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.
Previous issues are available through the Tax Policy News Index.
As a member of the Western States Association of Tax Administrators, Texas is proud to host the annual WSATA conference in Austin, Sept. 23-26, 2018, at the Sheraton Austin at the Capitol.
The Texas Tax Amnesty Program, under certain circumstances, provides delinquent taxpayers with relief from penalty and interest on tax due. Tax amnesty applies to periods before Jan. 1, 2018, and only includes penalty and interest on liabilities that have not been previously reported to the Comptroller’s office. If a taxpayer has been notified that a period or periods are scheduled for an audit review or if they are already under audit review, then those periods are not eligible for amnesty. Additionally, the amnesty does not apply to IFTA taxes, PUC gross receipts assessments, local motor vehicle tax and unclaimed property payments.
For more information, including frequently asked questions about the program, please visit the Tax Amnesty webpage.
The Comptroller’s office recently introduced new live and on-demand training sessions. We invite taxpayers and practitioners to listen to and participate in quarterly podcasts and webinars that provide information on tax topics that affect businesses today.
A new “Spotlight Podcast” is available on our Tax Training Resources webpage and covers the 2018 Emergency Preparation Supplies Sales Tax Holiday. You can also find previous podcasts in the Podcast Archive.
Our first webinar, “Mixed Transactions,” was presented on April 10, 2018, and will be available in the Webinar Archive after April 17, 2018.
Visit our Tax Training Resources webpage to view archives of previous training resources, register for upcoming webinars and for up-to-date information on training resources.
The Comptroller' s office has mailed letters for franchise tax reports, reminding taxpayers that May 15 is the due date for the annual reports. The letter includes your Webfile number that you will need to file your report using Webfile.
In addition to Webfile, you can use a third-party software provider to file your franchise tax report. The Comptroller' s office maintains a list of approved software providers.
If you need more time to file your report, you can also use Webfile to request an extension.
You can get a copy of your reminder letter by calling us at 800-252-1381.
If you only need your Webfile number, you can get it by calling 800-442-3453 and using our automated system. You will need to provide your taxpayer number, as well as confidential identifying information such as total revenue from a previous report or the amount of the last tax payment you made that was greater than zero.
The Comptroller' s office will mail the 2017 independently procured insurance report forms the second week of April. The annual independently procured insurance premium tax report and supplement (PDF) are due, and the taxes payable, on or before May 15.
To qualify as independently procured insurance, you must obtain a policy of insurance directly from a non-admitted insurer and must not use the services of an agent or broker in the procurement of coverage. If an agent is involved in the placement of the insurance, the policy will be surplus lines insurance with taxes due to the home state of the insured, or the transaction may be considered unauthorized insurance.
Emergency Preparation Supplies Sales Tax Holiday
On April 28-30, prepare for unpredictable Texas weather or other emergencies with our first tax-free weekend of the year. You can stock up on emergency preparation supplies, including certain portable generators, ladders, hurricane shutters and other helpful supplies tax free.
For details on what you can purchase tax free, visit our Emergency Preparation Supplies Sales Tax Holiday publication.
In this month’s issue, we introduce the second part of a five-part guide about sales for resale. Part 2 covers transactions as they apply to taxable services in Texas. Part 1 of this series, Sales for Resale of Tangible Personal Property, appeared in the March 2018 Tax Policy News.
What is a Taxable Service?
Taxable services include 17 broad categories of services that encompass a variety of activities. Taxable services are subject to limited sales and use tax, but as a Texas seller of taxable services with a sales and use tax permit, you can buy certain services tax free for resale by giving a Form 01-339 (PDF), Texas Sales and Use Tax Resale Certificate , to the service provider.
If you subcontract with another taxable service provider when providing a taxable service, you can give your subcontractor a resale certificate (PDF) instead of paying tax on their service. You must collect tax from your customer on the sales price of your taxable service.
Tangible Personal Property Used to Perform a Taxable Service
You can claim the sale for resale exemption when buying tangible personal property that you need to perform your taxable service so long as the tangible personal property is transferred to the care, custody and control of your customer.
Care, Custody and Control
Care, custody and control of tangible personal property is considered transferred when your customer has primary possession of the tangible personal property. Your customer has primary possession when they have physical possession of the tangible personal property off your premises and has an obligation to care for the property or consumes the property.
For example, a janitorial service stocks paper towels and toilet paper for their customers to use. Because your customer has physical possession and consumes the paper towels and toilet paper, the items are considered resold. This means you can give a resale certificate (PDF) to your vendor when buying paper products you plan to resell with your janitorial service.
You owe tax on all machinery, equipment and consumable items you use to provide your taxable service. Machinery and equipment can include tools, implements, accessories and repair or replacement parts for the equipment. In other words, you must pay sales tax when you buy, lease or rent equipment in Texas that you use to perform a contract. In addition, you must accrue and remit use tax when you buy, lease or rent equipment for use in Texas from an out-of-state seller, unless the out-of-state seller collected Texas use tax.
A consumable item is nondurable tangible personal property that, after being used once for its intended purpose, is completely used up or destroyed. Drop cloths, barricade tape, molds and forms are examples of consumable items.
For example, a janitorial service vacuums the floors of their customer’s office space. You owe tax when you buy a vacuum cleaner and bags that you use to vacuum your customer’s office space. You are not reselling vacuum cleaner or bags because their care, custody and control is not transferred to your customer.
Ruthie’s Story (continued from Part 1)
You may remember that Ruthie runs a café in her hometown where she sells food, drinks and gift items, such as hats and t-shirts.
Ruthie needs to hire a company to clean the restroom facilities and parking lot of her café. A janitorial service is a taxable real property service. Ruthie asks her property manager to perform the janitorial service.
Ruthie’s property manager subcontracts with a janitorial company to complete the job. The property manager can give a resale certificate to the subcontractor for the janitorial services they provide to Ruthie. This allows the property manager to buy the janitorial services tax free for resale. The property manager collects sales and use tax from Ruthie on its sale of the cleaning service to her.
* This applies to services that became taxable on or after Sept. 1, 1987.
In Part 3, we will take a closer look at sales for resale of off-road, heavy-duty diesel equipment; motor vehicles; motor fuel and automotive oil.
The Tax Policy Division ruled that membership assessments and user fees charged by a nonprofit, Internal Revenue Code (IRC) Section 501(c)(4) corporation are exempt from limited sales and use tax as exempt amusement services. The division also ruled that golf cart rental fees are subject to limited sales and use tax as the rental of tangible personal property.
Membership Assessments, Guest Fees, Green Fees and Trail Fees
The Property Owner’s Association (POA) manages and maintains all of the recreational facilities and common areas of a residential subdivision’s homeowners’ association. The POA issues annual membership assessments to recoup the cost of maintaining the recreational facilities and common areas. The POA also charges guest fees and golf course-related fees, including a trail fee for members who own their own golf carts. The IRS recognizes the taxpayer under IRC Section 501(c)(4).
Amusement services are taxable services. The sales price of an amusement service includes dues, initiation fees and other charges, assessments and fees required for a special privilege, status or membership classification in a private club or organization.
Amusement services are exempt from sales tax, however, if exclusively provided by a nonprofit corporation or association other than an entity described by IRC Section 501(c)(7), and if the proceeds do not benefit an individual except as a part of the services of a purely public charity. See Texas Tax Code Section 151.3101(a)(3).
Because the POA is a nonprofit, IRC Section 501(c)(4) organization, its membership assessments, guest fees, green fees and trail fees are exempt from sales and use tax.
Golf Cart Rental Fees
The POA also provides golf carts for rental. The rental of golf carts is not an exempt amusement service; rather, it is the taxable rental of tangible personal property. Renting tangible personal property is not the same as paying for an exempt amusement service.
See State Tax Automated Research (STAR) System letter 201710010L.
The Tax Policy Division ruled that the disposing and processing of waste materials that are byproducts of activities associated with the exploration, development or production of an oil and gas well and the labor to maintain or repair a motor vehicle are not taxable.
Oil and Gas Well Waste Removal Services
The taxpayer operates a landfill to dispose of non-hazardous oil and natural gas waste associated with the production of oil and natural gas.
Charges to remove non-hazardous solid waste are taxable real property services. Texas Tax Code 151.0048, however, excludes charges to remove waste materials that result from the exploration, development or production of oil and gas. This exclusion applies to the removal charges for non-hazardous oil and natural gas waste.
Motor Vehicle Maintenance Services
The taxpayer washes and cleans out their customers’ tractor trailer rigs that transported the oil and gas waste to the Landfill.
Washing and cleaning a motor vehicle or trailer is a non-taxable maintenance service. The taxpayer called the service “truck washouts.” Charges to wash and clean out the tractor trailer rigs are not taxable.
Tax is due on the equipment, parts, supplies and consumables used in the maintenance of motor vehicles. Charges to park or store a motor vehicle are taxable.
See State Tax Automated Research (STAR) System letter 201710016L.
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