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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

January 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, a personal message from Comptroller Hegar and hotel information. We welcome your support and ideas.

Tax Training Resources

New for 2018 – Podcasts and Webinars

The Comptroller’s office announces new live and on-demand training sessions. We invite taxpayers and practitioners to participate in quarterly podcasts and webinars that provide in-depth information on tax topics that affect your business today.

The first podcast is broken into four segments and covers taxpayers’ responsibilities, including collecting and reporting tax. The first segment will be available Jan. 3, 2018, and highlights sales and use tax return requirements, due dates and filing options.

Our first webinar, “Understanding Transactions Between Contractors and Subcontractors,” is scheduled for Tuesday, March 20, 2018.

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

Reminders

Take Advantage of Our Award-Winning Website

The Comptroller’s office website provides resources for taxpayers to take care of business – from updating contact information to researching tax policy, help is just a click away!

Not only can you read about all the taxes and fees our office collects, but you can also:

We’ve gathered the most popular topics in the “More Information” section of every Tax Policy News issue. Use this regular feature to take advantage of our award-winning website.

Cigarette Tax; Cigars And Tobacco Products Tax

Time to Renew Cigarette/Tobacco Non-Retailer Permits

It’s time to renew cigarette and tobacco products non-retailer permits for the upcoming period of March 1, 2018, through Feb. 28, 2019. “Non-retailers” include cigarette, cigar and/or tobacco products manufacturers, importers, distributors, bonded agents and wholesalers.

Current period non-retailer permits expire Feb. 28, 2018. We recently mailed renewal packets with preprinted applications to all non-retailers. Non-retailers should carefully review the preprinted information, make any needed corrections and return all pages of the renewal packet and any other documentation with the applicable permit fee to the Comptroller's office.

To ensure you receive your new permit before the current permit expires, return your packet with the application fee by Jan. 10, 2018.

Hotel Tax

All-Inclusive Hotel Packages: Understanding Tax Responsibilities

Hotel occupancy tax is due on all charges for items or services connected with occupying a room. Normally, the room price does not include the cost of food or drinks served by the hotel. For instance, when a person buys a meal at a restaurant inside a hotel or through room service, the meal is subject to limited sales and use tax; the alcoholic beverages are subject to mixed beverage gross receipts and mixed beverage sales taxes; and the room rental is subject to hotel occupancy tax.

If, however, a hotel provides an all-inclusive package (such as a package including meals, drinks, admission to tourist attractions or any other benefits unrelated to the room rental) for a lump-sum charge, hotel occupancy tax is due on the entire amount. The hotel must report and pay mixed beverage gross receipts and mixed beverage sales taxes on the alcoholic beverages’ sales price (normal or reduced) served with the package, and owes sales or use tax on the cost of any taxable items provided in the package (such as amusement services). Only separately stated meals, drinks and amusement service charges on the customer’s bill are not subject to hotel occupancy tax.

For example, an Austin bed-and-breakfast inn charges their customer $250 for lodging, meals, alcoholic drinks and a guided bike tour. The normal charge for the alcoholic drinks is $25. The inn also paid $20 for the bike tour.

Lump-Sum (All-Inclusive) Charge
Room, Meals, Drinks and Tour $250.00
State and Local Hotel Occupancy Tax (15%) $37.50
Total $287.50

Based on the location of the inn, state and local hotel occupancy tax of $37.50 ($250 x .15) is due on the entire package price of $250. At the time of purchase, the inn owes $1.65 ($20 x .0825) in limited sales and use tax on the guided bike tour included in its package. Since no mixed beverage taxes are collected, the inn owes $2.06 ($25 x .0825) in mixed beverage sales tax and $1.68 ($25 x .067) in mixed beverage gross receipts tax and will be responsible for paying these taxes. The inn must include the alcoholic beverage sales of $25 under its total gross taxable amount on its mixed beverage gross receipts tax report and $25 in total mixed beverage taxable sales on its mixed beverage sales tax returns.

The inn does not collect limited sales and use tax on the meals and tour or mixed beverage sales tax on alcoholic beverages served with its lump-sum package because it is collecting hotel occupancy tax on the total package price.

More Information

For information on hotel conference packages, see Hotel Conferences – What’s Taxable.

Sales And Use Tax

Mark Your Calendar for This Year’s Tax-Free Weekends

You can buy certain items tax free during our annual sales and use tax holiday weekends. You don’t need an exemption certificate to take advantage of the tax-free items that meet the specific guidelines for each tax holiday.

Emergency Preparation Supplies Sales Tax Holiday
April 28-30

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.

More Information

Rule 3.353 – Sales Tax Holiday-Certain Emergency Preparation Supplies

Energy Star and Water-Efficient Products Sales Tax Holidays
May 26-28 Memorial Day Weekend

Each Memorial Day weekend, Texans can save money and help the environment with tax-free sales of certain energy-saving and water-conserving products.

Save when you buy certain Energy Star products tax free during this weekend, such as air conditioners (with a sales price of $6,000 or less) or refrigerators (with a sales price of $2,000 or less). Additionally, certain residential water-conserving products and any product with a WaterSense label or logo are tax free during the holiday.

More Information

Rule 3.369 – Sales Tax Holiday-Certain Energy Star Products, Certain Water-Conserving Products, and WaterSense Products

Sales Tax Holiday (Back-to-School)
Aug. 10-12

Get ready for back-to-school savings when you can buy certain school supplies (if priced less than $100), including clothing, footwear and backpacks, tax free.

More Information

Rule 3.365 – Sales Tax Holiday-Clothing, Shoes and School Supplies

Tax-Free Sales – It’s a New Calendar Year

Each calendar year, certain nonprofit organizations, and each of their officially recognized chapters, can have two one-day, tax-free sales that last up to 24 consecutive hours each. To have the tax-free sales, your organization must be granted sales tax exemption by the Comptroller’s office and be:

  • a religious, charitable or educational organization; or
  • exempt from federal taxation under sections 501(c)(3), (4), (8), (10) or (19) of the Internal Revenue Code.

You must schedule (designate in your records) each tax-free sale ahead of time.

One-Day Sale

“One-day” means 24 consecutive hours. You can have the two tax-free sales back-to-back, lasting a total of 48 hours.

If you organize a tax-free sale on the same day with one or more exempt organizations, the event counts as one tax-free sale for each participating organization.

Reminder: Some organizations do not schedule events using a calendar year. For example, most schools start their new year in the fall and end in the spring, and often schedule their events using their school calendar. If your organization does not operate using the calendar year, be sure to plan your tax-free sale days carefully by verifying the number you have already had during the current calendar year.

Items You Can Sell

During your two one-day, tax-free sales, you can sell without collecting tax on any taxable item that is worth no more than $5,000. You may sell without collecting tax on a taxable item worth more than $5,000 if your organization made the item itself or it was donated to your organization; however, you must collect sales tax when a donated item worth more than $5,000 is sold back to the person or organization who donated it.

Pre-Orders

When you schedule a tax-free sale, you can take preorders and collect payment from your customers as long as you deliver the items to their purchasers, or the items are delivered to you by a third-party vendor, on the scheduled tax-free sale day.

In other words, when you accept preorders, your tax-free sale day (24 hours) is either:

  • the day the vendor delivers the items to be sold to your organization; or
  • the day you deliver the items to their purchasers.

Note: You can deliver pre-ordered items as soon as you receive them without losing your tax-free sale day. You can also sell items on the spot during a tax-free sale without causing preordered items to lose the exemption.

For more information, see State Tax Automated Research (STAR) System letter 200006400L.

Surplus Inventory

During the current year’s tax-free sales, you can sell surplus inventory from the previous year’s tax-free sales. For example, a school can sell old yearbooks on the same designated day they are distributing new yearbooks and not collect sales tax.

Buying Items for a Tax-Free Sale

To buy taxable items to sell during a tax-free sale, you can give the seller either:

Collecting and Remitting Tax

If you collect sales tax on a sale, you must either remit the tax to the Comptroller’s office or refund it to the purchaser. You cannot collect tax and keep it under the tax-free sale provision.

Verifying Eligibility

Use our Tax Exempt Entity Search to check that your exempt organization has been granted sales tax exemption by the Comptroller’s office and is eligible to have two one-day, tax-free sales each calendar year. If your organization is not listed, you must apply to the Comptroller’s office for exemption from sales tax before having a tax-free sale.

For information about school fundraising, see the December issue of Tax Policy News.

Private Letter Rulings

Franchise Tax

Apportioning Revenues Received From the Sale of Payment Risk and Fraud Prevention Solutions Services
March 15, 2017

A taxpayer provides real-time payment risk and fraud prevention solutions services through its secure website, which enables its customers, such as lenders, retailers and other businesses, to make decisions about whether to accept payment from or extend credit to their customers.

The taxpayer asked how to apportion the gross receipts it receives from its web-based services.

The Comptroller’s office ruled that for purposes of the Texas franchise tax, the taxpayer’s gross receipts are receipts earned from providing a service and are apportioned based upon the location of the customer where the response is received.

When a Texas customer submits an inquiry, the taxpayer’s response to that inquiry is displayed/received at the customer’s Texas location. The taxpayer’s service is performed in Texas, and the revenue from the transaction is a Texas gross receipt. When an out-of-state customer submits an inquiry, the taxpayer’s response to that inquiry is displayed/received at the customer’s out-of-state location. The taxpayer’s service is performed outside of this state, and the revenue from the transaction is not a Texas gross receipt.

See State Tax Automated Research (STAR) System letter 201703005L.

Sales Tax

Are Refundable Deposits Taxable?
May 2, 2017

The Comptroller’s office recently ruled that a business that uses a cash basis of accounting is not required to report and remit sales and use tax at the time it receives a customer’s refundable deposit for taxable goods and services. The tax is collected and remitted when the business invoices the customer and applies the deposit as payment.

A “sale” or “purchase” occurs when ownership of tangible personal property is transferred to a customer for consideration and when performing a taxable service for a customer for consideration.

A refundable deposit is paid before performing a taxable service or delivering taxable goods to a customer, meaning that it is paid before any sales of taxable goods or services occurs. The sale is complete once the business performs the taxable service or delivers the taxable goods and the deposit is applied as payment for the charge. The business then reports and remits any tax due.

See State Tax Automated Research (STAR) document 201705002L.

Rules

Proposed

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

State and Local Sales and Use Tax

Rule 3.335 – Property Used in a Qualifying Data Center or Qualifying Large Data Center Project; Temporary Sales Tax Exemption
Publication date – Dec. 15, 2017
Comment period ends – Jan. 14, 2018

Adopted

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

Franchise Tax

Rule 3.595 REPEAL – Margin: Transition
Publication date – Jan. 12, 2018
Effective date – Jan. 10, 2018

State and Local Sales and Use Tax

Rule 3.308 – Computers--Hardware, Computer Programs, Services, and Sales
Publication date – Jan. 19, 2018
Effective date – Jan. 22, 2018

STAR Watch

Monthly Updates

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

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: