Texas – District Taxes in Annexed Areas Must Be Approved by Voters

2/14/2013

SALT Report 2148 – The Texas Attorney General issued an opinion regarding a City’s efforts to impose sales and use district taxes in areas that the City annexed. In this situation, the City agreed to provide fire services, emergency medical services, and law enforcement services to certain areas. In exchange for those services, the areas were annexed by the City who in turn imposed sales and use district taxes to offset the cost of providing the services.

Once the agreement was in place, the City requested that the Comptroller collect the additional taxes in the annexed areas, but the Comptroller declined to do so. As a result, the City requested a ruling from the Attorney General regarding whether the Comptroller is permitted to implement rules that prevent a municipality from imposing tax on areas that have been annexed.

In his Opinion, the AG noted that under Chapter 321 of the Tax Code, fire control and crime control district taxes must be approved by voters in that district.   In 2011, voters in the City approved the creation of fire control and crime control districts and the additional taxes required to fund them. However, voters in the annexed areas were never given the opportunity to vote on the taxes.

Because the annexed areas did not vote on the taxes, the AG determined that the Comptroller’s refusal to collect the additional tax in the annexed areas was based on a reasonable interpretation of Texas law.  Accordingly, the City was not permitted to impose the district taxes in the annexed areas.

For Further Information

Texas Attorney General – Opinion GA-0987