After taking action on the budget and tax bills last week, Gov. Ferguson spoke to the press. He said,

The revenue that I signed will likely require adjustments in the future. These revenue bills, as you know, moved through the legislative process quickly, particularly changes to the B&O tax and sales tax on services. We already know that there may be unintended consequences that need to be addressed. 

Indeed, the tax bills moved very quickly. Further, even though the bills were introduced late in the session, they underwent material changes as they moved through the two houses but there was limited information available in real time about the impact of the changes. For example:

• The bill that increases business and occupation (B&O) taxes (HB 2081) originally increased the advanced computing surcharge to 5% and the cap on collections to $50 million a year. It also originally ended the temporary surcharge on Dec. 31, 2030. As passed by the Legislature, the advanced computing surcharge is 7.5% and the cap is $75 million. Additionally, as passed, the temporary surcharge ends Dec. 31, 2029. There was not a public fiscal note for the final version until May 8 (almost two weeks after the bill was passed by the Legislature).
• The bill repealing several tax “preferences” (SB 5794) originally would have repealed a long list of preferences. As passed by the Legislature, the list of repealed preferences is smaller and new provisions were added that apply the B&O tax to the rental of self-storage units and certain credit unions. A public fiscal note for the final version of the bill was published May 14 (10 days after the bill was passed). However, the fiscal note is only partially complete—there is still not a final version.
• The bill that applies the sales tax to services (SB 5814) originally included a one-time prepayment of sales taxes, but that provision is not in the final text. There was not a public fiscal note for the final version of the bill until May 16 (three weeks after the bill was passed by the Legislature).

Given the rushed process and the lack of public information about the impacts of the bills, unintended consequences are a certainty. As I wrote earlier this month, there are significant questions about how SB 5814 will be applied and whether it will survive legal challenges. Similarly, HB 2081 is unclear about exactly which activities are exempt from the temporary B&O surcharge. Additionally, there are interactions between SB 5794 and HB 2081 that I do not think have been broadly considered. (Here is my estimate of the B&O rates under the two bills by industry; the Department of Revenue could come to different conclusions.)

Gov. Ferguson said that he will be considering potential adjustments to the tax bills for the 2026 supplemental budget. While his acknowledgement that the tax bills need more work is welcome, it will be cold comfort for businesses. They must figure out before next session how to comply with the ambiguous new laws as currently written.