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Signed Into Law
Signed May 26, 2025Effective 2025-05-26
HB1109

Regular Session

Relating to an exemption from certain motor fuel taxes for counties in this state.

Government Affairs & Regulatory Compliance Analysis

HB1109: Government Affairs Overview

Effective July 1, 2025, Texas counties are exempt from the $0. 20/gallon state motor fuel tax for gasoline and diesel used for exclusive county purposes. Fuel distributors and suppliers must immediately reconfigure billing systems to cease tax collection on these accounts; failure to do so will result in overcharges, contract disputes, and significant administrative burdens to issue retroactive credits.

Rep. Gary Vandeaver·House Bill·Regular Session

Moderate
Low Cost
Effective:2025-05-26

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HB1109
Relating to an exemption from certain motor fuel taxes for counties in this state.
Moderate Urgency
Passed with Opposition
House Vote132 - 14
YEA
90% in favor146 voting
Senate Vote31 - 0
YEA
100% in favor31 voting
14
Total Opposition Votes
Cost Impact
Low
Effective
2025-05-26
Enforcing Agencies
Texas Comptroller of Public Acco...
Primary Author: Rep. Gary Vandeaver
89th Texas Legislature
jdkey.com
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Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: May 26, 2025 (Legislation enacted).
  • Compliance Deadline: July 1, 2025 (Operational start date). You must stop collecting state tax on sales to counties on this date. Invoices dated July 1 or later containing the tax are legally incorrect.
  • Agency Rulemaking: The Texas Comptroller will likely update Rule 3.432 and exemption forms (06-106) to explicitly include counties. Until then, use existing government exemption protocols.

Immediate Action Plan

  • 1. Audit Master Data: Immediately identify all customers coded as "County Government" in your billing system.
  • 2. Update Pricing Logic: Program your ERP to stop applying the $0.20/gallon state tax to these accounts effective 12:01 AM, July 1, 2025.
  • 3. Request Certificates: Send a blast communication to all county clients requesting a signed Motor Fuel Tax Exemption Certificate.
  • 4. Review Contracts: Identify fixed-price contracts and prepare addendums to lower the price by the tax amount.
  • 5. Notify Tax Team: Ensure your tax preparers are ready to file "Credit Claims" rather than standard payments for these volumes in the next filing cycle.

Operational Changes Required

Contracts

  • Fixed-Price Agreements: If you have "Fixed Delivered Price" contracts with a county, you must issue an amendment reducing the price by the tax amount ($0.20/gallon) effective July 1. Failure to lower the price constitutes an illegal overcharge.
  • Cost-Plus Agreements: Ensure your pricing formula automatically excludes the state tax component for flagged county accounts.
  • Bids/RFPs: All future bids for county fuel supply must exclude state motor fuel tax from the base price.

Hiring/Training

  • Sales & Dispatch: Train staff to distinguish between County Governments (Exempt) and County Contractors (Taxable). A road construction firm working for the county is not eligible for this exemption.
  • Accounts Receivable: Staff must be prepared to reject short-payments if a county deducts tax from a pre-July 1 invoice. The exemption is not retroactive.

Reporting & Record-Keeping

  • Exemption Certificates: You must obtain a signed exemption certificate from every county client. Do not rely on implied status. Update your files immediately.
  • Tax Returns: Distributors must claim a credit on their monthly/quarterly return to the Comptroller for tax-paid fuel sold tax-free to counties.
  • Invoicing: Invoices must clearly separate state tax lines. For county sales, this line must read $0.00 or "Exempt."

Fees & Costs

  • Cash Flow Impact: Distributors will carry the float. You will pay the tax at the terminal rack and must wait to recover it via credits on your tax return after selling to the county.
  • System Updates: Immediate IT costs to update ERP/billing logic to flag "County" customer types as state-tax exempt (distinct from federal tax status).

Strategic Ambiguities & Considerations

  • Retail Point-of-Sale: The law is vague on how the exemption applies to retail pump sales (e.g., a Sheriff’s Deputy filling up at a convenience store). Standard pumps cannot verify "exclusive use."
  • *Guidance:* Unless you operate a cardlock system with specific fleet card logic (e.g., WEX/Voyager) that strips tax automatically, charge the tax at retail. The County must file for a refund directly with the Comptroller.
  • "Exclusive Use" Definition: The statute requires the fuel be for the county's "exclusive use."
  • *Risk:* If a county allows employees to fuel personal vehicles or fuels third-party equipment, the exemption is void.
  • *Guidance:* Ensure your contract language indemnifies you against tax liability if the county misuses the fuel.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Nov 12, 2024
Passed House
Apr 10, 2025
Passed Senate
May 13, 2025
Signed
May 26, 2025
Effective
May 26, 2025
TopicsTaxationTaxation--motor FuelsCounty GovernmentCounty Government--generalComptroller of Public Accounts
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House Authors

Rep. Gary VandeaverRepublican · Primary Author
Joint Authors

Senate Sponsors

Sen. Bob HallRepublican · Primary Sponsor
Cosponsors (2)

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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Quick Reference

Frequently Asked Questions

Common questions about HB1109

Q

What does Texas HB1109 do?

Effective July 1, 2025, Texas counties are exempt from the $0. 20/gallon state motor fuel tax for gasoline and diesel used for exclusive county purposes. Fuel distributors and suppliers must immediately reconfigure billing systems to cease tax collection on these accounts; failure to do so will result in overcharges, contract disputes, and significant administrative burdens to issue retroactive credits.

Q

Who authored HB1109?

HB1109 was authored by Texas Representative Gary Vandeaver during the Regular Session.

Q

When was HB1109 signed into law?

HB1109 was signed into law by Governor Greg Abbott on May 26, 2025.

Q

Which agencies enforce HB1109?

HB1109 is enforced by Texas Comptroller of Public Accounts.

Q

How significant are the changes in HB1109?

The regulatory priority for HB1109 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of HB1109?

The cost impact of HB1109 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does HB1109 address?

HB1109 addresses topics including taxation, taxation--motor fuels, county government, county government--general and comptroller of public accounts.

Q

What are the key dates for HB1109?

Key dates for HB1109: Effective date is 2025-05-26. Consult with legal counsel regarding applicability.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026