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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

May 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 hotel information and to learn more about WSATA. We welcome your support and ideas.

The Texas Tax Amnesty Program

The Texas Tax Amnesty Program Will Run From May 1, 2018, Through June 29, 2018

The Texas Tax Amnesty Program provides, under certain circumstances, 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 or unclaimed property payments.

For more information, including frequently asked questions about the program, please visit the Tax Amnesty webpage.

Tax Training Resources

Podcasts and Webinars

In the January 2018 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.

Podcasts

Our first quarter podcast, which covered reporting and paying sales tax, is available on our Tax Training Resources webpage under Podcast Archive.

We have several “Spotlight Podcasts” that will be available in May covering the following topics:

  • Energy Star Sales Tax Holiday
  • Water-Efficient Products Sales Tax Holiday
  • Franchise Tax Due Date

Check our Tax Training Resources webpage for up-to-date podcast information and to listen to previous podcasts.

Webinars

Our first webinar, “Mixed Transactions,” covered transactions between contractors and subcontractors. It is available on our Tax Training Resources webpage under Webinar Archive.

Our next webinar, “Motor Vehicle Taxes and Your Organization’s Responsibilities,” covers responsibilities of businesses, nonprofit organizations, associations and other legal entities when buying, selling, giving away or transferring ownership of a motor vehicle. This webinar will be on Thursday, May 24, 2018. Registration opens Monday, May 7, 2018.

Sales for Resale – A Field Guide for Texas Sellers

Part 3 – Sales for Resale of Off-Road, Heavy-Duty Diesel Equipment; Motor Vehicles; Motor Fuel and Automotive Oil

In this month’s issue, we introduce the third of a five-part guide about sales for resale transactions applied to off-road, heavy-duty diesel equipment; motor vehicles; motor fuel and automotive oil. Part 1 of this series, Sales for Resale of Tangible Personal Property, appeared in the March 2018 Tax Policy News. Part 2 of this series, Sales for Resale of Taxable Services, appeared in the April 2018 Tax Policy News.

Off-Road, Heavy-Duty Diesel Equipment

Off-road, heavy-duty diesel equipment is:

Guidelines

Sales for resale transactions of off-road, heavy-duty diesel equipment subject to the TERP heavy-duty diesel equipment surcharge are treated the same as sales for resale of TPP. Neither the surcharge nor sales and use tax is due on sales for resale of off-road, heavy-duty diesel equipment.

Documentation

To purchase off-road, heavy-duty diesel equipment tax free for resale, the customer must give the seller a Form 01-339, Texas Sales and Use Tax Resale Certificate (PDF).

Motor Vehicles

Motor vehicles are trailers and self-propelled vehicles designed to transport people or property on a public highway. Sales of motor vehicles are subject to motor vehicle sales and use tax. Motor vehicle sales are not subject to sales and use tax.

Note: Off-road vehicles and salvage vehicles are tangible personal property subject to sales and use tax.

Guidelines

Only licensed motor vehicle distributors, motor vehicle manufacturers, new and used motor vehicle dealers and wholesale motor vehicle auctioneers can purchase motor vehicles tax free for resale.

For motor vehicle dealers:

  • New (franchise) motor vehicle dealers can purchase for resale new motor vehicles of the same make their franchise sells.
  • Used (independent) motor vehicle dealers can purchase for resale any used motor vehicle.
Documentation

To purchase a motor vehicle tax free for resale, the buyer must give the seller a Form 14-313, Texas Motor Vehicle Sales Tax Resale Certificate (PDF). The seller can accept a blanket resale certificate from customers who only purchases motor vehicles for resale.

Motor Fuels

Sales of motor fuels, such as gasoline and clear diesel, are subject to motor fuel taxes. Motor fuels taxes are due when motor fuel is removed from the terminal rack. Whoever orders the withdrawal must pay the tax but can recover it from subsequent purchasers. Sales of motor fuels are not subject to sales and use tax or any other Texas tax.

Guidelines

Motor fuels tax is included in the purchase price when the motor fuel is resold. A buyer who purchases clear diesel fuel to be used as a feedstock in manufacturing TPP for resale, and not as a motor fuel, can request a refund of the tax paid.

Automotive Oil

Automotive oil is TPP and its sale is subject to sales and use tax. In addition to sales and use tax, the first sale of automotive motor oil sold by an automotive oil manufacturer, importer or distributor is also subject to the automotive oil sales fee.

The first sale of automotive oil is the first actual sale delivered into Texas and sold to anyone other than automotive oil manufacturers and distributors.

Guidelines

Most sales for resale transactions of automotive oil are treated the same as sales for resale of TPP, but the automotive oil sales fee is due on most first sales, even when the first sale is to someone who will resell the automotive oil.

First sales do not include the sales of automotive oil:

  • for resale to or use by vessels exclusively engaged in foreign or interstate commerce; or
  • to someone who maintains certain used oil collection centers at the location where the automotive oil is changed, used, consumed, or resold to do-it-yourselfers.
Documentation

There is no resale certificate for the automotive oil sales fee. An automotive oil manufacturer, importer or distributor must keep records to support any sales for resale of automotive oil to vessels engaged exclusively in foreign or interstate commerce.

Notes

  • A do-it-yourselfer used oil collection center is a site or facility registered with the Texas Commission on Environmental Quality (TCEQ) that accepts or aggregates and stores used oil collected only from household do-it-yourselfers.
  • A used oil collection center site or facility that is registered by the TCEQ to manage used oil collected from used oil generators or household do-it-yourselfers.

Ruthie’s Story (continued from Part 2)

Business at Ruthie’s Café is going so well that she decides to branch out into food delivery and catering. To do this, Ruthie needs to buy a new delivery van. Ruthie will have to pay motor vehicle sales tax when she buys the delivery van.

Dealer buys delivery van from manufacturer Before a franchised dealer can sell the van to Ruthie, the dealer has to buy it from the manufacturer. The dealer buys the van tax free for resale by giving the manufacturer a Form 14-313, Texas Motor Vehicle Sales Tax Resale Certificate (PDF). The dealer then collects the motor vehicle sales tax due from Ruthie.
Manufacturer buys oil and transmission fluid from distributor Before the motor vehicle manufacturer can sell the van to the dealer, the manufacturer needs to buy automotive oil and transmission fluid from an automotive oil distributor and gasoline from a distributor. Since the first sale of the engine oil and transmission fluid is to a motor vehicle manufacturer and not for resale to vessels engaged exclusively in foreign or interstate commerce, the motor vehicle manufacturer must pay the automotive oil sales fee, but can issue an exemption or resale certificate for the oil and transmission fluid instead of paying limited sales and use tax. Note: A manufacturer must have a sales tax permit to issue a resale certificate.
Manufacturer buys gasoline from a fuel supplier The motor vehicle manufacturer must also buy gasoline from a fuel supplier so that Ruthie can drive the van when she takes delivery of it. The manufacturer pays tax on the gasoline when it is removed from the terminal rack, and a refund is not available because the fuel is not for use as a feedstock in manufacturing tangible personal property for resale.

At 3,000 miles, Ruthie brings her delivery van to the dealer for an oil change. When the dealer bills Ruthie for the service, the dealer includes separate charges for the oil, filter and labor.

Dealer buys engine oil for oil change Before the dealer can perform the oil change, the dealer must purchase engine oil from their distributor. The dealer can give the distributor a Form 01-339, Texas Sales and Use Tax Resale Certificate (PDF) for the engine oil, but must pay the automotive oil sales fee to the distributor. The dealer does not collect the automotive oil sales fee from Ruthie. The dealer also does not charge limited sales tax on the labor to change the oil. The dealer must, however, collect limited sales tax on the charge for the oil and filter.

To protect her investment, Ruthie hires a contractor to install a garage at Ruthie’s Café.

Contractor rents excavator from equipment rental company To perform the work, the contractor must rent an excavator (off-road, heavy-duty diesel equipment) from an equipment rental company. The contractor must pay both the TERP heavy-duty diesel equipment surcharge and limited sales and use tax on the rental.
Equipment rental company buys excavator from heavy equipment dealer Before the contractor can rent the excavator, the equipment rental company has to buy it from a heavy equipment dealer. The equipment rental company can give the heavy equipment dealer a Form 01-339, Texas Sales and Use Tax Resale Certificate (PDF) to claim exemption from both the TERP heavy-duty diesel equipment surcharge and limited sales and use tax.

More Information

Looking Ahead

In Part 4, we will discuss sales for resale of aircraft, batteries, boats and boat motors.

Private Letter Rulings

Insurance Premium Tax – Insurance Premium Tax on Policies Covering Foreign Risks

Insurance Premium Tax on Policies Covering Foreign Risks
Jan. 18, 2018

The Tax Policy Division ruled that a bank headquartered in Texas, with a branch in Canada, is not subject to either the independently procured insurance premium tax or the unauthorized insurance premium tax with respect to certain insurance policies.

Based on the documents provided, the insurance policies covered the risk that Canadian borrowers might default on loans issued by the taxpayer. The Canadian branch acquired the insurance and the Canadian borrowers are wholly located in Canada. Disputes arising from a default are under the jurisdiction of the Canadian government.

Under the facts presented, the premiums paid for the insurance purchased by the Canadian branch are excluded from the unauthorized insurance premium tax because there is no risk in Texas.

The independently procured insurance premium tax is not imposed because Texas is not the home state of the insured with respect to these insurance policies. Although the company’s headquarters is located in Texas, Texas is not the home state because 100 percent of the risk covered by the insurance is located outside of Texas.

See State Tax Automated Research (STAR) system letter 201801013L.

Sales and Use Tax – Streaming Services

Streaming Services
Jan. 4, 2018

Cable Television Service

Taxable cable television services include streaming video programming distributed with or without wires and can be provided via the internet or other technology. It does not matter what device the customer uses to receive the service.

When a customer purchases a subscription to a video streaming service, they are purchasing a taxable cable television service, and they owe sales tax on the entire subscription charge.

Amusement Service

The service provider’s subscriptions also offer access to enhanced features, which allow users to engage with other users. The taxpayer provides users with user icons, specialized or customized chat emoticons and faster and specialized chat functions. The chat function is similar to instant messaging, allowing users to interact directly in real time with third parties.

Electronic games and associated content also include subscriptions for access to games or game communities such as chat rooms, forums, discussion boards and similar areas where game players comment, interact, find information or generally communicate about games and game-play.

Existing statutes, rules and policy decisions state that electronic games and associated content are taxable as an amusement service.

See State Tax Automated Research (STAR) system letter 201801006L.

Rules

Proposed

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

State and Local Sales and Use Taxes

Rule 3.364 – Services by Employees
Publication date – May 11, 2018
Comment period ends – June 10, 2018

Adopted

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

State and Local Sales and Use Taxes

Rule 3.287 – Exemption Certificates
Publication date – May 11, 2018
Effective date – May 14, 2018

Rule 3.355 – Insurance Services
Publication date – May 4, 2018
Effective date – May 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

Help is just a click away! Use our website to take care of business.

Taxes

The Taxes webpage has links to:

  • all Texas taxes and fees
  • resources for taxpayers
  • filing and paying taxes
  • tax laws and rules
Taxpayer Seminars and Videos

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

Our Video Library has online tutorials on tax-related topics as well as information about our office.

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.

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: