Tax Policy News

February 2013

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

In This Issue...

Roundtable Held

Franchise Tax – Rule 3.588

The Tax Policy Division recently hosted a roundtable discussion on Rule 3.588 related to margin and the costs of goods sold. The roundtable discussion was based on a draft rule amendment that was sent to representatives of various businesses who had participated in a work group on the issue of qualifying labor costs for Cost of Goods Sold. The amendment has not been formally proposed in the Texas Register.

We'll be holding more roundtables to allow interested people to have input in the rules we propose, and we'll keep you informed of upcoming events through this newsletter.

Hotel Occupancy Tax

Homeowners Renting a Room to the Public

The many upcoming springtime festivals, rodeos, races and other entertainment events have some Texans leasing their homes to visitors in town for the events. Remember though, that persons leasing rooms or houses must collect hotel occupancy tax from their customers, in the same way a hotel or motel collects the tax from its patrons.

Sales Tax

Tax Deductions on 2012 Federal Income Tax Returns

Texans who itemize deductions on their federal income tax return can deduct state and local sales or use taxes paid on purchases made during the 2012 calendar year, including big-ticket items such as cars, recreational vehicles and boats.

To claim the federal deduction, eligible taxpayers can either:

Taxpayers who built a new home or improved their home in 2012 may deduct sales taxes paid on the materials incorporated into the real property improvement. Labor is not taxable for new construction or residential repair and remodeling.

To be eligible for the deduction, the homeowner must have:

  • purchased the materials directly from, and paid tax to, the building materials supplier; or
  • worked with a contractor under a separated contract.

Lump-sum (one price) contracts are not eligible for the deduction because a contractor performing a contract for a lump-sum price pays the sales tax on materials and does not collect tax from the customer. Since the customer did not pay tax to the contractor, the customer cannot deduct the tax on the federal income tax return.

Recent Tax-Related Website Updates

New and Updated Agency Rules Concerning Taxability Letters and Taxpayer Rights

In January's Tax Policy News, we announced that new Rule 3.1, relating to Private Letter Rulings and General Information Letters and amended Rule 3.10, relating to Taxpayer Bill of Rights, would be effective on Jan. 28, 2013.

We've created a new web page to summarize the information in Rule 3.1.

The Comptroller will issue a general information letter in response to a request for taxability information. Our response will refer the requestor to an existing resource, such as an administrative rule, a publication or a Frequently Asked Question (FAQ), to answer the question. You may want to search this list of resources to see if the answer to your question is already available, before writing to us.

A private letter ruling, on the other hand, is the Comptroller's written determination on the application of relevant tax laws, rules and policies to a specific set of facts. When submitting a request for a private letter ruling, consult Rule 3.1 to make sure all requirements for requesting a private letter ruling are met, as the information on the web page is not intended to be a substitute for the rule.

We've also enhanced our Compact with Texans web page to explain when the agency will give taxpayers detrimental reliance relief in relation to the taxes, fees and other charges administered by the agency. This longstanding policy is now more clearly explained in Rule 3.10. Other aspects of the rule are updated as well, such as information about our customer service liaison, and ways to help taxpayers comply with the laws and provide input into Comptroller rules and procedures.


Effective Rules

General Rules

The following rules became effective Jan. 28, 2013:

Rule 3.1 – Private Letter Rulings and General Information Letters

Rule 3.10 – Taxpayer Bill of Rights

Rule 3.1 – Request for Extensions of Time in Which to File Report, was repealed.