The program requires residential development companies that purchase more than $800,000 annually in materials to pay a use tax instead of a sales tax when they build in unincorporated areas of precincts 1, 2 and 3.
A sales tax is paid at a shop where an item is purchased, and a use tax is paid where the item is used, according to the Texas Comptroller of Public Accounts.
For Fort Bend County’s program, a development company will obtain a sales tax certificate that indicates to a wholesaler that the development company will pay the use tax instead of the sales tax, said Precinct 3 Commissioner Andy Meyers, who represents the Katy and Fulshear areas.
The new program is meant to give Fort Bend County the sales tax revenue that would likely have been collected by the city of Houston or the Metropolitan Transit Authority of Harris County when developers buy materials for homes that will be built in Fort Bend County, Meyers said in an interview.
He estimates Fort Bend County will collect an additional $1 million annually in revenue from the program to spend on local public projects, such as law enforcement and transportation, once the program is set up and fully functioning.
“[Developers who build in unincorporated Fort Bend County] purchase almost their entire supplies and materials and fixtures, etc., from the large wholesale operations in the city of Houston,” Meyers said at the March 12 Commissioners Court meeting. “So they’re currently paying a tax to the city of Houston and paying a tax to METRO, and neither one of those entities provide any services whatsoever to the people [of Fort Bend County].”
However, Precinct 4 Commissioner Ken DeMerchant said he disagreed with Meyers.
“That’s not what I’ve heard,” DeMerchant said at the March 12 meeting. “I’ve talked to developers, and they buy local.”
DeMerchant expressed other concerns about the program. He said he feared Precinct 4 would not be a benefit because the area is nearly built out. He also questioned how the county would be able to manage such a program.
“[Developers] buy in bulk,” DeMerchant said at the March 12 meeting. “You don’t know where those materials are [going]. … They have subcontractors. There’s a lot going on. And it’s distributed out all over the place. You’re going to have a hard time figuring out when it’s bought and where it’s actually used.”
DeMerchant asked that Precinct 4, which covers areas of Sugar Land and Missouri City, be removed from the program, which the court agreed to and amended the resolution and interlocal agreements. He also abstained from voting on resolution and voted against the interlocal agreements.
The county has employed the law firm Smith, Murdaugh, Little and Bonham LLP to oversee the program by notifying and educating developers about it and helping them fill out the proper paperwork to the Texas comptroller.
Meyers said he did not have an estimate for the cost to operate the program. In fact, Fort Bend County is the first Texas county to do this type of program, though many cities have similar programs, he said in the interview.
Although this program is meant to entice developers to build in Fort Bend County, it does not provide any financial benefit to them, Meyers said in the interview.
“Our deal does not rebate any funds to the builder at all, so there’s no financial money that they get,” he said. “They do get the intangible benefit [in which the county] we can go out [to their development] and build parks, [add] more law enforcement and improve roads and put in signals and things of this nature with the funds that certainly are beneficial to the community as a whole.”