taxes

Tax Policy News

October 2016

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...

Motor Vehicle Sales and Use Tax

Electric and Hybrid Cars

Buying an electric or hybrid car? Motor vehicle sales and use tax is due on your purchase. There is no tax exemption for electric or hybrid cars. There is a tax exemption for certain hydrogen-powered motor vehicles, but because electric and hybrid cars are not powered by hydrogen, they do not qualify for the exemption.

If you are buying an electric or hybrid car from a licensed dealer, the dealer will collect and report the tax for you. Otherwise, you must pay the tax when you register your vehicle.

Sales and Use Tax

Disasters and Texas Taxes

Filing an Extension of Time to File Texas Tax Reports

When the governor of Texas, another state or the President of the United States declares an area to be a disaster, businesses affected by that disaster can request an extension of time to file Texas tax reports and pay Texas tax. Extension requests are handled on a case-by-case basis and when granted will be for 90 days.

Out-of-state businesses that have a location in Texas can also request an extension of time to file and pay a Texas tax report, if needed. This need might arise if, for example, the business has sales tax filing and payment responsibilities in Texas, but its primary place of business where records are located is in a Louisiana parish that was declared a disaster area by Louisiana's governor.

Repairing Damaged Commercial Property

If your commercial property is damaged in an area declared a disaster, the separately stated labor charges to repair or restore the property are exempt from Texas sales and use tax.

Charges for material used in the repair are still taxable. If the service provider bills you one amount (a lump-sum charge) for both labor and materials for the repair, the entire charge is taxable. If the service provider does bill one amount, you can request the provider reissue you an invoice separately stating the charges for labor and material so you can get an exemption from tax on the labor charge.

To claim the exemption on the tax, you must give the service provider a Form 01-339, Texas Sales and Use Tax Exemption Certificate (PDF), describing the declared disaster.

There is no time limit on how long you have to make the repair related to a declared disaster. The clock starts running, however, on the four-year statute of limitations for refund purposes at the time you are billed for the repair. For example, you can ask for an exemption from tax on the labor charged to repair commercial property in 2016 that was damaged by Hurricane Ike in 2008. If you pay tax on the labor in 2016, you have until 2020 to request a refund for tax paid on the labor related to the declared disaster.

The labor to repair residential real property is not taxable.

The Governor's Proclamations web page lists current disaster declarations, and the Comptroller's Disaster Relief Frequently Asked Questions provide additional information on tax relief.

Fall Cleaning – Preparing Your House and Lawn for Winter

As you get your house and lawn ready for winter, remember that many cleaning services and landscaping services are taxable.

Taxable cleaning and landscaping services include the following:

  • window washing
  • window covering cleaning
  • wall, flooring or ceiling cleaning
  • siding or gutter cleaning
  • tree trimming
  • lawn maintenance (raking, fertilizing, mowing, planting, edging, snow shoveling, etc.)
Fall Decorating – It's the Holiday Season

As you shop or visit pumpkin patches or Christmas tree farms, remember your purchases are generally taxable.

Pumpkins

Although pumpkins are often sold for decorating, they are a food product and are not taxable. Pumpkins that are not a food product (Styrofoam, ceramic, metal, etc.) are taxable.

Holiday Trees, Greenery and Poinsettias

Holiday trees, holly, mistletoe, garlands, poinsettias and other holiday greenery (cut, live and artificial) are taxable.

Pumpkin Patches and Christmas Tree Farms

Entrance fees for tours of a pumpkin patch or Christmas tree farm are taxable amusement services.

Fall Fundraising – Exempt Organizations

What are your tax responsibilities when planning a fundraiser for your school or other exempt organization?

Many tax-exempt organizations believe they don't have to collect sales tax when selling items to the public. But generally, the exemption applies to the organization's purchases and not to its sales. Unless the fundraiser falls within one of the two one-day, tax-free days allowed, every t-shirt, box of candy, roll of wrapping paper, etc. sold is taxable.

Be sure to collect the appropriate tax when making your sales. If the tax is built into the sales price, remember to include a statement that the price includes tax. Don't forget to "back out" the tax when completing your sales tax return.

Backing out sales tax when it is included in the sales price is easy to do. Use our Sales Tax Rate Locator to find the total state and local sales tax rates and then follow this formula:

  1. Divide the total price by 1.0 plus the total sales tax rate for where the sale occurs to obtain the taxable sales price.
  2. Subtract the taxable sales price from the total price to obtain the amount of sales tax that you will report and pay to the Comptroller's office on the sale.

For example, you sell an item in Austin for $100, tax included. The state tax rate is 6.25 percent and the local tax rate in Austin is 2 percent, for a tax rate of 8.25 percent (0.0825).

$100 ÷ (1.0 + 0.0825) = $92.38 taxable sales price

$100 - $92.38 = $7.62 tax to be reported and paid on your sales tax return

If your organization is working with a third-party fundraising company, find out if that company is responsible for remitting the tax to the Comptroller's office. Your organization is not required to remit the sales tax from the fundraiser if the third-party fundraising company is remitting the tax.

Photos and Videos – Buying, Storing and Sharing

We're at the peak of picture-taking time with summer ending and the holiday season approaching! Here is what you need to know about the taxability of buying, storing and sharing your photos.

Photography Services

Hiring a photographer to take your family portrait this year? A photographer's service fees are taxable. All photos (printed and digital), shipping costs and framing are also taxable.

Buying Photos or Videos in Person or Online

Sales tax is due on purchases you make either in person or online in Texas. This includes buying digital images that are sent to you electronically.

Online Photo Storage

Storing your digital photos online? Online storage sites usually offer multiple benefits for one monthly fee. This service is considered taxable data processing. Twenty percent of the taxable data processing fee is exempt from sales tax. For example, an online storage company charges $20 a month to store your photos. Sales tax is only due on $16 because 20 percent of the $20 is exempt.

Photo Sharing

Sharing your photos? If your friends or family buy your photos online through a photo sharing website, the sale is taxable.

Public Notice

Breastfeeding Rights

As required by the 84th Legislature's House Bill 1, the Comptroller's office is reminding readers that all mothers have the right to breastfeed their babies without interference or restriction of that right.

Reminder

Coin-Operated Amusement Machines Tax

Renewal Applications for 2017 are due by Nov. 30, 2016

Coin-operated amusement machine owners and operators must file renewal applications for their 2017 General Business License, Registration Certificate, Import License or Repair License by Nov. 30. A $60 occupation tax permit for each coin-operated amusement machine exhibited or displayed in Texas is also due by Nov. 30.

Rules

Proposed

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

Franchise Tax

Rule 3.598 – Margin: Tax Credit for Certified Rehabilitation of Certified Historic Structures
Publication date – Sept. 30, 2016
Comment period end date – Oct. 30, 2016

State and Local Sales and Use Taxes

Rule 3.335 – Property Used in a Qualifying Data Center or Qualifying Large Data Center Project; Temporary Sales Tax Exemption
Publication date – Sept. 23, 2016
Comment period end date – Oct. 23, 2016