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 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.
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.
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:
Check our Tax Training Resources webpage for up-to-date podcast information and to listen to previous podcasts.
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.
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 is:
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.
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 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.
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:
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.
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.
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 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.
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:
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.
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.|
In Part 4, we will discuss sales for resale of aircraft, batteries, boats and boat motors.
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.
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.
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.
The Comptroller's office proposed the following rule for public comment through the Texas Register:
Rule 3.364 – Services by Employees
Publication date – May 11, 2018
Comment period ends – June 10, 2018
The Comptroller's office filed the following rules for adoption with the Secretary of State:
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
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