Texas has an economic environment that encourages job creation while maintaining low taxes, predictable regulations and a fair legal system. And, with no corporate income tax and no personal income tax, we have one of the lowest tax burdens of any state in the country.
Sales & Use Tax
Sales Tax Exemption
The State of Texas sales tax rate is 6.25%. Texas cities, counties, transit authorities and special purpose districts have the option of imposing an additional local sales tax for a combined total of state and local taxes of 8.25%. The Sales and Use Tax is imposed on all retail sales, including rentals and leases of most goods. The local sales tax rate in the City of Pearland is 2.0% for a total sales tax rate of 8.25%.
The State of Texas has no personal or corporate income tax. In fact, the state’s constitution restricts passage of a personal income tax.
The State of Texas levies a margin tax on each taxable entity organized in Texas or doing business in Texas. Margin equals the lowest of three figures:
• Total revenue less cost of goods sold
• Total revenue less compensation
• Or 70% of total revenue
The tax does not apply to sole proprietorships, general partnerships with individual owners, nonprofits or entities with $300,000 or less in gross receipts.
Rate = 1.0% of margin for most taxable businesses
0.5% for qualifying retailers and wholesalers
0.575% for qualifying entities with $10 million or less in total revenue annualized per 12 month period
Ad Valorem property taxes are placed on real property and tangible personal property. Real property includes land, building, structures and all improvements or fixtures annexed to the building or structure. Tangible personal property that is used for the production of income includes business inventories, machinery, equipment and furnishings.
The majority of the land area of City of Pearland is in Brazoria County and either the Pearland or Alvin Independent School Districts. There are also smaller portions of the city that are located in either Harris and Fort Bend Counties and other taxing jurisdictions.
City of Pearland typical tax rate:
Depending upon the location of a specific piece of property, the levying jurisdictions will vary. All rates are per $100 of assessed value. To determine the tax, divide the assessed value of the property by 100 and multiply by the rate.
2011 Tax Rates for Selected Taxing Entities:
City of Pearland = $0.685100
Pearland Independent School District = $1.4194
Alvin Independent School District = $1.3441
Fort Bend Independent School District = $1.34
Brazoria County = $0.413101
Fort Bend County = $0.480960
Harris County = $0.636561
Alvin Community College = $0.199485
Houston Community College = $0.097222
San Jacinto Community College = $0.185602
Brazoria Drainage District = $0.156
Harris County Flood = $0.02809
Fort Bend Drainage = $0.0188
Brazoria County Road/Bridge Fund = $0.06
Municipal Utility Districts (MUDs)
Property may be subject to a MUD tax if located within a district boundary. The tax rate varies by district.
Sales Tax Exemptions on Manufacturing Property
Manufacturers may claim a Texas sales tax exemption for tangible personal property directly used or consumed in or during the actual manufacturing, processing or fabrication of tangible personal property.
Local taxing jurisdictions have the option to exercise or not exercise their authority to tax specific personal property known as freeport goods. The City of Pearland, Brazoria and Harris Counties, the Pearland Independent School District and the Brazoria County Drainage District #4 have elected to allow the freeport exemption on eligible property.
The freeport exemption exempts certain types of tangible personal property (i.e., inventory) from ad valorem (property) taxation provided the property is:
• Acquired in or imported into Texas to be forwarded out of state
• Detained in Texas for assembling, storing, manufacturing, processing or fabricating purposes by the person who acquired or imported it
• Transported out of state within 175 days after the date that it was acquired or imported into Texas
Tax abatement may be available for new or expanded improvements to real property or business equipment investments through the city, county or other taxing entity. Tax abatement may exempt all or part of the increase in the value of the real property and/or tangible personal property from taxation for a period of up to 10 years. Requirements vary from jurisdiction to jurisdiction.
In Texas, private employers can choose whether or not to carry workers’ compensation insurance. Texas employers who do not carry workers’ compensation insurance are required to report their non-coverage status and work-related injuries and illnesses to the Texas Department of Insurance, Division of Workers’ Compensation (TDI-DWC). Employers are also required to notify their employees if they do not carry workers’ compensation insurance.
Unemployment Insurance (UI) tax is a tax employers pay to fund unemployment compensation for workers who lose their jobs. The Texas Unemployment Compensation Act (TUCA) requires Texas employers, including sole proprietorships, partnerships and corporations, to pay UI tax. Employers must register with the Texas Workforce Commission and report employees’ names, social security numbers and total gross wages quarterly. UI tax is paid quarterly.
The first $9,000 a year employers pay each employee is taxable. Employers' tax rate and the taxable wages they pay determine the amount they owe. New employers pay at a rate of 2.70%. Employers receive an experience rate after six calendar quarters. Their experience rate will vary depending on taxable wages reported and individual claims charged against their account.