taxes

Tax Policy News

September 2015

This issue of Tax Policy News summarizes Texas tax law changes resulting from bills passed by the 84th Legislature.

In This Issue...

2015 Legislative Update – 84th Legislature

Note from Glenn Hegar

Immediately upon taking office as Texas Comptroller, I conducted a top-down review of the agency to look for inefficiencies. We found a number of outdated taxes that provided more of an unnecessary administrative burden than a net good for the state. This session, we successfully repealed eight of those taxes as discussed in greater detail in this issue, creating an administrative cost savings for the agency, reducing paperwork burdens on those we serve and providing tax relief for many.

As the chief financial officer of this great state, I will continue to monitor the Texas economy and do my part to make sure Texas continues to thrive. I hope you find this legislative roundup helpful.

E-Cigarettes

E-Cigarettes Regulated under Public Health Provisions Senate Bill 97, Effective Oct. 1, 2015

SB 97 prohibits the sale of e-cigarettes to persons younger than 18 years of age (minors). Additionally, minors are prohibited from possessing, using or receiving e-cigarettes. Retailers are required to post warning signs notifying minors of the legal hazards involving the purchase of e-cigarettes. The Comptroller will provide these signs to retailers upon request. Delivery sales of e-cigarettes are now subject to regulation and notification requirements. E-cigarette violations are subject to criminal and administrative penalties.

The bill amends the public health provisions law under Health and Safety Code Chapter 161.

Crude Oil

Crude Oil Regulatory Tax, Senate Bill 757, Effective Sept. 1, 2015

SB 757 repeals the crude oil regulatory tax starting with the production month of Sept. 2015.

Taxpayers are still required to pay the Oil Field Cleanup Fee of $0.00625 per barrel starting with production on or after Sept. 1, 2015.

This bill repeals Natural Resources Code Sections 81.111, 81.113 and 81.114.

Fireworks Tax

Fireworks Tax Repealed, Senate Bill 761, Effective Sept. 1, 2015

SB 761 repeals the 2 percent tax on the sale of fireworks that was imposed under Tax Code Chapter 161. Fireworks will continue to be subject to sales and use tax imposed under Tax Code Chapter 151.

The repealed 2 percent tax, which provided funding to the Volunteer Fire Department Insurance Fund, will be replaced by an allocation equal to 2 percent (or the amount estimated to represent 2 percent) of the 6.25 percent state sales tax collected on each retail sale of fireworks sold in Texas.

The bill repeals Tax Code Chapter 161 Fireworks Tax.

Franchise Tax

Franchise Tax Rates for 2016, House Bill 32, Effective for reports originally due on or after Jan. 1, 2016

HB 32 allows for reduced franchise tax rates beginning with the 2016 report.

Most taxable entities will pay a rate of 0.75 percent of taxable margin for franchise tax.

Taxable entities primarily engaged in retail or wholesale trade will pay a franchise tax rate of 0.375 percent of taxable margin.

The bill amends Tax Code Sections 171.002(a) and (b).

New Franchise Tax Rate and Revenue Threshold for Businesses Choosing to File Using the EZ Computation, House Bill 32, Effective for reports originally due on or after Jan. 1, 2016

HB 32 increases the revenue threshold for the EZ computation from $10 million to $20 million and allows a taxable entity choosing the EZ computation to pay tax at a rate of 0.331 percent.

The bill amends Tax Code Sections 171.1016(a) and (b).

Out-of-State Businesses Performing Disaster- or Emergency-Related Work in Texas, House Bill 2358, Effective June 16, 2015

HB 2358 exempts out-of-state business entities who enter Texas at the request of an in-state business entity under a mutual assistance agreement or affiliates of an in-state business entity from Texas licensing and registration requirements when their business in Texas is limited to performing disaster- or emergency-related work during a disaster response period. The out-of-state business entity is not required to register with the Secretary of State or to file or pay any state or local taxes, including franchise tax, when performing disaster- or emergency-related work during a disaster response period. This bill adds Tax Code Section 151.0241 and Business & Commerce Code Chapter 112.

Reporting Requirements for Limited Partnerships and Professional Associations, House Bill 2891, Effective Jan. 1, 2016

HB 2891 requires limited partnerships and professional associations to file Public Information Reports in place of Ownership Information Reports with the Comptroller's office. In addition, professional associations are no longer required to file annual statements with the Secretary of State under the Business Organizations Code.

The bill amends Tax Code Sections 171.203(a), (b), (d) and (e) and Business Organizations Code Section 4.156.

Apportionment of Certain Broadcaster Receipts, House Bill 2896, Effective for reports originally due on or after Jan. 1, 2018

HB 2896 provides that broadcasting entities apportion to Texas receipts arising from licensing income from broadcasting or otherwise distributing film programming only when Texas is the legal domicile of the broadcaster's customer.

This bill adds Tax Code Section 171.106(h).

Tax Credit for the Rehabilitation of Historic Structures, House Bill 3230, Effective for reports originally due on or after Jan. 1, 2016

HB 3230 expands the definition of eligible costs and expenses of certified rehabilitation of certified historic structures to allow nonprofits to earn credit for eligible costs and expenses.

The bill amends Tax Code Section 171.901(4).

Franchise Tax Not Imposed on New Veteran-Owned Businesses, Senate Bill 1049, Effective Jan. 1, 2016

SB 1049 defines new veteran-owned businesses formed on or after Jan. 1, 2016, and before Jan. 1, 2020, and does not impose franchise tax on qualifying businesses for a five-year period.

The bill amends Tax Code Sections 171.0001(4) and 171.063(g) and adds Tax Code Sections 171.0005, 171.001(d) and 171.204(d).

Electronic Reporting Requirements, Senate Bill 1364, Effective Sept. 1, 2015

SB 1364 requires electronic filing of Franchise No Tax Due Reports required under Tax Code Section 171.204.

The bill amends Tax Code Section 111.0626.

General Bills

TexAmericas Center, Senate Bill 1563, Effective June 16, 2015

SB 1563 exempts the property, revenue and income of each nonprofit corporation created by TexAmericas Center from all taxes imposed by the state and political subdivisions of Texas.

The bill adds Special District Local Laws Code Section 3503.111 and amends Special District Local Laws Code Section 3503.154.

Hotel Occupancy Tax

"Short-term Rental" Added to the Definition of "Hotel," House Bill 1905, Effective Sept. 1, 2015

HB 1905 clarifies that the term "hotel" includes a rental of all or part of a residential property to a person who is not a permanent resident.

The bill adds Tax Code Section 156.001(b).

Barrier Island Coastal Municipalities, House Bill 1915, Effective Oct. 1, 2015

HB 1915 adds the cities of Corpus Christi, Quintana and Surfside Beach as eligible barrier island coastal municipalities. These three cities join the cities of Galveston, Port Aransas and South Padre Island to receive a 2 percent rebate of the state hotel tax collected from hotels located in these cities.

The bill also increased the state hotel tax rebate for Port Aransas from 1 percent to 2 percent.

The bill amends Texas Tax Code Section 156.2512.

El Paso, Frisco and Nacogdoches Qualify as Eligible Central Municipalities; Odessa, Round Rock and Tyler are Eligible to Receive Certain Tax Proceeds for a Qualified Hotel Project, House Bill 1964, Effective May 29, 2015

HB 1964 amends the municipal hotel tax law to add the cities of El Paso, Frisco and Nacogdoches as eligible central municipalities.

An eligible central municipality is entitled, upon request, to receive a rebate of certain tax proceeds that are paid or collected by a qualified hotel project and businesses ancillary to the hotel project that are located within 1,000 feet of a convention center facility owned by the municipality. Included in the rebates are state and local sales and hotel occupancy taxes, ad valorem tax and local mixed beverage taxes. The cities can receive the tax rebates for 10 years after the hotel initially opens.

The bill also authorizes the cities of Odessa, Round Rock and Tyler to receive the same tax rebates that an eligible central municipality can receive for a qualified hotel project. The rebated taxes may be pledged as payment for obligations issued for the hotel project.

The bill provides that, except for Nacogdoches, these municipalities cannot reduce the amount of hotel tax revenue allocated for advertising and promotional programs used to attract tourists and convention participants to less than the average amount spent for that purpose during the 36-month period before using the revenue or funds for a hotel project.

The bill also deletes language that had included a hotel located in El Paso in the definition of a qualified hotel project in Government Code Section 2303.003(8). Lastly, the bill deletes language from Tax Code Section 151.429(h) that had restricted El Paso from receiving rebates of state sales and state hotel tax revenue generated at a qualified hotel project.

The bill amends Government Code Sections 2303.003(8) and 2303.5055(b) and Tax Code Sections 151.429(h), 351.001(2) and (7) and 351.102(a), (b) and (d).

Inheritance Tax

Inheritance Tax Repealed, Senate Bill 752, Effective Sept. 1, 2015

SB 752 repeals Tax Code Chapter 211, Inheritance Taxes. This repeal does not affect any tax liability accruing before Sept. 1, 2015.

The bill amends Estates Code Section 124.001 to recognize the repeal of Tax Code Chapter 211.

Insurance Tax

Volunteer Fire Department Assistance Fund Assessment, House Bill 7, Effective Sept. 1, 2015

HB 7 amends the appropriation for the Volunteer Fire Department Assistance Fund.

For fiscal years beginning Sept. 1, 2015, and Sept. 1, 2016, the bill requires the Comptroller to assess the lesser of the total amount appropriated from the fund's account in general revenue, other than appropriations for contributions to the Texas Emergency Services Retirement System made under Government Code Section 614.104(d) and appropriations to the Texas A&M Forest Service for grants to volunteer fire departments not to exceed $11,500,000, or $30 million. This provision expires Sept. 1, 2017.

Automobile Burglary and Theft Prevention Authority Assessment, House Bill 2424, Effective Sept. 1, 2015

HB 2424 allows an insurance company up to four years after the date an assessment payment was made to submit a request for refund to the Authority.

An insurer who originally requested a refund after Jan. 1, 2010, and before Sept. 1, 2015, and was denied before Sept. 1, 2015, solely on the basis of the six-month refund request requirement, must refile a request for refund with the Authority not later than Nov. 1, 2015. This provision expires Sept. 1, 2017.

This bill amends Tex. Rev. Civ. Stat. Ann. Art. 4413(37), Section 6A.

Mixed Beverage Sales Tax

Exemption for Volunteer Fire Departments, Senate Bill 31, Effective May 28, 2015

SB 31 allows volunteer firefighter departments and volunteer firefighter departments providing emergency services that qualify for a sales tax exemption under Tax Code Section 151.310(a)(4) to hold 10 tax-free sales or auctions during a calendar year. If two or more exempt organizations jointly hold an auction or sale, it will count toward the 10 tax-free sales or auctions allowed for each organization.

These qualifying organizations do not have to collect mixed beverage sales tax on sales of alcoholic beverages during these sales or auctions, but must remit mixed beverage gross receipts tax pursuant to Tax Code Section 183.021.The organizations must have a temporary mixed beverage permit from the Texas Alcoholic Beverage Commission to sell mixed drinks.

Each tax-free sale or auction can last no more than 72 hours.

The bill adds Tax Code Section 151.310(c-1).

Motor Fuels Tax

Motor Fuel Tax on Liquefied Gas (LG) or Liquefied Petroleum Gas (LPG) Repealed, House Bill 1905, Effective Sept. 1, 2015

HB 1905 repeals the Texas motor fuels tax on liquefied gas (LG) or liquefied petroleum gas (LPG).

All prepaid LG decals currently issued to Texas-registered motor vehicles that operate using LG or LPG are cancelled effective Aug. 31, 2015.

This bill repeals Subchapter D, Chapter 162, Section 162.001(40), and makes conforming amendments to Tax Code Sections 162.402 and 162.403.

The Comptroller sold prepaid LG decals issued beginning July 16, 2015, on a prorated basis. The Comptroller will automatically process refunds for the unused portion of any prepaid LG decals that expire Sept. 1 or later.

Nonprofit Emergency Medical Services, House Bill 1905, Effective Sept. 1, 2015

HB 1905 exempts nonprofit entities organized for the sole purpose of exclusively providing emergency medical services (including rescue and ambulance services) from Texas motor fuels tax on gasoline, diesel fuel, compressed natural gas or liquefied natural gas. In addition, if the motor fuels tax is paid, the entity can file a refund claim with the Comptroller's office.

This bill amends Tax Code Sections 162.104, 162.204, 162.356 and 162.365.

Texas Municipalities, House Bill 1905, Effective Sept. 1, 2015

HB 1905 exempts Texas municipalities from the motor fuels tax on compressed natural gas and liquefied natural gas. In addition, if the motor fuels tax is paid, the Texas municipality can file a refund claim with the Comptroller's office.

This bill amends Tax Code Sections 162.356 and 162.365.

Metropolitan Rapid Transit Authorities and Regional Transportation Authorities, House Bill 1905, Effective Sept. 1, 2015

HB 1905 exempts an entity from the state motor fuels tax on compressed natural gas or liquefied natural gas delivered into the fuel supply tank of a motor vehicle, if the entity had a prepaid liquefied gas tax decal on Jan. 1, 2015, and the motor vehicle is:

  • to exclusively resell the vehicle; or
  • to test the vehicle on a public street or highway or to loan it to a consumer when the consumer's vehicle is being repaired under a manufacturer's warranty.

This bill amends Tax Code Section 162.356.

Motor Vehicle Sales and Use Tax

Sales of Motor Vehicles to Manufacturers or Distributors, House Bill 2400, Effective Sept. 1, 2015

HB 2400 amends the definition of a retail sale to exclude the sale of a new motor vehicle when the purchaser is a manufacturer or distributor (as defined by Occupations Code Section 2301.002) who acquires the motor vehicle for one of these purposes:

  • to exclusively resell the vehicle; or
  • to test the vehicle on a public street or highway or to loan it to a consumer when the consumer's vehicle is being repaired under a manufacturer's warranty.

The bill amends Tax Code Section 152.001.

Special Olympics Texas Fund Voluntary Contribution, Senate Bill 272, Effective Jan. 1, 2016

SB 272 allows a person to make a voluntary contribution to the Special Olympics Texas Fund when registering or renewing a motor vehicle's registration in Texas.

The Special Olympics Texas Fund is a trust fund held by the Comptroller and administered by the Texas Department of Aging and Disability Services as trustee on behalf of Special Olympics Texas.

The bill amends Transportation Code Section 502.413.

Autocycle Defined, Senate Bill 449, Effective May 22, 2015

SB 449 defines an "autocycle" as a motor vehicle (other than a tractor) that is:

  • designed to have not more than three wheels on the ground when propelled;
  • equipped with a steering wheel;
  • equipped with seating that does not require the operator to straddle or sit astride the seat; and
  • manufactured and certified to comply with federal safety requirements for a motorcycle.

The sale of an autocycle is subject to motor vehicle tax in the same manner as the sale of a street-legal motorcycle.

The bill adds Transportation Code Section 501.008 and Section 502.004.

Exemption for Certain Commercial Transportation Companies, Senate Bill 724, Effective June 17, 2015

SB 724 exempts from motor vehicle sales and use tax, the purchase of a motor vehicle operated with exempt license plates issued under Transportation Code Section 502.451 and used by a public agency or a commercial transportation company to provide transportation services under a contract with one of the following:

  • a board of county school trustees or school district board of trustees under Education Code Section 34.008; or
  • the governing body of an open-enrollment charter school.

The bill amends Tax Code Section 152.082.

Sales and Use Tax

Texas Emissions Reduction Plan Surcharge Rate Decrease, House Bill 7, Effective Sept. 1, 2015

HB 7 reduces the Texas Emissions Reduction Plan Surcharge imposed on the sale, lease or rental of off-road, heavy-duty diesel equipment from 2 percent to 1.5 percent.

The bill amends Tax Code Section 151.0515.

Municipality Sales and Use Tax Rates, House Bill 157, Effective Sept. 1, 2015

HB 157 allows municipalities to set their sales and use tax rate at any rate that is an increment of one-eighth of 1 percent as long as the rate would not exceed the maximum 2 percent combined local tax rate provided by Tax Code Section 321.101(f).

The adoption and changes in rates of municipal sales and use taxes must be approved by voters.

The bill applies to the municipal sales and use tax and to city sales and use taxes imposed for street maintenance, venue projects, property tax relief, economic development and crime control and prevention.

The bill amends provisions of Local Government Code Chapters 334, 363, 504 and 505. It also amends provisions of Tax Code Chapters 321 and 327.

Insurance Services, House Bill 1841, Effective Oct. 1, 2015

HB 1841 excludes services performed on behalf of an insured by a person licensed under Insurance Code Chapter 4102 (public insurance adjusters) from the definition of insurance services. As a result, insurance services provided by a public insurance adjuster are not subject to sales and use tax.

This bill amends Tax Code Section 151.0039.

Snack Items Defined, House Bill 1905, Effective Sept. 1, 2015

HB 1905 amends the definition of "snack items" to mean:

  • breakfast bars, granola bars, nutrition bars, sports bars, protein bars or yogurt bars, unless labeled and marketed as candy;
  • snack mix or trail mix;
  • nuts, but not including pine nuts or candy-coated nuts;
  • popcorn;
  • chips, crackers, hard pretzels, pork rinds, or corn nuts;
  • sunflower seeds or pumpkin seeds;
  • ice cream, sherbet, or frozen yogurt; and
  • ice pops, juice pops, sorbet, or other frozen fruit items containing not more than 50 percent fruit juice by volume.

Snack items sold in portions labeled as having not more than one serving or containing less than 2.5 ounces are taxable.

Food products served, prepared or sold for immediate consumption by a restaurant, lunch counter, cafeteria, deli or similar types of businesses are taxable. The bill provides that a grocery store or convenience store containing one of these types of locations will be considered such a place of business only in regard to sales made from that location within the store.

This bill amends Tax Code Section 151.314.

Exemption for Certain Items Sold Through Vending Machines, House Bill 2313, Effective Sept. 1, 2015

HB 2313 exempts the sale of tangible personal property through a vending machine if:

  • the sale is made by a nonprofit organization under Section 501(c)(3) Internal Revenue Code of 1986;
  • the machine is owned by the nonprofit organization; and
  • the machine is stocked and maintained by individuals with special needs as part of an independent life skills and education program operated by the nonprofit organization.

The bill adds Tax Code Section 151.3051.

Out-of-State Businesses Performing Disaster- or Emergency-Related Work in Texas, House Bill 2358, Effective June 16, 2015

HB 2358 exempts an out-of-state business entity that enters Texas at the request of an in-state business entity under a mutual assistance agreement, or that is an affiliate of an in-state business entity, from Texas licensing and registration requirements when its business in Texas is limited to performing disaster- or emergency-related work during a disaster response period. The out-of-state entity will not be required to collect and remit Texas sales and use tax on its sales of taxable items in Texas nor on its purchases of taxable items that are sold or transferred to its customers during a disaster response period.

An out-of-state entity will not be considered engaged in business in Texas if the entity's physical presence in Texas is solely for performing disaster- or emergency-related work during a disaster response period. The out-of-state business entity is not required to register with the Secretary of State or to file a tax report with or pay taxes or fees to Texas or a political subdivision of Texas when its business in Texas is limited to performing disaster- or emergency-related work during a disaster response period.

The out-of-state entity will not owe use tax on equipment brought into Texas used only by the entity to perform disaster- or emergency-related work during the disaster response period, and removed from Texas by the entity following the disaster response period. The out-of-state entity will owe sales tax on its purchases of taxable items for its own use.

The bill does not provide an exemption for taxable items sold by the out-of-state business described by the bill. Purchasers are still responsible for use tax on any taxable items purchased from such an out-of-state business entity.

The bill adds Tax Code Section 151.0241 and Business & Commerce Code Chapter 112.

Exemption for Certain Digital Audio Broadcasting Equipment, House Bill 2507, Effective Sept. 1, 2015

HB 2507 exempts tangible personal property sold to licensed digital audio broadcasting stations, if the property is necessary to provide digital audio broadcast service.

The bill amends Tax Code Section 151.3185.

Qualifying Large Data Center – Tangible Personal Property Temporary Exemption, House Bill 2712, Effective June 10, 2015

HB 2712 exempts certain items necessary for operating a qualifying large data center project from state and local sales and use tax.

An owner, operator or occupant of a data center comprising at least 250,000 square feet in one or more buildings, located on a single or contiguous parcels of land, that is being specifically constructed or refurbished in Texas to be used by a single occupant to house servers and related equipment for processing, storing and distributing data can apply to the Comptroller for certification as a qualifying large data center project.

For certification, a qualifying owner, operator or occupant (independently or jointly) must agree to:

  • make a capital investment of $500 million or more over a five-year period from the date of certification;
  • create at least 40 permanent, full-time qualifying jobs in the county where the data center is located that are unrelated to moving jobs from another Texas county; and
  • contract for at least 20 megawatts of transmission capacity for operating the large data center project.

A "qualifying job" must pay at least 120 percent of the county average weekly wage in the county where the job is based.

Owners, occupants and operators of certified data centers can claim an exemption on qualified purchases made for 20 years following the date of certification. A large data center's certification can be revoked if the owner, operator or occupant (individually or jointly) fails to make the amount of capital investment or create the number of jobs required within the initial five-year time frame. If the certification is revoked, tax will be due on tax-free purchases made before the revocation.

Data centers with agreements to limit the appraised value of property for property tax under Tax Code Chapter 313 do not qualify for this exemption.

The bill amends Tax Code Section 151.317 and adds Tax Code Section 151.3595.

Tax-Free Sales by Volunteer Fire Departments, Senate Bill 31, Effective May 28, 2015

SB 31 allows volunteer firefighter departments and volunteer firefighter departments providing emergency services that qualify for a sales tax exemption under Tax Code Section 151.310(a)(4) to hold 10 tax-free sales or auctions during a calendar year. If two or more exempt organizations jointly hold an auction or sale, it will count toward the 10 tax-free sales or auctions allowed for each organization.

Each tax-free sale or auction cannot last more than 72 hours.

The bill adds Tax Code Section 151.310(c-1).

Tax Refunds for Enterprise Projects, Senate Bill 100, Effective Sept. 1, 2015

SB 100 removes the cap placed on capital investments for qualified enterprise projects. An enterprise project can qualify for a tax refund based on their capital investment. The bill removes the cap of $149,999,999 placed on capital investment that results in a refund of $2,500 per job.

Enterprise projects that have capital investments of $150,000,000 or more will receive refunds for new permanent jobs. The refund per job has been changed to capture only new permanent jobs.

The bill adds the definition of a half enterprise project and provides that the maximum sales tax refund a half enterprise project may receive is $125,000.

The bill amends Tax Code Section 151.429.

Telecommunications Services for Farm and Ranch Machinery and Equipment, Senate Bill 140, Effective Sept. 1, 2015

SB 140 provides a sales and use tax exemption for telecommunications services exclusively provided or used for navigating machinery and equipment exclusively used on a farm or ranch for the following purposes:

  • building or maintaining roads;
  • building or maintaining water facilities; or
  • producing agricultural products to be sold in the regular course of business.

Purchasers must provide sellers a Texas Agricultural Sales and Use Tax Exemption Certificate, including an Agricultural and Timber Registration Number and expiration date, to claim the exemption.

The bill amends Tax Code Sections 151.1551 and 151.316.

Resale of Certain Computer Programs, Senate Bill 755, Effective June 10, 2015

SB 755 expands the definition of "sale for resale" to include a sale of a computer program to a provider of Internet hosting services who sells a license to use the program to an unrelated user of Internet hosting services, provided that the reseller does not retain a right to use the program under that license. A sale for resale is exempt from sales and use tax.

The bill adds Tax Code Section 151.006(d).

Electronic Filing Satisfies Signature Requirement on Sales Tax Permit Application, Senate Bill 853, Effective June 1, 2015

SB 853 provides that an electronically filed sales tax permit application complies with the signature requirement under Tax Code Section 151.202(b).

The bill adds Tax Code Section 151.202(c).

Emergency Preparation Supplies Temporary Exemption, Senate Bill 904, Effective Sept. 1, 2015

SB 904 provides a temporary sales and use tax exemption for certain emergency preparation items sold during a three-day period beginning on the Saturday before the last Monday in April and ending on the last Monday in April.

Items that qualify for the exemption include certain portable generators, hurricane shutters, ladders, portable self-powered light sources, fuel containers, radios, batteries, smoke detectors, fire extinguishers and first aid kits.

The bill adds Tax Code Section 151.3565.

Water-Efficient Products Temporary Exemption, Senate Bill 1356, Effective Oct. 1, 2015

SB 1356 provides a temporary sales and use tax exemption for certain water-conserving products and for products with a "WaterSense" label from the U.S. Environmental Protection Agency.

The items are exempt when sold during a three-day period beginning on the Saturday before the last Monday in May (Memorial Day) and ending on Memorial Day.

The bill adds Tax Code Section 151.3335.

Aircraft, Senate Bill 1396, Effective Sept. 1, 2015

SB 1396 defines "certificated or licensed carriers" as carriers authorized under Parts 121, 125, 133, and 135 of the Federal Aviation Regulations. The bill provides that the exemption for aircraft under Tax Code Section 151.328(a)(1) applies regardless of whether the aircraft is acquired by purchase, lease or rental.

The bill also provides a unique "sale for resale" definition for purchases of aircraft. A sale for resale includes a sale to a purchaser for the purpose of leasing, renting or reselling the aircraft to another person. The sale for resale does not have to be for the sole purpose of leasing or renting, provided that more than 50 percent of the departures are under the operational control of a lessee.

Operational control is defined by Federal Aviation Regulations. The consideration for a lease or rental does not have to be in the form of cash payments, and can be fixed, variable or periodic.

Liability for tax on divergent use does not apply to aircraft purchased under the sale for resale exemption.

Use tax does not apply to aircraft brought into Texas for the sole purpose of being completed, repaired, remodeled or restored. There is also no presumption of taxable use when an aircraft is brought into Texas, if the aircraft was not purchased directly from a seller.

The bill provides that tax is not due on certain aircraft after out-of-state use. Specifically, the bill exempts from use tax any aircraft purchased outside of the state that is predominantly used outside of Texas for more than a year before being brought into Texas. An aircraft is predominantly used outside of Texas if more than half of its departures are from locations outside of Texas.

For transactions involving aircraft, transactions between related persons are taxable or not taxable to the same extent as transactions between unrelated persons. When a person pays tax on the purchase of an aircraft, use by a related entity is not also subject to tax. Use by a related entity of a purchaser is not taxable, if tax was paid by the purchaser or, if subject to certain exceptions, the purchase was exempt.

The use of an aircraft by a fractional owner of the aircraft is not a taxable transaction.

This bill adds Tax Code Chapter 163, Sales and Use Taxation of Aircraft.

Sulphur Tax

Sulphur Tax Repealed, Senate Bill 757, Effective Sept. 1, 2015

SB 757 repeals Tax Code Chapter 203 Sulphur Production Tax and adds Tax Code Section 151.3171 to retain the exemption for sulphur from sales and use tax.