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 response to the U.S. Supreme Court’s decision on South Dakota v. Wayfair, Texas-based businesses selling items or services into other states may be required to collect taxes for those states. Additionally, remote sellers who were previously not required to collect and remit sales and use tax may have to begin collecting Texas tax on their sales into Texas in late 2019. Generally, a “remote seller” is a seller that does not have a physical presence in a state, but who sells products or services for delivery into that state.
The Comptroller’s office is currently updating sales and franchise tax rules to provide details about remote seller tax responsibilities. We are not applying the Wayfair decision to additional taxes at this time, and any new tax responsibilities will be prospective.
You can learn more about tax requirements on our new webpage, Texas Tax Responsibilities and Resources for Sellers After Wayfair.
If you are a Texas-based business selling into other states you may now be required to collect taxes for those states. Beginning Oct. 1, 2018, some states require remote sellers to collect taxes if they have more than $100,000 in gross sales or 200 individual transactions into that state. You must contact the state taxing agency or authority directly for exact tax responsibilities.
For more information about Texas businesses’ collection responsibilities for other states, see these websites:
Disclaimer: Each website listed is responsible for its own information, and the Texas Comptroller of Public Accounts is not responsible for maintaining the information provided on these websites.
As part of our Wayfair implementation, amendments to Rule 3.286, concerning seller’s and purchaser’s responsibilities, will be effective Jan. 1, 2019. The amendments establish a safe harbor for remote sellers whose Texas revenues are below $500,000 from sales of tangible personal property and services in the preceding 12 calendar months. Remote sellers with Texas revenue below the safe harbor amount will not have to register and collect tax. Remote sellers whose Texas revenue exceeds the safe harbor amount shall register and begin collecting tax.
To allow time for remote sellers to prepare for these changes, the amendments postpone the permitting and tax collection requirements for remote sellers until Oct. 1, 2019. The initial 12 calendar months for calculating a remote seller’s Texas revenues will be July 1, 2018, through June 30, 2019.
The Comptroller’s office has completed an overall update to the Comptroller’s Rules of Practice and Procedure, new 34 Texas Administrative Code Section 1.1-1.35, which will be effective Jan. 1, 2019.
You now can recover your Texas Comptroller eSystems/Webfile password by text message. First, update your eSystem/Webfile profile and add your mobile phone number. Then, if you forget your password at any time, you can easily receive a temporary password by entering the last four digits of your number. This option is only available with a valid U.S. mobile phone number.
Update your profile by doing the following:
If you have any questions or need assistance, please contact us.
The Comptroller’s office offers several training resources that provide in-depth information on tax topics that affect your business today. These include live and on-demand training sessions, as well as tax seminars.
Visit our Tax Training Resources page to:
Our podcast covers popular tax topics and other helpful information. Listen to our current series highlighting exempt organizations, including religious, charitable and educational organizations. Learn about the application process and exempt purchases and sales for qualified organizations in Texas.
Coming soon is our next podcast series covering Mixed Beverage Taxes.
Our previous webinar, “Sales by Nonprofit Organizations – Taxable or Nontaxable,” addressed the sales tax responsibilities of nonprofit organizations and provided instruction on identifying taxable and nontaxable sales. A recording of the webinar is available through our Tax Training Resources page.
Our latest webinar, “Franchise Tax and Closing Your Business in Texas,” covered the franchise tax responsibilities of entities registered with the Texas Secretary of State and provided the steps for closing a business and ending reporting responsibilities. A recording of the webinar will soon be available through our Tax Training Resources page.
Our latest video series covers contractors, repairpersons and Texas Sales Tax:
We also offers video tutorials on filing and paying sales tax though Webfile. To view these videos visit the Video Tutorials webpage.
We offer sales and use tax seminars across the state throughout the year. New taxpayers are especially encouraged to attend these overviews of tax responsibilities for buyers, sellers and service providers. For locations, dates and times, visit the Taxpayer Seminars webpage.
Property and casualty insurance companies authorized by the Texas Department of Insurance to write automobile insurance under Insurance Code, Art. 5.01(e) must report and pay this assessment on or before March 1, 2019, for policies effective from July 1, 2018, through Dec. 31, 2018. Companies licensed to write automobile coverage must file the tax form, even if no assessment is due. Refer to Form 25-107 (PDF) and the Insurance FAQs for additional information.
The annual insurance premium and maintenance tax reports and payments for licensed insurance companies and miscellaneous organizations are due on or before March 1, 2019.
Also due March 1, 2019, are the annual insurance premium tax reports and payments for Texas licensed surplus lines agents and agencies, and for entities required to report unauthorized insurance premium taxes.
Taxpayers required to report electronically and those who voluntarily reported their taxes electronically for two consecutive years do not receive a paper tax report. Instead, the insurance company receives an email reminder about the filing deadline.
Taxpayers who are not required to file electronically will receive paper tax reports before the end of January 2019.
In January 2019, for tax year 2018, all licensed insurance companies will receive a statement showing the available guaranty association assessment credits, including any remaining Texas Windstorm Insurance Association (TWIA) and Certified Capital Company (CAPCO) credits.
In this month’s issue, we are concluding the contractor series with a look at the tax treatment for pipeline construction. This article summarizes the tax treatment of new construction work and real property repair, remodeling and restoration work and examines the tax application to pipeline construction work.
Contractors perform new construction. Taxable service providers perform nonresidential real property repair, remodeling and restoration.
When performing pipeline construction work, tax responsibilities depend on the type of:
As previously discussed in the August Tax Policy News article, The Sales Tax ABCs for Contractors and Taxable Service Providers, in a lump sum contract you charge one amount for both labor and incorporated materials. In a separated contract, you separately state your labor and materials.
A contract to build an addition to an existing nonresidential structure or to build a new structure is a real property improvement and taxed as “new construction.” The person making the improvements is a contractor. Note that the labor to “tie in” a new to an existing structure is taxable remodeling labor (see information below on repair, remodeling and restoration work). If this labor is included in the new construction contract and the charge for remodeling is less than 5 percent of the total job, it can be excluded from tax. If the charge is 5 percent or more, the charge for remodeling must be separately stated and taxed or the total contract will be subject to tax.
Contractors performing new construction under lump-sum contracts are consumers of all materials, consumable items and equipment used or incorporated into customers’ properties. As consumers, contractors must pay tax to suppliers when buying the materials. If the materials are purchased from out-of-state sellers, contractors must accrue and remit use tax on the materials, unless Texas use tax was collected by the out-of-state sellers. Contractors do not collect tax from customers on lump-sum charges or on any portion of the charges.
Contractors performing separated contracts are the retailers of all materials physically incorporated into the real property improvements. As retailers, contractors collect tax from customers based on the agreed contract price of the incorporated materials.
Nonresidential repair, remodeling and restoration services are taxable. A person repairing, remodeling or restoring nonresidential real property is a taxable service provider, rather than a contractor.
All taxable service providers who repair, restore or remodel nonresidential real property either collect tax on the total sales price to their customers, or accept a valid Form 01-339 (front), Texas Sales and Use Tax Resale Certificate (PDF); Form 01-339 (back), Texas Sales and Use Tax Exemption Certificate (PDF); or Form 01-919, Texas Direct Payment Exemption Certification Limited Sales, Excise and Use Tax Certificate (PDF), instead of tax. When the work is for nonresidential real property repair, remodeling or restoration, there is no distinction between a lump sum or a separated contract.
Last year, in a private letter ruling, the Tax Policy Division outlined the sales tax treatment of different pipeline construction and remodeling services.
For construction services, installing a new pipeline in a new trench is new construction, and the labor is not taxable. The new pipeline’s location in relation to an existing pipeline does not affect the tax treatment.
Additionally, removing an existing pipeline and installing a new pipeline at a lower or greater depth is new construction and the labor is not taxable if the pipeline’s depth changes substantially (the new pipeline’s depth must be at least one-third deeper or shallower than the existing pipeline’s depth). This excavation work to remove the existing pipeline and install the new deeper or shallower pipeline is complete demolition and new construction work, respectively. The labor is not taxable.
In all instances, connecting the new pipeline to an existing pipeline is nonresidential real property repair or remodeling and is taxable. Likewise, replacing the existing pipeline with a new pipeline at the same depth is taxable nonresidential real property repair or remodeling work.
For abandoning the pipeline, filling an existing pipeline with concrete is not taxable because it is complete pipeline demolition. If, however, the service provider caps the ends of an existing pipeline in order to abandon the pipeline in place, the labor is taxable nonresidential real property repair or remodeling.
Unless connected to the sale of a taxable item or service, inspection and testing services are not taxable.
To be nontaxable, stand-alone inspection and testing charges must not be related to any taxable equipment or nonresidential real property repairs, restoration or remodeling.
When nontaxable unrelated services and taxable services are sold or purchased for a single charge and the portion relating to taxable services represents more than 5 percent of the total charge, the total charge is presumed to be taxable. The service provider may later establish the percentage of the total charge that relates to nontaxable services. To do so, the service provider’s books must support the apportionment between taxable and nontaxable services.
If a service provider separately states the nontaxable unrelated services from the taxable services, they only charge tax on the taxable services.
The Tax Policy Division determined that the fee a taxpayer charges for payment review services to hospitals is a taxable insurance service.
The taxpayer offers payment review services to hospitals and reviews the reimbursements that the hospitals received from their patients’ insurers. Their review involves investigating previously submitted claims in order to recover additional reimbursements and identifying any errors the hospital may have made when filing the initial claims.
The taxpayer’s activities involve investigating, settling, and often adjusting a claim. These are all activities included in the definition of “insurance claims adjustment or claims processing” in Rule 3.355(a)(5), Insurance Services. Consequently, the taxpayer is providing taxable insurance services.
As part of its services, the taxpayer also may identify under-reimbursements resulting from missing charges for services, which hospitals provided but did not bill. Filing new claims resulting from missing charges is not taxable.
The taxpayer’s service is not taxable only to the extent it is preparing a new claim for initial filing with an insurance company. Charges for these nontaxable services must be separately stated from charges for taxable insurance services. If the taxpayer charges a single amount for non-taxable and taxable charges and the taxable charges are more than 5 percent of the total price, then tax is due on the total price. The service provider may later establish the percentage of the total charge that relates to nontaxable services. To do so, the taxpayer’s (insurance service provider’s) books must support the allocation between taxable and nontaxable services based on the cost of providing the service or on a comparison to the normal charge for each service if provided alone.
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.
The Comptroller's office proposed the following rules for public comment through the Texas Register:
Rule 1.100 – Fines Retained by Municipalities and Counties for Certain Enforcement Expenses
Rule 1.101 – Reporting Requirements
Rule 1.102 – Failure to Submit Report
Rule 1.103 – Requirement to Maintain Records
Publication date – Nov. 30, 2018
Comment period end date – Dec. 30, 2018
Rule 3.12 – Hotel Projects, Project Financing Zones, and Qualified Hotel Projects
Publication date – Nov. 23, 2018
Comment period end date – Dec. 23, 2018
The Comptroller's office filed the following rules for adoption with the Secretary of State:
Rule 3.286 – Seller’s and Purchaser’s Responsibilities
Publication date – Dec. 14, 2018
Effective date – Jan. 1, 2019
Rule 3.293 – Food Products; Meals; Food Service
Publication date – Dec. 14, 2018
Effective date – Dec. 18, 2019
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