'One of the worst taxes': Texas business owners discontent with inventory tax amid rising costs

HOUSTON, Texas (KTRK) -- Inside the Spring Branch factory for Pieper Houston Electric, workers are fabricating parts for upcoming jobs.

Pieper is a commercial electric contractor responsible for work in the Texas Medical Center and on the University of Houston, Rice University, and Texas Southern University campuses. And while you might not see their handiwork because it's hidden behind walls and in basements, what you see in this factory is all subject to what's called the inventory tax. Bud Walters is Pieper's CEO.

"Seems to be double taxation to me. So, I don't think it's a tax we need to keep," Walters told ABC13. "It's a recurring repetitive tax. We're paying tax when we buy the product, the desk, the chairs, and then we're turning around and paying tax year after year after year on the same product."

His company pays $40,000 per year in inventory tax - money they could use to grow their business and help their 350 employees. The discontent with the tax has sparked a lot of conversation in Austin at the state capitol. It would take a change in state law to alter or do away with the tax.

State Senator Mayes Middleton seems to agree with Walters. He's a Republican who represents parts of Galveston, Brazoria, and Harris counties.

"The inventory tax is one of the worst taxes," Middleton told ABC13. "It's a huge burden on small businesses and it's also a burden on stopping companies from moving to Texas because not all states have an inventory property tax."

Texas is one of only nine states that still have an inventory tax. Another four states partially tax inventory. Right now, businesses only have a $2,500 exemption. In his inaugural address, Lt. Gov. Dan Patrick promised something much larger.

"It's time this year to increase the business property exemption from a lowly $2,500 to $100,000," Patrick said.

To Walters, that's a start.

"It's better than a poke in the eye with a sharp stick, but it's not much," Walters said. "The inventory tax just needs to go away."

That could happen. The National Federation of Independent Business is lobbying hard to do away with it.

"Is this tax bringing in enough money for the state?" NFIB state director, Annie Spilman, asked. "There has not been a relief for business owners for quite some time."

Small and medium business owners make up the vast majority of all businesses in Texas. And in a climate with rising costs, hard-to-find labor, and a record state budget surplus, now might be the time the state flips the switch and unplugs the inventory tax.

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