taxes

Businesses Affected by Natural Disasters Frequently Asked Questions

Some businesses may be unable to file timely due to damage caused by a natural disaster. The Comptroller can grant an extension of up to 90 days to file tax returns to a business affected by a declared disaster. An affected business must request the extension. These types of extension requests are handled on a case-by-case basis. For more information or to request a tax filing extension, call the Comptroller's tax assistance line at 800-252-5555.

The governor, by way of proclamation, may include exemptions for other taxes as the natural disaster warrants. The governor's website will have specific information related to each natural disaster, and we will update this page as needed.

Can I claim exemption from sales tax on labor charges to repair property damaged in a disaster area?

You can claim exemption from sales tax on the following labor charges by giving the seller an exemption certificate (PDF). The certificate must give the reason for claiming the exemption; for example, “Repair of damaged tree due to natural disaster in Panola County.”

  • Nonresidential real property with separately stated labor charge: Purchasers can claim a sales tax exemption from separately stated labor charges to repair or restore nonresidential real property damaged by the disaster. (Labor to repair residential real property is not taxable.)
  • Nonresidential real property billed lump-sum (one charge): If the service provider charges a lump-sum charge, the charge is presumed to be taxable. However, the service provider can overcome this presumption (even after the service is completed) by accepting an exemption certificate and then separately stating the charge for labor from the charge for incorporated materials so that the service provider can refund the sales tax collected on the charge for labor.
  • Personal property: Purchasers can claim an exemption from sales tax on charges for labor to repair or restore items damaged by a natural disaster, including furniture and other items of tangible personal property. The exemption can also be claimed on costs to launder or dry clean damaged clothing or other items.
  • Trees: Purchasers can claim an exemption from sales tax on labor on charges for cutting down damaged branches or cutting up a damaged tree. Charges for hauling away branches, limbs or trees are taxable waste removal services. Charges for nontaxable services should be separately stated from charges for taxable services. A lump-sum charge for taxable and nontaxable services will be presumed taxable if the taxable portion is greater than 5 percent of the total bill.
Is sales and use tax due on the purchase, lease or rental of equipment such as chainsaws, stump cutters, brush chippers and other tools that will be used in disaster areas?

Yes. Sales and use tax is due on the purchase, lease or rental of tools and other equipment that will be used in disaster areas. A purchase, lease or rental of these items only qualifies for exemption from Texas sales and use tax in the following situations:

  • Governmental agencies and any nonprofit entities exempt from Texas sales and use tax can claim an exemption from the tax when buying, renting or leasing the equipment in Texas. To verify that a nonprofit entity is exempt from Texas sales and use tax, check our Texas Tax Exempt Entity Search webpage. Purchase orders issued by federal, state and local governmental entities are sufficient documentation for sellers to accept that the purchase, lease or rental qualifies for exemption from sales and use tax. Nonprofit entities exempt from Texas sales and use tax must issue exemption certificates in lieu of paying the sales and use tax.
  • If a seller or a third-party common carrier delivers equipment to a location outside of Texas, Texas sales and use tax should not be collected. The seller must keep the shipping documentation to show that the sale is exempt from Texas sales and use tax as an interstate shipment. The lessee will be responsible for collecting sales and use tax on the lease or rental if the equipment is brought back into Texas for use.
  • No tax is due on taxable items purchased, leased or rented with Federal Emergency Management Agency (FEMA) or Red Cross debit cards and/or vouchers. Retailers must keep documentation that the items were purchased with FEMA or Red Cross debit cards and/or vouchers. The documentation can be either a copy of the voucher or a copy of the receipt issued to the purchaser. The receipt copy should be clearly marked "FEMA" or "Red Cross" and should be signed by the purchaser. If a combination of a FEMA or Red Cross debit card or voucher AND cash or a personal credit/debit card are used to purchase, lease or rent a taxable item, the retailer must collect sales and use tax on the amount of the purchase that was paid with personal funds but not on the amount paid with a FEMA or Red Cross debit card and/or voucher.

Sellers must keep documentation relating to the above situations for four years from the date of sale.

Are disaster victims making purchases with personal funds exempt from sales tax?

No. Disaster victims making purchases with personal funds are not exempt from paying sales tax unless the items will be donated to an entity exempt from sales tax prior to any use by the purchaser. An individual making a purchase that will be donated to an entity exempt from sales and use tax will issue an exemption certificate for that purpose.

Are purchases made with a FEMA debit card or voucher exempt from Texas sales and use tax?

Yes. Purchasers are not required to pay Texas sales and use taxes on taxable goods and services purchased with a FEMA debit card or voucher. Retailers must keep documentation that the items were purchased with a FEMA debit card or voucher for four years from the date of sale. The documentation can be either a copy of the voucher or a copy of the receipt issued to the purchaser. The receipt copy must be clearly marked "FEMA" and signed by the purchaser.

Because FEMA debit cards and vouchers are federal government purchases, no additional documentation is necessary.

If a taxable item or service is purchased with a combination of a FEMA debit card or voucher AND cash or a personal credit/debit card, the retailer must collect sales and use tax on the amount of the purchase that was paid with personal funds but not on the amount paid with a FEMA debit card or voucher.

Note that purchases of motor vehicles made with a FEMA debit card or voucher are not exempt from Texas motor vehicle sales tax. In these cases, the title passes from the seller to the individual. The vehicles are not being sold to an exempt organization.

Are purchases made with a Red Cross debit card or voucher exempt from Texas sales and use tax?

Yes. Purchasers are not required to pay Texas sales and use taxes on taxable goods and services purchased with a Red Cross debit card or voucher. Retailers must keep documentation that the items were purchased with a Red Cross debit card or voucher for four years from the date of sale. The documentation can be either a copy of the voucher or a copy of the receipt issued to the purchaser. The receipt copy must be clearly marked "Red Cross" and signed by the purchaser.

If a taxable item or service is purchased with a combination of a Red Cross debit card or voucher AND cash or a personal credit/debit card, the retailer must collect sales and use tax on the amount of the purchase that was paid with personal funds but not on the amount paid with a Red Cross debit card or voucher.

Note that purchases of motor vehicles made with a Red Cross debit card or voucher are not exempt from Texas motor vehicle sales tax. In these cases, the title passes from the seller to the individual. The vehicles are not being sold to an exempt organization.

Can disaster victims making purchases with money received from FEMA or Red Cross through a money order or direct deposit in a personal bank account receive an exemption from sales tax or claim a refund of taxes paid on items purchased in Texas with those funds?

No. Purchases made by individuals using funds in personal accounts, even if those funds were given to the individual by an exempt organization, are not exempt. Purchases of taxable items an individual makes in Texas do not qualify for an exemption or refund of sales tax unless the individual is donating the items for a qualifying organization’s use.

Are purchases of prepared food (i.e., ready to eat from a fast food restaurant) using a FEMA or Red Cross voucher or debit card exempt from Texas sales and use tax?

Yes. Ready-to-eat food qualifies for exemption when purchased with a FEMA or Red Cross debit card or voucher.

Sellers of the prepared food must keep a copy of the receipt in their records. The receipt copy must be clearly marked "FEMA" or “Red Cross” and must be signed by the purchaser.

Is sales tax due on purchases of alcohol and tobacco products when using FEMA or Red Cross debit cards and/or vouchers?

Yes. The sales tax exemption does not extend to purchases of alcohol and tobacco products when using FEMA or Red Cross debit cards and/or vouchers; therefore, sales tax is due.

Are purchases made with Salvation Army vouchers exempt from tax?

Items purchased with a Salvation Army voucher are not subject to Texas state and local sales and use taxes. Retailers should show the amount of the Salvation Army voucher on the invoice, deduct that amount before computing the sales tax, and keep a copy of the voucher to substantiate the sale to the Salvation Army on behalf of the individual. In addition, the Salvation Army should provide a properly completed exemption certificate for purchases made with Salvation Army vouchers.

Can a school district or a PTA buy school supplies and clothes sales tax free to give to students who are victims of a natural disaster?

Yes. A school district or a PTA can claim an exemption from sales tax on purchases of school supplies and clothing that will be given to students who are victims of a natural disaster. Vendors selling to school districts or PTAs must have written purchase orders/vouchers available for audit review to substantiate sales exempt from sales tax.

Can individuals or other nonprofit organizations hold fundraising events and sell goods tax free if all proceeds will be donated to disaster relief?

Generally, all sales of taxable items are subject to tax, even if all proceeds will be donated to a charity. However, there are a variety of events that can be held as fundraisers that are not subject to tax, including:

  • Bake sales
  • Car washes
  • Concerts – if the admission is based on donations only or if the concert is sponsored by a nonprofit organization. Otherwise, a set price for admission to a concert, even for a fundraising event, is subject to tax.

Each chapter of an organization qualifying for sales tax exemption under the religious, educational or charitable category, as well as organizations exempted from sales tax based on their IRS Section 501 (c)(3), (4), (8), (10) or (19) status, can hold two one-day, tax-free sales or auctions each calendar year. During each one-day sale, the organization does not need to collect sales tax. For purposes of the exemption, one day is counted as 24 consecutive hours. The exemption does not apply to items sold for more than $5,000 unless the organization manufactures those items or the items are donated to the organization and not sold back to the donor.

College or university student organizations affiliated with an institution of higher education can hold a one-day, tax-free sale each month. The organization must have a primary purpose other than engaging in business or performing an activity designed to make a profit, and the purpose of the sale must be to raise funds for the organization. The exemption does not apply to items sold for more than $5,000 unless the organization manufactures those items or the items are donated to the organization and not sold back to the donor.

Youth athletic organizations, volunteer fire departments and chambers of commerce cannot hold tax-free sales.