Rent-to-own News - Texas' 2008 tax plan may cause small rent-to-own dealers financial hardship

The Texas Legislature broadened its scope of what type of businesses would be subject to its new "margin tax" (formerly known as the franchise tax) in 2008, which may cause smaller rent-to-own dealers financial hardship, says Aaron's owner Robert Briley of Abilene, Texas. In early 2007, the Texas Legislature increased the state's "franchise" tax in order to procure lower property taxes for homeowners. In addition to broadening the scope of the businesses that are to be taxed next year, the Legislature also changed its calculations on how it would tax these businesses, says Briley. "We're predicting that our tax rate is going to go from $2,000 to $40,000," he says.

"The tax used to be based on your retained earnings, but now it is calculated on your revenues." Briley says that the additional tax may make it a little less profitable to stay in business. "One thing that it could do is cause smaller dealers who are not highly profitable to sell out by making it a little less profitable to stay in business," he says. Briley and the Texas Association of Rental Agencies have been working with Texas legislators on a depreciation exception to the tax. Read more about the tax and how it is calculated here.