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Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts

taxes

Tax Policy News

February 2018

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.

In This Issue...

Western States Association of Tax Administrators (WSATA)

Join Us for the 2018 WSATA Conference in Austin

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.

Visit the WSATA Conference website for more information about the association and hotel information. We welcome your support and ideas.

The Texas Tax Amnesty Program

The Texas Tax Amnesty Program: No Excuses Necessary

The Texas Tax Amnesty Program will run from May 1, 2018, through June 29, 2018.

The Texas Tax Amnesty Program provides delinquent taxpayers with relief from penalty and interest on tax due. Tax amnesty applies to periods prior to Jan. 1, 2018, and only includes liabilities that have not been previously reported to the Comptroller. 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 doesn’t apply to the local motor vehicle tax, IFTA taxes, PUC gross receipts assessments and unclaimed property payments.

Stay tuned to the Tax Amnesty webpage for details.

Tax Training Resources

Podcasts and Webinars

In the January issue of Tax Policy News, the Comptroller’s office 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 in-depth information on tax topics that affect businesses today.

Our first quarter podcast, which covered reporting and paying sales tax, is available on our Tax Training Resources page. Our second quarter podcast is in production and will be announced in the March issue of Tax Policy News.

Our first webinar, “Understanding Transactions Between Contractors and Subcontractors,” is in production. We will include updates in the March issue of Tax Policy News.

Visit our Tax Training Resources page to listen to the podcasts and for information on webinar registration.

Reminder

Petroleum Product Delivery Fee Requirements and Diversions of Motor Fuel

Each supplier, rather than each operator of a bulk facility, must collect and/or remit the petroleum product delivery fee (PPDF) when a petroleum product is withdrawn from a bulk facility. Each supplier must obtain a PPDF permit.

A person who imports motor fuel into Texas must obtain a PPDF permit and pay the fee, which is based on the number of gallons imported into Texas, to the Comptroller’s office.

A person who redirects the delivery of a petroleum product purchased for export to a location in Texas must obtain a PPDF permit and pay the fee. Instead of collecting the fee from the person ordering the withdrawal, a supplier can accept a letter issued by the Comptroller’s office authorizing the person to purchase petroleum products without paying the PPDF.

To apply for a permit, complete Form AP-154, Texas Application for Petroleum Delivery Fee Permit (PDF).

Report these transactions on Form 64-100, Texas Petroleum Products Delivery Fee Report (PDF). The report is due the 25th day of the month following the end of each month for which the activity is being reported. For example, a report is due on April 25 for March activity.

More Information

Franchise Tax

Exemption for Solar and Wind Energy Devices

Entities that manufacture, sell or install solar devices, systems or component parts may qualify for a franchise tax exemption. The exemption also applies to wind energy devices.

Qualifications for Exemption

To qualify for this franchise tax exemption, an entity must be engaged solely in manufacturing, selling or installing:

  • qualifying solar and wind energy devices; and/or
  • component parts of qualifying solar or wind energy devices.

Qualifying Solar or Wind Energy Devices

A qualifying solar or wind energy device is a system or series of mechanisms designed primarily to:

  • provide heating or cooling; or
  • produce electrical or mechanical power by collecting and transferring solar or wind generated energy; or
  • store the solar or wind generated energy until needed for use in:
    • heating or cooling; or
    • producing power using a mechanical or chemical device (i.e., a battery that can store the solar- or wind-generated power).

Component Parts

In order for an entity engaged solely in manufacturing, selling or installing component parts of qualifying solar or wind energy devices to claim this exemption, each component part must meet all of the following criteria:

  • the component part is essential to the operation of a qualifying solar or wind energy device;
  • the component part cannot be an item that could be used for any purpose other than a component part that is essential to the operation of a qualifying solar or wind energy device; and
  • the entity manufacturing, selling or installing the component part can only sell the component part to, or install it for, a person or entity that will be incorporating the item into a qualifying solar or wind energy device.

How to Apply for Exemption

To apply for exemption, qualifying entities must submit:

Submit your application and supporting documentation by:

More Information

Fuels Tax

Export of Motor Fuel

Purchasers of motor fuel must hold a license in Texas to export fuel to another state or foreign country tax-free. The purchaser must have an exporter license, or a license that allows them to act as an exporter. If the purchaser is not licensed in Texas as an exporter, motor fuels tax is due. Once the fuel is exported, the purchaser can use Form 06-106, Texas Claim for Refund of Gasoline or Diesel Fuel Taxes (PDF), to request a refund from the Comptroller’s office within one year of the purchase.

More Information

Texas Tax Code Sections 162.104 (a)(4), 162.204 (a)(4), 162.127 and 162.227.

Subsequent Tax-Free Sales of Motor Fuel

As of Jan. 1, 2018, a licensed supplier, distributor or exporter who purchases tax-free fuel for export and sells that same fuel before exporting it must report the transaction on their monthly fuels tax return. Form 06-168, Texas Fuels Tax Report, has a new line for Gallons Subsequently Sold Tax-Free Prior to Export (Item 17) and a new corresponding schedule, Form 06-190, Texas Schedule for Gallons Subsequently Sold Texas Tax-Free Prior to Export.

A person who fails to report a tax-free subsequent sale of gasoline or diesel fuel in Texas before export, and does not file an amended report that includes this sale on or before the 180th day after the due date of the original report, will be assessed a penalty of $200 for each sale that is not reported.

Additionally, the Comptroller’s office will assess a penalty equal to the greater of $2,000 or five times the amount of tax due on the motor fuel if a person fails to pay the tax due on gasoline or diesel fuel purchased for export and redirected to a destination in Texas.

More Information

Texas Tax Code Sections 162.101, 162.125, 162.201, 162.1155, 162.2165, and 162.401

Insurance Tax

Claiming the Insurance Premium Tax Credit for the Rehabilitation of Certified Texas Historic Structures

Beginning with the 2017 Texas Annual Insurance Premium Tax Report due March 1, 2018, an entity subject to reporting a premium tax imposed under Insurance Code Chapters 221, 222, 223 or 224 can claim all or part of the tax credit for the rehabilitation of certified Texas historic structures against its insurance premium tax due.

The insurance premium taxpayer can:

  • buy or be assigned a historic structure credit; and
  • claim the credit up to the amount of insurance premium tax due after the application of all other allowable insurance premium tax credits.

A credit may be carried forward for five consecutive years after the year in which the credit is first eligible for use.

The sale or assignment of a credit does not affect the carryforward period of the credit.

An insurance premium taxpayer owes no additional retaliatory tax levied under Insurance Code, Chapter 281, as a result of claiming the credit.

See Tax Credit for Certified Rehabilitation of Certified Texas Historic Structures for additional information.

Motor Vehicle Tax

Replacing Rental Vehicles, Related Finance Companies and New and Revised Exemptions

Replacing Rental Vehicles

Motor vehicle dealers may utilize the fair market value deduction (FMVD) when replacing a vehicle that’s retired from service.

When taking a FMVD, there are two types of vehicles involved: a retired vehicle and a replacement vehicle.

Vehicle requirements:

  • The retired vehicle is titled to the rental or lease company purchasing the replacement vehicle or in the name of the qualified related company
  • You purchase the replacement vehicle for business or personal use (not for resale).
  • You offer the retired vehicle for sale before claiming the deduction.

Using and calculating FMVD:

  • You can use a FMVD once within 18 months of offering the retired vehicle for sale.
  • If you use the deduction before selling the retired vehicle, the deduction amount equals your book value for the retired vehicle.
  • If you sell the retired vehicle before claiming the deduction, the deduction amount equals the retired vehicle’s sales price.

Registering Related Finance Companies

When a motor vehicle dealer makes a seller-financed sale and then sells the note to a qualifying related finance company (RFC) the tax due on the note does not accelerate. The ownership of the RFC must be at least 80 percent identical to the ownership of the dealer, and the RFC must be registered with the Comptroller’s office.

Each qualifying RFC to which the dealer sells notes must submit a completed Texas Registration for Motor Vehicle Related Finance Company registration form (PDF) to the Texas Comptroller of Public Accounts. A RFC’s registration remains effective until canceled by the registrant or the Comptroller’s office. There is no longer an annual fee for the registration.

New and Revised Exemptions

Churches and religious societies can purchase motor vehicles (seating more than six passengers) tax free if they are the “primary user.” The exemption is no longer limited to motor vehicles used to provide transportation to and from church or religious services or meetings. Churches and religious societies can also now purchase trailers tax free if they are the “primary user.”

Open-enrollment charter schools can purchase a motor vehicle tax free as a public agency. To qualify for the exemption, the vehicle must be used exclusively in the service of the school.

A public agency, church or religious society does not need to use an exemption certificate when purchasing a motor vehicle, but the Application for Texas Title and/or Registration for the vehicle must note the exemption.

More Information

Sales Tax

Changes to Claiming Bad Debt Credit on Your Sales Tax Return

If you are claiming bad debt credit on your sales tax return, you must file electronically using Webfile or Electronic Data Interchange (EDI) beginning with the January 2018 return due on Feb. 20, 2018.

Bad debt is any portion of the sales price of a taxable item that a retailer or a private label credit provider cannot collect. The bad debt must be taken as a deduction on the federal income tax return during the same or subsequent reporting period.

Third-party bad debt is bad debt that is assigned to you by another entity.

Policy Memo

Sales and Use Tax

Internet Access Service Exemption for Mobile Data Plans
Sept. 18, 2017

The Tax Policy Division ruled on mobile data services and whether they meet the definition for internet access service.

Internet access service is taxable in Texas, but the first $25 of a monthly charge is exempt from sales and use tax.

A mobile data service meets the definition of an internet access service because it allows users to access and browse the internet, access electronic email accounts and use internet-based applications.

The exemption applies to a mobile data service, even when it is bundled with other services. When a mobile data service is bundled with one or more services, tax is due on the total monthly amount of the bundled charge minus $25.

See State Tax Automated Research (STAR) System letter 201709014L.

Private Letter Ruling

Sales and Use Tax

Charges for Consulting Services Connected to the Sale of a Taxable Data Processing Service
Sept. 25, 2017

The Tax Policy Division ruled that a consulting service sold with a subscription to a cloud-based customer relationship management (CRM) platform is not unrelated to the sale of the CRM platform and cannot be excluded from the sales price of the taxable data processing service.

Taxable data processing services can include many Software as a Service (SaaS) products. When you purchase a subscription to a SaaS product, you are purchasing a taxable data processing service and you owe sales tax on 80 percent of its sales price.

Sales price” means the total amount for which a taxable item (such as a taxable data processing service) is sold, leased or rented and includes a service that is a part of the sale.

Unless a nontaxable service is unrelated to a taxable service, the nontaxable service is part of the sales price of the taxable service, even if separately stated on billing documents or separately invoiced.

A nontaxable service is unrelated to a taxable data processing service only if:

  • it is neither a data processing service or other taxable service;
  • it is of the type which is commonly provided on a stand-alone basis; and
  • the performance of the service is distinct and identifiable.

See State Tax Automated Research (STAR) System letter 201709026L.

Rules

Proposed

The Comptroller's office proposed the following rules for public comment through the Texas Register:

Cigarette Tax

Rule 3.101 – Cigarette Tax and Stamping Activities
Publication date – Jan. 26, 2018
Comment period ends – Feb. 25, 2018

Franchise Tax

Rule 3.598 – Margin: Tax Credit for Certified Rehabilitation of Certified Historic Structures
Publication date – Feb. 16, 2018
Comment period ends – March 18, 2018

Adopted

The Comptroller's office filed the following rule for adoption with the Secretary of State:

Manufactured Housing Sales and Use Tax

Rule 3.481 – Imposition and Collection of Manufactured Housing Tax
Publication date – Feb. 2, 2018
Effective date – Feb. 11, 2018

Motor Vehicle Sales Tax

Rule 3.83 – Sales and Use of Motor Vehicles Purchased or Leased by Public Agencies; and Sales and Use of Motor Vehicles Purchased by Commercial Transportation Companies
Publication date – Feb. 2, 2018
Effective date – Feb. 7, 2018

State Tax Automated Research System

STAR Watch

To see the latest items added to our State Tax Automated Research (STAR) system, use the Monthly Updates Search Form link on the STAR home page in the right-hand column.

The Monthly Updates Search Form defaults to the current month and “All Taxes.” Use the pull-down menu to choose a different month or a particular tax. Selecting “All Taxes” brings up the documents organized by tax type.

More Information

Our website is the main source of information about Texas taxes for everyone. The links below take you to specific webpages to help individuals, businesses and practitioners take care of business, from updating contact information to how to report tax. Help is just a click away!

Taxes

The Taxes webpage has links to:

  • all Texas taxes and fees
  • resources for taxpayers
  • filing and paying taxes
  • tax laws and rules
Practitioners’ Corner

The Practitioners’ Corner is a one-stop resource for information about filing and paying taxes, links to tax research sources and searchable databases.

Taxpayer Seminars and Videos

We host free taxpayer seminars across the state about the tax responsibilities of buyers, sellers and service providers.

Our Webfile How-To Videos show you step-by-step how to file and pay taxes online.

HB855 Browser Statement

In 2015, the Texas Legislature passed House Bill 855, which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Texas Comptroller’s most commonly used Web browsers are Google Chrome, Microsoft Internet Explorer and Apple Safari.

We support: