23) Section 151.3134 (Breast milk pumping products);
(24) Section 151.3135 (Baby bottles);
(25) Section 151.316 (Agricultural items);
(26) Section 151.3162 (Timber items);
(27) Section 151.3171 (Sulphur);
(28) Section 151.318 (Property used in manufacturing);
(29) Section 151.3181 (Divergent use of property used in manufacturing);
(30) Section 151.3185 (Property used in the production of motion pictures, recordings, and broadcasts);
(31) Section 151.3186 (Property used in cable television, internet access, or telecommunications services);
(32) Section 151.319 (Newspapers and property used in newspaper publication);
(33) Section 151.320 (Magazines);
(34) Section 151.321 (University and college student organizations);
(35) Section 151.322 (Containers);
(36) Section 151.323 (Certain telecommunications services);
(37) Section 151.324 (Equipment used elsewhere for mineral exploration or production);
(38) Section 151.326 (Clothing and footwear for limited period);
(39) Section 151.327 (School supplies and school backpacks before start of school);
(40) Section 151.328 (Aircraft);
(41) Section 151.329 (Certain ships and ship equipment);
(42) Section 151.3291 (Boats and boat motors);
(43) Section 151.331 (Rolling stock; train fuel and supplies);
(44) Section 151.332 (Certain sales by senior citizen organizations);
(45) Section 151.333 (Energy-efficient products);
(46) Section 151.3335 (Water-efficient products);
(47) Section 151.334 (Components of tangible personal property used in connection with sequestration of carbon dioxide);
(48) Section 151.336 (Certain coins and precious metals);
(49) Section 151.338 (Environment and conservation services);
(50) Section 151.340 (Official state coin);
(51) Section 151.341 (Items sold to or used by development corporations);
(52) Section 151.3415 (Items sold to or used to construct, maintain, expand, improve, equip, or renovate certain media production facilities);
(53) Section 151.342 (Agribusiness items);
(54) Section 151.343 (Animals sold by nonprofit animal shelters or nonprofit animal welfare organizations);
(55) Section 151.344 (Post exchanges on state military property);
(56) Section 151.346 (Intercorporate services);
(57) Section 151.347 (Certain lawn and yard service);
(58) Section 151.348 (Cooperative research and development ventures);
(59) Section 151.350 (Labor to restore certain property);
(60) Section 151.3501 (Labor to restore, repair, or remodel certain property);
(61) Section 151.351 (Information services and data processing services);
(62) Section 151.353 (Court reporting services);
(63) Section 151.354 (Services by employees of property management companies);
(64) Section 151.355 (Water-related exemptions);
(65) Section 151.356 (Offshore spill response containment property);
(66) Section 151.3565 (Emergency preparation supplies for limited period);
(67) Section 151.359 (Property used in certain data centers; temporary exemption);
(68) Section 151.3595 (Property used in certain large data center projects; temporary exemption);
(69) Section 151.4292 (Tax refund pilot program for certain persons who employ apprentices);
(70) Section 151.4305 (Tax refunds for oil or gas severance taxpayers);
(71) Section 151.433 (Deduction for certain taxpayers purchasing Texas farm-raised oysters);
(72) Section 151.434 (Deduction for certain taxpayers participating in oyster shell recycling program).
SECTION 5.12. The following provisions of the Tax Code are repealed, subject to Section 9.03 of this Act:
(1) Section 151.429 (Tax refunds for enterprise projects);
(2) Section 151.4291 (Tax refunds for defense readjustment projects);
(3) Section 151.431 (Sales and use tax refund for job retention).
SECTION 5.13. Any reference in Chapter 151, Tax Code, or another law to a sale for resale, a resale certificate, or an exemption repealed by this article is void to the extent the reference would exempt a transaction from the taxes imposed by Chapter 151. A reference to an exemption certificate under Section 151.155, Tax Code, means a certificate claiming a TLES exemption or a transaction excluded by Article 2 of this Act.
ARTICLE 6. AMENDMENTS TO CHAPTER 152, TAX CODE
SECTION 6.01. Subchapter E, Chapter 152, Tax Code, is amended by adding Section 152.0801 to read as follows:
Sec. 152.0801. PRIMARY PERSONAL VEHICLE. (a) The sale, purchase, or use of a personal-use motor vehicle that a natural person designates as the person's primary personal vehicle under TLES-13 of the TPTRP Texas Living Exemption Set Act — Standalone Edition is exempted from the taxes imposed by this chapter, whether the vehicle is purchased from a motor vehicle seller or from a person who is not a motor vehicle seller.
(b) The purchase of a personal-use motor vehicle by a lessor for a personal lease to a natural person who designates the vehicle as the lessee's primary personal vehicle is an agent transaction made on behalf of the lessee and is exempted from the taxes imposed by this chapter.
(c) The exemption is claimed by filing the Primary Personal Vehicle Certificate established by Section 4.04 of the TPTRP Texas Living Exemption Set Act — Standalone Edition with the county tax assessor-collector at titling or registration.
(d) A rental of a motor vehicle for 180 days or less is not exempt under this section.
(e) If an exemption under this section is forfeited under TLES-13(e), the tax imposed by this chapter, plus interest, is due from the purchaser or lessee.
SECTION 6.02. Section 152.082, Tax Code, is amended to read as follows:
Sec. 152.082. SALE OF MOTOR VEHICLE TO OR USE OF MOTOR VEHICLE BY THE UNITED STATES. The taxes imposed by this chapter do not apply to the sale of a motor vehicle to, or the use of a motor vehicle by, the United States or an agency or instrumentality of the United States, as provided by Category G-1 of Section 2.03 of the TPTRP Texas Living Exemption Set Act — Standalone Edition.
SECTION 6.03. The following provisions of the Tax Code are repealed:
(1) Section 152.081 (Driver training motor vehicles);
(2) Section 152.083 (Lease of motor vehicle to public agency);
(3) Section 152.084 (Rental of motor vehicle to public agency);
(4) Section 152.085 (Rental of motor vehicle for purposes of re-rental);
(5) Section 152.086 (Motor vehicles driven by handicapped persons);
(6) Section 152.087 (Fire trucks and emergency medical services vehicles);
(7) Section 152.088 (Motor vehicles used for religious purposes);
(8) Section 152.089 (Exempt vehicles);
(9) Section 152.090 (Certain hydrogen-powered motor vehicles);
(10) Section 152.091 (Farm or timber use);
(11) Section 152.093 (Motor vehicles sold to certain licensed child-care facilities);
(12) Section 152.094 (Motor vehicles used by nonprofit food bank (the section of that number so headed));
(13) Section 152.095 (Motor vehicles used by provider of housing and related services).
SECTION 6.04. Section 152.092, Tax Code (Motor vehicles transported out of state), and Section 152.094, Tax Code (Motor vehicle transferred from decedent), continue in effect as provisions defining transactions outside the taxable base under Sections 2.01(b) and 2.03(2)(F) of this Act, and are not exemptions.
ARTICLE 7. LOCAL SALES AND USE TAXES
SECTION 7.01. Section 321.105, Tax Code, is amended to read as follows:
Sec. 321.105. RESIDENTIAL USE OF GAS AND ELECTRICITY. A municipality may not impose a tax under this chapter on the sale, production, distribution, lease, or rental of, or the use, storage, or other consumption of, gas, electricity, or any other residential utility service or home fuel exempt under TLES-3 of the TPTRP Texas Living Exemption Set Act — Standalone Edition.
SECTION 7.02. Section 321.1055, Tax Code, is repealed.
SECTION 7.03. (a) Notwithstanding any other law, a political subdivision of this state, including a municipality, county, special purpose district, transit authority, or other local taxing authority, may not impose a sales and use tax on a transaction exempt under the Texas Living Exemption Set or excluded by Article 2 of this Act.
(b) A local sales and use tax applies to each taxable transaction subject to the tax imposed by Chapter 151, Tax Code, as amended by this Act, unless the law authorizing the local tax expressly limits the tax to a narrower base.
(c) An ordinance, order, or resolution that imposes a tax prohibited by Subsection (a) is void on and after the effective date of this Act. No political subdivision is entitled to payment or compensation for revenue not collected because of this article.
ARTICLE 8. COORDINATION WITH THE TEXAS PROPERTY TAX REPLACEMENT PLAN
SECTION 8.01. If the constitutional amendment is approved by the voters:
(1) Articles 5, 6, and 7 of this Act expire on the TPTRP implementation date, and the repeal of Chapters 151 and 152, Tax Code, by other law takes effect according to its terms;
(2) Articles 1 through 4 of this Act continue in effect and apply to the sales and use tax imposed by Chapter 151A, Tax Code; and
(3) a reference in this Act to Chapter 151, Tax Code, means Chapter 151A, Tax Code, and a reference to a permit, certificate, or filing system under Chapter 151 means the corresponding provision of Chapter 151A or the Texas Sales and Use Tax Portal.
SECTION 8.02. If the TPTRP Texas Living Exemption Set Act and this Act are both enacted, the TPTRP Texas Living Exemption Set Act governs on and after the TPTRP implementation date, and the two Acts shall be construed as establishing the same Texas Living Exemption Set.
SECTION 8.03. If the constitutional amendment is not approved by the voters, this Act continues in effect under Chapters 151 and 152, Tax Code, and the local sales and use tax laws, without expiration.
ARTICLE 9. TRANSITION
SECTION 9.01. The changes in law made by this Act apply only to a transaction occurring on or after the effective date of this Act. A transaction occurring before the effective date is governed by the law in effect on the date of the transaction, and that law is continued in effect for that purpose.
SECTION 9.02. (a) An exemption repealed by this Act continues to apply to a transaction made under a written contract or bid entered into or submitted before the effective date of this Act, to the extent provided by Section 151.339, Tax Code, until the earlier of the expiration of the contract or September 1, 2030.
(b) This section does not extend the term of a contract by renewal, amendment, or exercise of an option after the effective date of this Act.
SECTION 9.03. A certificate, agreement, or designation issued before the effective date of this Act under Section 151.359 or 151.3595, Tax Code, or a refund eligibility determined before that date under Section 151.429, 151.4291, or 151.431, Tax Code, continues in effect according to its terms until it expires, and the former law is continued in effect for that purpose. No new certificate, agreement, designation, or determination may be issued on or after the effective date of this Act.
SECTION 9.04. The comptroller and the Texas Department of Motor Vehicles shall adopt the rules and forms required by this Act, including the Primary Residence Certificate, the Primary Personal Vehicle Certificate, and the agent-transaction documentation rules, not later than the 90th day after the effective date of this Act.
SECTION 9.05. This Act takes effect September 1, 2027.
ARTICLE 10. SEVERABILITY
SECTION 10.01. If any provision of this Act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are declared to be severable. A holding that the repeal of a particular exemption is invalid does not revive any other exemption repealed by this Act.
References — Annotated Bibliography
Sources are listed in APA 7th edition format with the use of each in this article. Figures derived from two or more sources are identified as deductions in the text.
Household spending and TLES values
American Council of Life Insurers. (2025). Life insurers fact book 2025 (Chapters 4 and 10). https://www.acli.com/research-and-reports
Texas life premiums and the U.S. individual share (TLES-12).
Centers for Medicare & Medicaid Services. (2025). Medical loss ratio data and system resources: 2024 public use file [Data set]. https://www.cms.gov/marketplace/resources/data/medical-loss-ratio-data-systems-resources
Texas individual-market health premiums in TLES-5.
Child Care Aware of America. (2025). Child care affordability in Texas: 2024 price and supply data. https://info.childcareaware.org/hubfs/Pricing%20and%20Landscape%20Infograms/Pricing%20Sheets%20PDF/2024-2025-price-fact-sheet-child-care-affordability-Texas.pdf
Center-based infant care in Texas averaged $11,349 a year in 2024.
Federal Highway Administration. (2025). Highway statistics 2024, Table DL-22: Licensed drivers by state, sex, and age group. https://www.fhwa.dot.gov/policyinformation/statistics/2024/dl22.cfm
19,543,658 Texas licensed drivers; numerator of the TLES-13 primary share.
Federal Highway Administration. (2026). Highway statistics 2024, Table MV-1: State motor-vehicle registrations - 2024. https://www.fhwa.dot.gov/policyinformation/statistics/2024/mv1.cfm
324,381 Texas motorcycles, added to the vehicle pool because ACS excludes motorcycles.
National Association of Realtors. (2025). Realtors Confidence Index survey (January, March and August 2025 reports). https://www.nar.realtor/research-and-statistics/research-reports/realtors-confidence-index
15%–21% of 2025 buyers bought for non-primary use; supports the 83% TLES-9 share.
Texas Department of Insurance. (2026). 2025 market conditions annual report: Property and casualty lines. https://www.tdi.texas.gov/reports/pc/documents/pcalr2025.pdf
Texas homeowners and private passenger auto premiums, CY2025 (TLES-10, TLES-11).
Texas REALTORS. (2026). 2025 Texas real estate year in review. https://www.texasrealestate.com/research/quarterly-housing-report
Texas home sales volume (TLES-9).
U.S. Bureau of Economic Analysis. (2024). Personal consumption expenditures by state: Concepts, data, and methods. https://www.bea.gov/sites/default/files/2024-11/BEA-PCE-by-State-Concepts-and-Methods.pdf
Explains how state spending is measured, including the fuel and vehicle lines.
U.S. Bureau of Economic Analysis. (2026). National income and product accounts Table 2.4.5U: Personal consumption expenditures by type of product [Data set]. https://apps.bea.gov/national/Release/TXT/
National shares used for the prescription share, motorcycles and vehicle leasing.
U.S. Bureau of Economic Analysis. (2026). SAPCE: Personal consumption expenditures by state, 1997–2025 (SAPCE1–SAPCE5) [Data set]. https://apps.bea.gov/regional/downloadzip.htm
Texas household spending by product, 2025; source for TLES-1 to TLES-8 and TLES-13, including fuel oil and other fuels and recreational vehicles.
U.S. Census Bureau. (2025). American Community Survey 2024 1-year estimates, Table B25046: Aggregate number of vehicles available. https://data.census.gov/table/ACSDT1Y2024.B25046
21,509,481 Texas household vehicles; denominator of the TLES-13 primary share.
U.S. Energy Information Administration. (2026). Texas all grades all formulations retail gasoline prices, annual [Data set]. https://www.eia.gov/dnav/pet/
2025 Texas average retail gasoline price ($2.762), used to convert fuel spending to gallons.
U.S. Energy Information Administration. (n.d.). State Energy Data System, Table E10: Residential sector energy expenditure estimates, 2024. Retrieved October 22, 2026, from https://www.eia.gov/state/seds/data.php?incfile=/state/seds/sep_sum/html/sum_ex_res.html&sid=TX
Independent check on TLES-3; EIA’s residential heating-fuel estimate is lower than BEA’s.
Current Texas taxes and who pays them
Bajomo, E. (2026, October 15). Expense watch: Property taxes continue to rise across U.S. apartment markets. National Apartment Association. https://naahq.org/news/expense-watch-property-taxes-continue-rise-across-us-apartment-markets
Market-rate apartment figures for the 12 months ending July 2026 (Dallas 15.9%).
Beebe, J., & Diamond, J. W. (2025, February 27). Reform inventory tax to ease burden on Texas consumers. Rice University’s Baker Institute for Public Policy. https://www.bakerinstitute.org/research/reform-inventory-tax-ease-burden-texas-consumers
Analysis of the business personal property (inventory) tax and its effect on prices.
Glasmeier, A. K. (2026). Living wage calculator: Dallas County, Texas. Massachusetts Institute of Technology. https://livingwage.mit.edu/counties/48113
Dallas County family budgets, used for HD109.
Glasmeier, A. K. (2026). Living wage calculator: Texas. Massachusetts Institute of Technology. https://livingwage.mit.edu/states/48
Texas statewide family budgets.
Glasmeier, A. K. (2026). Methodology. Living wage calculator. Massachusetts Institute of Technology. https://livingwage.mit.edu/pages/methodology
MIT’s “annual taxes” are federal income and payroll taxes; Texas sales and property taxes sit inside the budget lines.
National Apartment Association. (2025). Dollar of rent tool [Interactive data tool]. https://naahq.org/research/dollar-rent-tool
Measured share of apartment rent that pays property tax: Texas 14.4% in 2025; Dallas metro 15.9%.
Texas Apartment Association. (2024, September 4). Written testimony to the Senate Committee on Finance. https://www.taa.org/wp-content/uploads/2024/12/09-04-24-senate-finance-written-testimony-signed.pdf
The “about 20% of every rent dollar” statement presented to legislators.
Texas Comptroller of Public Accounts, Property Tax Assistance Division. (2026). 2025 tax rates and levies [Data set]. https://comptroller.texas.gov/taxes/property-tax/rates/
Combined property tax rates for rented homes and levies by level of government.
Texas Comptroller of Public Accounts. (2025). 2025 State of Texas annual cash report (Publication 96-368). https://comptroller.texas.gov/transparency/reports/cash-report/2025/96-368.pdf
FY2025 state revenue by source.
Texas Comptroller of Public Accounts. (2025, January). Tax exemptions & tax incidence: A report to the Governor and the 89th Texas Legislature (Publication 96-463). https://comptroller.texas.gov/transparency/reports/tax-exemptions-and-incidence/
Initial-payer and final-incidence shares by income fifth for each tax, and the value of every sales tax exemption ($51.16B in FY2025).
Texas Comptroller of Public Accounts. (2026). First supplement to the May 2026 bond appendix (Table A-5, Tax collections by major tax). https://comptroller.texas.gov/programs/systems/treasury-ops/docs/bond-appendix.pdf
FY2025 motor vehicle sales and rental taxes ($7.08B).
Texas Department of State Health Services. (2021, December 30). February 2021 winter storm-related deaths — Texas. https://www.dshs.texas.gov/sites/default/files/news/updates/SMOC_FebWinterStorm_MortalitySurvReport_12-30-21.pdf
246 storm-related deaths, most from hypothermia.
U.S. Bureau of Labor Statistics, Southwest Information Office. (2026). Consumer Price Index, annual average historical, 2021–2025. https://www.bls.gov/regions/southwest/data/consumerpriceindexaahistorical_southwest_table.htm
Dallas–Fort Worth CPI-U category factors used to bring 2022–23 spending to 2025 dollars.
U.S. Bureau of Labor Statistics. (2024). Texas: Quintiles of income before taxes, 2022–2023 [Consumer Expenditure Surveys state-level research table]. https://www.bls.gov/cex/tables/geographic/mean/2023/cu-state-tx-income-quintiles-before-taxes-2-year-average-2023.htm
Household spending by income fifth.
U.S. Census Bureau. (2025). American Community Survey 2024 1-year estimates: Detailed tables [Data set]. https://data.census.gov/
Texas households, incomes by fifth, renters and home values.
U.S. Census Bureau. (2026). 2024 state & local government finance datasets and tables [Data set]. https://www.census.gov/data/datasets/2024/econ/local/public-use-datasets.html
Local tax collections by level of government.
U.S. Census Bureau. (2026). American Community Survey 2020–2024 5-year estimates: Detailed tables [Data set]. https://data.census.gov/
Dallas County and HD109 households and incomes by fifth.
Law
7 U.S.C. §2013(a). https://uscode.house.gov/view.xhtml?req=granuleid:USC-2023-title7-section2013&num=0&edition=2023
SNAP condition, kept in the Standalone Edition.
Congressional Research Service. (n.d.). The Internet Tax Freedom Act and federal preemption (IF11947). https://www.congress.gov/crs-product/IF11947
Federal ban on state taxes on internet access.
Tex. Const. art. VIII, §§7-a, 7-c, 7-d, 7-e, 29, 30. https://statutes.capitol.texas.gov/Docs/CN/htm/CN.8.htm
Motor fuel and motor vehicle revenue dedications, the real property transfer tax ban and the securities transaction tax ban.
Tex. Ins. Code Ann. §§ 221.002, 222.003; Tex. Tax Code Ann. § 171.052. https://statutes.capitol.texas.gov/Docs/IN/htm/IN.221.htm
Premium tax rates: 1.6% property and casualty; 1.75% life, accident and health.
Tex. Tax Code Ann. ch. 162 (Motor fuel taxes). https://statutes.capitol.texas.gov/Docs/TX/htm/TX.162.htm
State motor fuel tax of 20 cents a gallon on gasoline and diesel (TLES-7).
Tex. Tax Code Ann. chs. 151, 152, 321, 323. https://statutes.capitol.texas.gov/
Current sales, motor vehicle and local sales tax law, including the local option to tax residential gas and electricity (§321.105).
Tex. Tax Code Ann. § 151.314 (Food and food products). https://statutes.capitol.texas.gov/Docs/TX/htm/TX.151.htm#151.314
Current food exemption and its soft-drink, candy and ice exclusions.
Tex. Tax Code Ann. § 152.001(5)–(6). https://statutes.capitol.texas.gov/Docs/TX/htm/TX.152.htm
Definition of a motor vehicle lease (more than 180 days) versus a rental.
Tex. Transp. Code Ann. § 601.072. https://statutes.capitol.texas.gov/Docs/TN/htm/TN.601.htm
Minimum liability insurance required on every registered vehicle (TLES-11).
Tex. Transp. Code Ann. §§ 541.201(9), 521.084. https://statutes.capitol.texas.gov/Docs/TN/htm/TN.541.htm
Motorcycle definition and Class M license (TLES-13).
Texas Comptroller of Public Accounts. (2026, January). Tax policy news: STAR accession no. 202511012L; and 34 Tex. Admin. Code §3.295. https://comptroller.texas.gov/taxes/tax-policy-news/2026-january.php
The residential “gas” exemption covers natural gas only, so propane, heating oil and firewood are taxed today.
Texas Comptroller of Public Accounts. (n.d.). Grocery and convenience stores (Publication 96-280). Retrieved October 22, 2026, from https://comptroller.texas.gov/taxes/publications/96-280.php
How soft drinks and candy are taxed at the register today.
United States v. New Mexico, 455 U.S. 720 (1982). https://supreme.justia.com/cases/federal/us/455/720/
Purchases by the United States are outside the tax.