taxes

Texas Sales and Use Tax Frequently Asked Questions

ENERGY STAR® Sales Tax Holidays

Shopper Eligibility

Who qualifies as a Texas shopper? For example, do homebuilders buying in large quantities qualify for the exemption?

A “Texas shopper” refers to anyone in Texas buying these products on the stated weekend at a store in Texas or from an internet or catalog seller engaged in business in this state. This includes homebuilders, real estate developers, dealers, service providers and contractors. Products may be purchased for existing homes, new homes and nonresidential properties. The purchased items may be held in inventory until ready for use. There is no limit on the number of qualifying items one can purchase during this sales tax holiday, and the purchaser does not need to give the seller an exemption certificate.

Do I have to live in Texas to make tax-free purchases of qualifying products during the ENERGY STAR sales tax holiday?

No. Anyone shopping in Texas can purchase qualifying items free of Texas sales tax during the ENERGY STAR sales tax holiday, but use tax may be due to the state where the items are brought or delivered.

ENERGY STAR Product Eligibility

What is exempt during the holiday?

The law lists the items eligible for the exemption during the ENERGY STAR holiday.

The ENERGY STAR sales tax holiday applies only to the following appliances and household equipment:

  • Air conditioners priced at $6,000 or less
  • Refrigerators, including mini-fridges, priced at $2,000 or less
  • Ceiling fans
  • Incandescent and fluorescent light bulbs
  • Clothes washers
  • Dishwashers
  • Dehumidifiers
  • Programmable thermostats

Current law does not exempt water heaters or clothes dryers, even if Energy Star-certified, or freezers or stoves. However, combination clothes washer/dryer units qualify for the exemption if the ENERGY STAR program classifies them as a clothes washer and if the model number is listed on the ENERGY STAR-qualified clothes washer product list.

Attic fans, wine refrigerators, kegerators and residential beverage chillers are not part of the ENERGY STAR program, and the exemption does not apply.

I heard that programmable thermostats no longer receive the ENERGY STAR certification. Why are they still on the list?

ENERGY STAR specification of programmable thermostats was suspended on December 31, 2009; however, any existing stock of ENERGY STAR-labeled programmable thermostats that retailers offer for sale is still eligible for the exemption.

A central air conditioning system consists of several components. If I replace an air conditioner component in an existing system with a new ENERGY STAR-rated component, will that part qualify for the sales tax holiday exemption?

No. The exemption does not apply to individual air conditioning components. The exemption is for the purchase of air conditioning systems priced at $6,000 or less.

Are heat pumps considered air conditioners for the purpose of the ENERGY STAR sales tax holiday?

No. Under current Texas law, heat pumps do not qualify for the exemption, even if they can be used to cool a home.

Delivery and Installation Charges

If I purchase a qualified item, does it need to be delivered (or otherwise received) during the sales tax holiday period?

No. The exemption applies to all sales of qualifying products made during the sales tax holiday period. A sale is considered made during the sales tax holiday period if:

  • the item is both paid for and delivered to the purchaser during the exemption period; or
  • the retailer accepts an order for the item during the exemption period for immediate shipment and the item is paid for during the exemption period, even if delivery is made after the exemption period
Do delivery or shipping and handling charges qualify for the exemption?

Yes. Delivery, shipping, handling or other transportation charges connected to the sale of a qualifying item qualify for the tax exemption.

If a delivery contains both exempt and taxable items, only the fee for delivery of the qualifying item(s) is exempt from sales tax. For example, if a customer purchases both an ENERGY STAR clothes washer and a clothes dryer, and the retailer charges $25 per appliance for delivery, only the fee for delivery of the clothes washer is exempt from sales tax.

What if the delivery charge is a flat rate, not allocated by item?

If the delivery charge is a flat rate, the total delivery charge can be attributed to the tax-exempt item(s). For example, if a retailer charges a flat fee of $50 per delivery and the delivery includes an ENERGY STAR appliance as well as several other items, the $50 delivery charge is also exempt.

What happens if the delivery charge causes an air conditioner or refrigerator purchase to exceed the price cap?

The exemption no longer applies if the total price exceeds the statutory caps. If delivery charges connected with the sale of air conditioners and refrigerators cause the total price of the item to exceed the exemption’s price caps ($6,000 for air conditioners and $2,000 for refrigerators), the purchase does not qualify for the exemption. This is because the total sales price includes additional charges for shipping.

Do installation charges for free-standing or mobile items qualify?

Yes. Items that are free-standing or mobile, such as clothes washers, dehumidifiers, refrigerators, portable dishwashers and window or room air conditioning units are tangible personal property, and their installation charges qualify for the exemption even if the items are installed after the holiday period ends.

Do installation charges for permanently installed items qualify?

Items such as programmable thermostats, central air conditioning units and built-in refrigerators and dishwashers that are plumbed, wired or otherwise permanently attached to a building's structure are considered improvements to real property. Labor charges associated with such installations in new or existing homes qualify, while installations in nonresidential properties do not.

Because installations in nonresidential properties are taxable, how should these appear on the invoice?

Charges for installations performed on nonresidential property should be stated on the invoice separately from the sales price of the qualifying ENERGY STAR-rated item. A lump sum charge for the purchase of an ENERGY STAR item and installation is subject to tax because it comprises the purchase of nonresidential repair and remodeling.

Are installation charges, like delivery charges, considered part of the total sales price of an air conditioner or refrigerator?

For ENERGY STAR-qualified window air conditioners and refrigerators that will not be “built-in,” the installation charge, like the delivery charge, is considered part of the sales price. If the total sales price, including the charge for installation, exceeds the price cap, the entire charge – including delivery and installation – is taxable. If the total sales price is less than the applicable cap, the installation charge is exempt, even if the installation is performed after the exemption period and/or the installation charge is separately stated.

Note that charges for installing central air conditioners and built-in refrigerators are not considered part of the sales price of the appliances and do not affect the item's eligibility for the exemption. Central air conditioning units and built-in refrigerators are considered improvements to realty, and the taxability of the installation charges is determined by the type of contract (lump sum or separated) and the type of property (residential, nonresidential or new construction).

Nonresidential real property repair and remodeling is a taxable service. If the appliance is installed in an existing nonresidential building and the installation charges are separately stated from the purchase of the appliance, the charges for labor are not considered part of the sales price of the appliance but rather a charge for nonresidential real property repair or remodeling, which is a taxable service.

Under a lump sum contract for the purchase of a qualifying product and the labor to install it in an existing nonresidential building, the total charge is taxable because it comprises the sale of a taxable service regardless of the total price.

Labor charges for new construction and residential real property repair and remodeling are not taxable. As a result, charges for installation of a qualifying built-in refrigerator or central air conditioner in a residential building or as part of a new construction project do not affect the total sales price of the appliance when purchased during the exemption period.

Purchasing Requirement

Are rentals and leases of qualifying equipment eligible for the ENERGY STAR holiday tax exemption?

Rentals and leases of qualifying ENERGY STAR products, including “rent to own” contracts, qualify for exemption during the ENERGY STAR sales tax holiday. Sale includes the exchange, barter, lease or rental of tangible personal property. Therefore, rental and lease contracts (for qualifying items) entered into during the sales tax holiday qualify for the exemption. The exemption will only apply to the specified rental or lease period the contract designates. However, contract extensions or renewals do not qualify unless they occur during another Texas ENERGY STAR sales tax holiday.

Can I receive a refund of sales and use taxes I paid on qualifying ENERGY STAR equipment I bought before the holiday?

No. The exception applies only to sales made during the Memorial Day weekend holiday period beginning at 12:01 a.m. the Saturday before Memorial Day and ending at 11:59 p.m. on Monday (Memorial Day).

Do I have to replace or recycle an old appliance?

No, there are no replacement or recycling requirements for the tax exemption, although recycling is strongly encouraged. Recycling helps keep scrap metal out of landfills and avoids contaminating Texas natural resources. For more information about recycling in Texas or to find a recycling location, see the State of Texas Alliance for Recycling (STAR) website.

Seller

Do all retailers located in the state of Texas have to participate in the ENERGY STAR Tax Holiday?

Yes. Texas retailers that sell qualifying ENERGY STAR products must comply with the sales tax exemption law.

As a seller of items that qualify for this temporary exemption, how do I report my May sales taxes to account for those sales?

If you sold qualifying ENERGY STAR products during the holiday, don’t include receipts from those sales in Taxable Sales (Item 2) of your sales tax return, because those sales are not taxable sales. If you collected tax, however, you must send it to the state.

EXAMPLE. During the three-day holiday, an appliance store sold a qualifying dishwasher for $850 and did not collect tax. The appliance store will report the $850 in Total Sales (Item 1), but will not include the $850 in Taxable Sales. This dishwasher qualifies as a tax-free holiday item, and no tax is due.

EXAMPLE. An appliance store sold a qualifying dishwasher for $850 and a dryer for $990 during the holiday. The appliance store will report $1840 in Total Sales (all sales made during the reporting period) and $990 in Taxable Sales (for the dryer only).