(a) For a period of three years only after the effective date of the tax authorized by Section 321.101(a) in a municipality, the receipts from the sale of, and the use, storage, and consumption of, taxable items are exempt from the tax imposed by the municipality under Section 321.101(a) if the notice required by Subsection (b) is given and if:
(1) the items are used for the performance of a written contract entered into before the effective date of the tax imposed under Section 321.101(a) in the municipality if the contract may be affected and the contract may not be modified because of the tax; or
(2) the items are used under the obligation of a bid submitted before the effective date of the tax imposed under Section 321.101(a) in the municipality if the contract may be affected and the bid may not be withdrawn or modified because of the tax.
(b) The taxpayer must give the comptroller notice of the contract or bid on which an exemption is to be claimed within 60 days after the effective date of the tax imposed under Section 321.101(a) in the municipality.
Official text of the Texas Tax Code as published by the Texas Legislative Council.