When the governor of Texas or the president of the United States declares a location in Texas to be a disaster area, taxpayers in the affected area are eligible for certain tax exemptions and filing extensions for their taxes.
A disaster can be natural or man-made, causing significant physical damage or destruction, loss of life or a drastic change to the environment.
Texas has had its share of declared disaster areas caused by hurricanes, tornadoes, fires and floods over the years, and our office wants to help you take care of yourself, your home or your business when disaster strikes.
Taxpayers in Texas counties declared disaster areas can request an extension to file their taxes. The Comptroller’s office allows temporary filing extensions on a case-by-case basis. Our office will notify taxpayers when we grant or deny their extension requests.
Taxable items and services bought by an individual with funds from a personal account are taxable, even if an exempt organization gives those funds to the individual. Exception: Items bought by an individual with personal funds to be donated for disaster relief can qualify for exemption. See the Helping People Affected by a Disaster section.
Sales and use tax is not due on taxable items purchased with a Federal Emergency Management Agency (FEMA) debit card or a Red Cross voucher.
If FEMA or the Red Cross provides a check for assistance that is deposited into an individual’s personal bank account, tax is due on the sale or use of taxable items purchased with those personal funds. See the Personal Funds section.
Sales and use tax is not due on taxable items purchased at a designated Salvation Army retail outlet or thrift store with a Salvation Army voucher. A properly completed exemption certificate (PDF) is required for purchases made with Salvation Army vouchers. Purchases made with personal funds are taxable.
Purchases, leases and rentals by governmental agencies and nonprofit entities are exempt from Texas sales and use tax.
Purchase orders issued by federal, state and local governmental entities can be used to document exempt purchases.
Qualifying nonprofit entities can give the seller an exemption certificate (PDF).
If another state is declared a disaster area, and a Texas seller or a third-party common carrier wants to help by delivering equipment there, Texas sales and use tax is not due. The seller must keep the shipping documentation to show that the sale is exempt from Texas sales and use tax as an interstate shipment. Texas sales and use tax is due if the equipment is brought back into Texas for use.
If FEMA or the Red Cross provides a check for assistance that is deposited into an individual’s personal bank account, ready-to-eat food is taxable purchased with those personal funds. See the Personal Funds section.
Alcohol and tobacco products are taxable, even when using FEMA or Red Cross funds.
For exempt entity purchases, retailers can check our Texas Tax-Exempt Entity Search to verify exemption.
To document exempt purchases, retailers must keep copies of vouchers or receipts for the items purchased (including receipts for food) for at least four years. The receipt copy must be clearly marked “FEMA” or “Red Cross” and must be signed by the purchaser.
If a combination of FEMA or Red Cross funds and cash or a personal credit or debit card are used, the retailer must collect sales and use tax on the amount paid with personal funds, but not on the amount paid with FEMA or Red Cross funds.
For Salvation Army vouchers, retailers must show the amount of the 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 general, charges for labor to repair residential or nonresidential real property damaged in a declared disaster area are exempt from sales and use tax. The materials used to make the repairs are taxable.
For the customer to receive an exemption from tax on labor charges, the service provider must either:
Note: The exemption certificate must include the service provider’s name and address, the customer’s name and address and a list of the items being repaired. The certificate must also give the reason for claiming the exemption. For example, “Repair due to Hurricane Harvey in Galveston County.”
For residential real property repairs in a disaster area, the charges for labor are exempt from sales and use tax. The contract used determines the taxability of the incorporated materials.
For nonresidential real property repairs in a disaster area, the contract used determines the taxability of the incorporated materials and labor.
Purchasers can claim an exemption from sales and use tax on charges for the following:
Individuals who want to help people recover from a disaster do not have to pay tax on items they buy to donate directly to these exempt organizations:
The purchaser must give the seller an exemption certificate (PDF) showing the individual’s name and the name of the qualifying exempt organization accepting the donation. If the individual uses the item before donating it, the individual owes tax on the purchase price.
A retailer can remove an item from a tax-free inventory to donate to qualified exempt organizations without paying use tax on the item.
A school district or a PTA can claim sales tax exemption on purchases of school supplies and clothing that will be given to students affected by a declared disaster.
Generally, all sales of taxable items are subject to tax, even if all proceeds will be donated to a charity. There are, however, several events that can be held as fundraisers that are not 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. These designated days can be used for disaster relief.
Youth athletic organizations, volunteer fire departments and chambers of commerce cannot hold tax-free sales.
For more information, see Nonprofit and Exempt Organizations – Sales and Purchases.
An out-of-state business coming to Texas to help with disaster recovery is not considered engaged in business here and is not required to register with the Secretary of State or to collect or remit Texas taxes (including franchise tax) from its customers if it meets certain requirements.
The out-of-state business must:
The out-of-state business will owe sales tax on taxable items purchased for its own use here.
It will not owe use tax on equipment it brings here used only to perform disaster-related work to repair or restore damaged critical infrastructure during the disaster response period, and it must remove the equipment from Texas after the disaster response period. See Rules 3.583 and 3.286 for more information.
Take advantage of the annual Emergency Preparation Supplies Sales Tax Holiday when you can buy many items tax free, such as emergency generators, hurricane shutters and batteries.
The Governor’s Office has helpful emergency preparation information on its website at Emergency Management – Planning for Emergencies and Disasters in Texas.
If you need more information, contact us at Texas Taxes Help.