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Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts

taxes

Tax Policy News

April 2017

The Comptroller’s office publishes this online newsletter to keep you informed about Texas taxes. Tax Policy News provides general information and is not a substitute for legal or other professional advice.

In This Issue...

Reminders

Franchise Tax

Franchise Tax Annual Report – Due May 15

In January and February, our office mailed notices to remind you that your business’s annual franchise tax report is due May 15, 2017. The notice includes the WebFile number assigned to your business. You will need this number to file your report electronically.

You must file a report, even if no tax is due. If you need more time to file, submit a franchise tax extension request on or before May 15. Generally, for an extension to be valid, 100 percent of the tax paid on the prior year’s report, or 90 percent of the tax that will be due with the current year’s report, must be paid on or before May 15.

You will owe a $50 late filing penalty (PDF) on reports filed after May 15 if you do not file an extension request.

Sales and Use Tax

Emergency Preparation Supplies Sales Tax Holiday – April 22-24

In Texas, fire, flooding and severe weather can occur at any time. Be prepared; stock up on certain emergency preparation supplies tax free during the annual Emergency Preparation Supplies Sales Tax Holiday. This year’s sales tax holiday is Saturday, April 22 through Monday, April 24.

You can buy the following items tax free during this holiday:

  • portable generators (with a sales price of less than $3000)
  • hurricane shutters and emergency ladders (each with a sales price of less than $300)
  • these items each with a sales price of less than $75:
    • axes
    • batteries – single or multipack (AAA cell, AA cell, C cell, D cell, 6-volt or 9-volt)
    • carbon monoxide detectors
    • coolers and ice chests for food storage – nonelectric
    • can openers – nonelectric
    • fire extinguishers
    • first aid kits
    • flashlights, portable – self-powered or battery-operated
    • fuel containers
    • ground anchor systems and tie-down kits
    • hatchets
    • ice products – reusable or artificial
    • mobile telephone batteries and chargers
    • radios, portable – self-powered or battery-operated, including two-way and weather band
    • smoke detectors
    • tarps and other plastic sheeting

There is no limit on the number of qualifying items that you can purchase, and no exemption certificate is required to claim the exemption.

Franchise Tax

Policy Change on Extension Payment Options for Combined Groups

We have changed our policy on extension payment requirements for combined groups. Combined groups that added a member during the accounting period can use the 100 percent tax due extension option. Before this policy change, combined groups that added a member did not have this option. A combined group can now use the 100 percent tax due extension option regardless of any changes to the combined group.

We are updating Franchise Tax Rule 3.585 to reflect the policy change.

Mixed Beverage Taxes

Tax Responsibilities When Selling Mixed Beverages

To sell alcoholic mixed beverages in Texas, you must apply for both a sales tax permit from the Comptroller’s office and a permit from the Texas Alcoholic Beverage Commission (TABC). Once permitted with the TABC, the Comptroller’s office will automatically set up your business to report and pay mixed beverage taxes.

Three taxes apply to mixed beverage sales: mixed beverage sales tax, mixed beverage gross receipts tax and sales and use tax:

Mixed Beverage Sales Tax

  • Tax is due on alcoholic beverages and set-ups sold, prepared or served by a permitted entity
  • Tax is paid by the customer and remitted to the Comptroller's office by the permitted entity
  • Tax rate is 8.25 percent (.0825)

Mixed Beverage Gross Receipts Tax

  • Tax is due on alcoholic beverages and set-ups sold, prepared or served by a permitted entity
  • Tax is paid and remitted to the Comptroller's office by the permitted entity; it is not collected from the customer
  • Tax rate is 6.7 percent (.067) on gross receipts minus the mixed beverage sales tax

Sales and Use Tax

  • Tax is due on the cost of complimentary alcoholic beverages and set-ups prepared or served by a permitted entity
  • Tax is paid to the Comptroller's office by the permitted entity
  • Tax rate is 6.25 percent state sales and use tax plus up to 2 percent local tax for a maximum rate of 8.25 percent (.0825). The local tax rate is determined by your place of business

Recordkeeping

As an alcoholic mixed beverage seller, you must keep complete records such as:

  • point of sale records (cash register tapes and service checks)
  • daily summaries of sales and service fees
  • daily summaries of complimentary drinks
  • purchase invoices
  • distributor documentation supporting beer loss due to line cleaning
  • vendor documentation supporting meter system calibration, adjustment or changes
  • bank statements showing deposits and disbursements
  • credit card statements and summaries
  • price lists of current and past drink pricing

For more information on mixed beverage taxes responsibilities, see Publication 96-1780, Mixed Beverage Taxes: What You Can Expect (PDF).

Motor Vehicle Sales and Use Tax

Motor Vehicle Repossessions

When a lienholder repossesses a motor vehicle, there is generally no need for the lienholder to take title to the vehicle. If the lienholder does take title, then it can do so without paying motor vehicle sales tax.

If the previous owner buys back the vehicle from the lienholder after the lienholder repossesses the vehicle and files form VTR-264, Repossessed Motor Vehicle Affidavit, with the Texas Department of Motor Vehicles, a new taxable sale occurs and motor vehicle sales tax is due from the purchaser.

For seller-financed sales, if the dealer collects and remits the motor vehicle tax on each of their customer’s payments, the vehicle repossession does not accelerate the tax payments. If the dealer pays the total motor vehicle tax due at the time of registration, the dealer can get a refund for the taxes paid on the contract’s remaining unpaid balance.

Sales and Use Tax

Fireworks Sales

Fireworks sellers must have a sales tax permit and must collect all applicable state and local sales and use taxes on their fireworks sales. For fireworks licensing requirements, see the Texas Department of Insurance.

Fireworks can legally be sold to the public in Texas each year during the following periods:

  • June 24-July 4 – Independence Day
  • Dec. 20-Jan. 1 – New Year's Eve

If the county commissioners’ court approves the sale of fireworks for their county, fireworks can also be sold during the following periods:

  • Feb. 25-March 2 – Texas Independence Day
  • April 16-21 – San Jacinto Day
  • May 1-5 – Cinco de Mayo (only at a location that is not more than 100 miles from the Texas-Mexico border)
  • May 25-30 – Memorial Day
Rodeo, Concerts and Festivals

Putting on a rodeo, concert, festival, or other event is no easy task. Although the Comptroller’s office cannot help you organize or promote your event, we can help you with the taxability of common fees and services.

An entry fee to an amusement event (such as a rodeo, concert or festival) is taxable as an amusement service; this includes all administrative and processing fees.

Certain qualified non-profit organizations can sell entry fees tax-free. These organizations must still collect tax on other taxable items and services, unless it falls during their two one-day, tax-free sale days.

As a promoter, you are responsible for:

  • Collecting tax on charges for:
    • renting tables, chairs, electricity or power strips, when separately stated from booth fees
    • parking
    • food for immediate consumption
    • souvenirs
  • Paying tax on amounts paid for:

A qualified non-profit can purchase taxable services and items to put on their event tax-free, if the purchases further their exempt purpose.

You are not required to collect tax on fees such as space or booth rental or participatory fees, such as a fee a bull rider pays to compete in a rodeo.

You must collect sales tax from your customers based on the location of your event. You can verify the local tax rate using our Sales Tax Rate Locator.

For more information, see Publication 96-211, Fairs, Festivals, Markets and Shows (PDF) and these Sales Tax Rules:

Renting a Venue for a Wedding or Other Special Event

Wedding season is around the corner. If you are thinking about charging to host such an occasion, the following information can help you determine the taxability of renting your venue.

Renting a party hall or other venue is not subject to sales tax, unless connected to the sale of a taxable item or service. For example, when you rent a party hall and provide food for the event, you are acting as a caterer and the total charge (including the party hall rental) is taxable.

A venue can also be taxable when it allows access to an amusement service, such as renting a pavilion at a swimming pool. If the pavilion rental also gives you access to the pool, sales tax is due on the total rental charge.

The sales tax is based on the rented venue’s location. You can verify the local tax rate using our Sales Tax Rate Locator.

Renting a venue that is attached to a building with sleeping accommodations is subject to hotel occupancy tax, including renting a space and rooms in a house for a wedding. Since the space is in the same building as the sleeping accommodations, the total amount (including the space and rooms) is subject to hotel occupancy tax. This is not the case when a space is separate from the home. For example, renting a barn that is separate from the house is not taxable, but the rooms you rent are still subject to hotel occupancy tax.

The 6 percent state hotel occupancy tax is due on the charge for the space or room, no matter the location in Texas and is remitted to the Comptroller’s office. Your local taxing authority sets local hotel taxes. For more information on local hotel tax, contact your local city or county.

For more information, see Rule 3.298, Amusement Services, Rule 3.162, Hotel Occupancy Tax Base and Collections of the Tax and Hotel Occupancy Tax Frequently Asked Questions (FAQS).

Towing and Debt Collection Services

In general, towing as a stand-alone service is not taxable. If, however, a secured party (such as a seller-financed dealer or financial institution) hires a towing company to repossess a vehicle, the towing company is providing a taxable debt collection service and must collect sales tax on the towing charge to the secured party.

Debt collection services include any activities to collect or adjust a delinquent debt or claim, or to repossess property subject to a claim. Debt collection services are taxable when the debt collector is doing business in Texas and the creditor’s last known address is in Texas.

If a debt collector hires the towing company to repossess a vehicle, sales and use tax is not due on the towing charge to the debt collector. The debt collector does not need to give a resale certificate to the towing company. The debt collector, however, must include the towing charge as part of its debt collection service charge and collect sales tax on the entire charge to the secured party, even if the towing charges are separately stated.

For more information, see Rule 3.354, Debt Collection Services.

Private Letter Rulings

Sales and Use Tax

Fraud Detection and Risk Assessment – Only Making Recommendations

The Comptroller’s office recently issued Private Letter Ruling 150120751. This ruling addresses fraud detection and risk assessment services that provide recommendations to customers on whether to accept a sales order.

A company requested guidance on the taxability of their service to provide retailers a recommendation to complete a transaction based on information gathered by the company.

The company gathers information from the devices purchasers use to complete online transactions and compares that information to a database of devices (computer, tablet, phone, etc.) that are known to have been used in fraudulent transactions. The information collected includes the type of device used, its operating system, IP address, location and telecommunication or internet access service provider.

When a purchaser initiates a transaction with a retailer the company’s software, installed on the retailer’s website, transmits the information to the company’s servers, where the collected attributes are compared against the database. Based on the results of the comparison, the company transmits a recommendation to “Allow,” “Deny,” or “Review” the transaction to its customer.

Customers are billed a minimum monthly fee and are charged based on the number of queries to company’s databases.

The company's service involves gathering information and comparing that information to data that the company has compiled and analyzed, to make a recommendation to its customers based on that comparison. Because the company's service does not involve the sale of information, it does not fall within the scope of an information service. Therefore, the Comptroller’s office determined this type of service is not taxable as an information service under Texas Tax Code Section 151.0038 and Rule 3.342.

Website Update

Our Web Pages are Now Printer Friendly

We listened to readers’ suggestions to make the web pages on our website printer friendly. If you want to print an issue of this newsletter, you are now able to print the entire issue instead of each section separately.

Rules

Proposed

The Comptroller’s office proposed the following rules for public comment through the Texas Register:

Motor Vehicle Sales Tax

Rule 3.74 – Seller Responsibility
Publication date – March 10, 2017
Comment period ended – April 9, 2017

State and Local Sales and Use Taxes

Rule 3.280 – Aircraft
Publication date – March 10, 2017
Comment period ended – April 9, 2017

Rule 3.297 – Carriers, Commercial Vessels, Locomotives and Rolling Stock, and Motor Vehicles
Publication date – March 10, 2017
Comment period ended – April 9, 2017

Rule 3.292 – Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property
Publication date – March 10, 2017
Comment period ended – April 9, 2017

Adopted

The Comptroller’s office filed the following rules for adoption with the Secretary of State:

Cigarette, E-Cigarette, and Tobacco Products Regulation

Rule 3.1205 – Delivery Sales of Cigarettes (Health and Safety Code, Chapter 161, Subchapter R)
Publication date – March 10, 2017
Effective date – March 15, 2017

Rule 3.1206 – Delivery Sales of E-Cigarettes (Health and Safety Code, Chapter 161, Subchapter R)
Publication date – Feb. 17, 2017
Effective date – Feb. 21, 2017

Motor Vehicle Sales Tax

Rule 3.83 – Sales and Use of Motor Vehicles Purchased or Leased by Public Agencies; and Sales and Use of Motor Vehicles Purchased by Commercial Transportation Companies
Publication date – Feb. 10, 2017
Effective date – Feb. 14, 2017

State and Local Sales and Use Taxes

Rule 3.295 – Natural Gas and Electricity
Publication date – March 3, 2017
Effective date – March 7, 2017

Rule 3.335 – Property Used in a Qualifying Data Center or Qualifying Large Data Center Project; Temporary Sales Tax Exemption
Publication date – March 10, 2017
Effective date – March 19, 2017

HB855 Browser Statement

In 2015, the Texas Legislature passed House Bill 855, which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Texas Comptroller’s most commonly used Web browsers are Google Chrome, Microsoft Internet Explorer and Apple Safari.

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