Texas

Texas

April 04, 2005 | By Keith Martin in Washington, DC

TEXAS is moving to close a loophole that allows projects in the state largely to avoid franchise taxes by operating as limited partnerships.

One sixth of businesses in the state avoid paying franchise taxes currently. The state House of representatives voted on March 16 to increase business taxes. Businesses would have a choice in the future of paying a tax tied to payroll — the tax would be 1.15% of the first $90,000 in wages paid to each employee — or choosing to pay a franchise tax of either 4.5% of net income or 0.25% of capital. The measure goes next to the state Senate, where Senate staff say they expect action by the end of April. The current session of the legislature ends on May 30. 

The House also voted to increase the state sales and use tax rate to 7.25%. That would make it the highest state sales tax rate in the nation.