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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

April 2019

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 This Issue...

Tax Training Resources

Podcast Episodes, Webinars, Videos and Seminars

Webinars

Our next webinar, Taxable Services, will be held on Tuesday, June 18. This one-hour webinar highlights taxable services in Texas. In addition to a general overview of taxable services, we will cover the following:

  • amusement services
  • data processing services
  • nonresidential repair, remodeling and/or restoration services
  • personal property maintenance, remodel and/or restoration services
  • real property services

Registration for the Taxable Services Webinar is available on our Tax Training Resources webpage.

Podcast Episodes

Listen to our current podcast episode that highlights the Emergency Preparation Supplies Sales Tax Holiday happening April 27 – 29.

Videos

Our current video series covers contractors, repairpersons and Texas sales tax:

We also offer video tutorials on filing and paying sales tax through Webfile. To view these videos visit the Video Tutorials webpage.

Seminars

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.

Visit our Tax Training Resources webpage to:

  • find out more about our training resources;
  • listen to the current episode of our podcast;
  • register for upcoming webinars; and
  • view the Podcast and Webinar Archive sections for previous recordings.

Reminders

Annual Franchise Tax Reports are Due May 15

The Comptroller' s office mailed out letters for franchise tax reports, reminding taxpayers that May 15 is the due date for the annual reports. The letter includes your Webfile number needed to file your report electronically.

In addition to Webfile, you can use third-party software to file your franchise tax report. The Comptroller's office maintains a list of approved software providers.

If you need more time to file your report, you can also use Webfile to request an extension.

You can get a copy of your reminder letter by calling us at 800-252-1381.

If you only need your Webfile number, you can get it by calling 800-442-3453 and using our automated system. You will need to provide your taxpayer number, as well as confidential identifying information such as total revenue from a previous report or the amount of the last tax payment you made that was greater than zero.

Annual Independently Procured Insurance Premium Reports Due May 15

The Comptroller's office mailed the 2018 independently procured insurance report forms the second week of April. The annual independently procured insurance premium tax report (PDF) and supplement (PDF) are due, and the taxes payable, on or before May 15.

To qualify as independently procured insurance, you must obtain a policy of insurance directly from a non-admitted insurer and must not use the services of an agent or broker in the procurement of coverage. If an agent is involved in the placement of the insurance, the policy will be surplus lines insurance with taxes due to the home state of the insured. If Texas is the home state of the insured and the agent does not hold a surplus lines license in Texas, the transaction may be considered unauthorized insurance.

Fireworks Sales – May 1-5

Retailers can legally sell fireworks beginning May 1 and ending at midnight on May 5 if the fireworks are sold at a location that is not more than 100 miles from the Texas-Mexico border and is in a county in which the commissioners court of the county has approved the sale of fireworks during the period. Fireworks retailers must have a sales tax permit and must collect applicable state and local sales and use taxes on their sales.

Upcoming Sales Tax Holiday

Emergency Preparation Supplies Sales Tax Holiday

April 27-29

On April 27-29, 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.

For details on what you can purchase tax free, see our Emergency Preparation Supplies Sales Tax Holiday publication.

More Information

Volunteer Fire Department Assistance Fund Assessment Billing

The Comptroller’s office will mail the billings for the Volunteer Fire Department Assistance Fund Assessment by the end of May, and the assessment is due Aug. 1, 2019.

This assessment applies to property and casualty insurers writing homeowners insurance, fire insurance, farm and ranch owners insurance, private passenger auto physical damage insurance, commercial auto physical damage insurance or commercial multi-peril insurance.

Crude Oil and Natural Gas

Reporting Requirements and Software Updates

Changes to Crude Oil Tax Reporting Requirements

Crude oil producers and purchasers in Texas are required to report project numbers for corresponding leases involving tax exemptions or enhanced oil recovery (EOR) projects and EOR projects using anthropogenic carbon dioxide. Taxpayers can now report multiple Exempt Types in a single lease transaction. The eligible Exempt Types include:

  • EOR projects (Exempt Type 05);
  • Low-producing oil lease (Exempt Type 11); and
  • EOR project using Anthropogenic Carbon Dioxide (Exempt Type 14).
Reporting Requirements by Exemption Type
Exempt Type Reporting Requirements
Type 11 Continue to reduce the “Net Taxable Value” field by the appropriate percentage.
Type 05 and 14 Report a valid project number. If the project number is not reported, the tax exemption is disallowed.
Type 05 and/or 14 Report these Exempt Types with the appropriate reduced tax rate to calculate the tax due amount.

The Comptroller’s office will automatically apply the tax credit for report periods of February through June 2016 for an Exempt Type 11 lease if amended reports were filed for previously approved Exempt Type 05 leases.

The Comptroller’s office will not apply the tax credit for report periods of February through June 2016 for an Exempt Type 11 lease if the lease has not been approved as an Exempt Type 11 lease and amended reports have not been filed by April 26, 2019, for previously approved Exempt Type 05 leases.

For more information, visit the Comptroller’s office Crude Oil Production Tax webpage, or contact Account Maintenance Crude Oil Natural Gas Section at 800-531-5441, ext. 3-4455.

Crude Oil and Natural Gas Electronic Tax Filing Software Version 5.0

The new version of the Texas Comptroller’s Crude Oil and Natural Gas Electronic Tax Filing software is now available on the Comptroller’s office Electronic Data Interchange (EDI) webpage. If you are filing crude oil producer or purchaser reports using the Texas Comptroller’s software, this is a required upgrade. Crude oil producer or purchaser reports created with previous Texas Comptroller’s software versions will no longer be accepted as of 5 p.m. CDT on Friday, April 26, 2019. The new software allows you to enter crude oil producer and purchaser reports for crude oil leases claiming multiple oil exemptions on the same lease.

Reminder: New Petro Import and Preload Templates

The new Crude Oil and Natural Gas Electronic Tax Filing software includes updates to the import and preload templates for taxpayers who elect to use them. The new templates will be used for both crude oil and natural gas severance tax filers even though only crude oil taxpayers will have new capabilities. Our software installer program automatically saves the templates to C:\ProgramData\TexasCPA\Petro50.

Third-Party or Proprietary Software

If you create or use third-party or proprietary software to create the EDI files, please contact your software provider and review the new EDI maps for more information. Crude oil producer or purchaser reports using the previous map structure will no longer be accepted as of 5 p.m. CDT on Friday, April 26, 2019.

For assistance with tax filing software, contact Electronic Reporting at 800-442-3453.

Motor Vehicle Tax

Motor Vehicle Sales and Use Tax Series

In this month’s issue, we continue a four-part series to help guide you through some common transactions related to motor vehicle sales tax.

This series will include the following topics:

Part 3 – Motor Vehicle Tax Exemptions

We continue our series and take a closer look at the available exemptions for specific motor vehicle transactions.

Before you can claim a motor vehicle tax exemption, you must qualify. Because exemptions apply to taxable transactions only, when a taxpayer does not qualify or cannot provide the required documentation, tax is due. Let’s look at each exemption and the documentation needed.

Agriculture and Timber Exemptions

Farm and timber machines and trailers are exempt from motor vehicle tax. The buyer must have an active Agricultural/Timber Registration Number (Ag/Timber Number) with the Comptroller’s office.

Farm Trailers

In Texas, a farm trailer bought for and used on a qualified farm or ranch is exempt from motor vehicle tax. To be considered a farm trailer, it must be used primarily (meaning at least 80 percent of its operating time) on a farm or ranch:

  • in producing:
    • food for human consumption;
    • grass (for either animal feed or for selling);
    • animal feed;
    • livestock; or
    • other agricultural products that are sold in the regular course of business; or
  • for livestock or agricultural:
    • processing;
    • packing; or
    • marketing.

A farm trailer used by an agricultural cooperative in processing, packing or marketing agricultural products is taxable, unless the cooperative can prove it is the original producer of all agricultural products being processed, packed or marketed. The cooperative must perform the functions at a location it operates.

Non-Qualifying Land, Trailers and Uses

Home gardens, wildlife management operations and preserves, and animal boarding facilities are not qualified farms or ranches.

Trailers designed with human accommodations are not exempt from motor vehicles taxes, even if used to transport livestock or other agricultural products.

Transporting horses or livestock to and from competitions or shows is not an exempt use.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Agricultural exemption” and the 11-digit Texas Ag/Timber Number.

Farm Machines

To be considered a farm machine, a motor vehicle must be specially adapted and used primarily (meaning at least 80 percent of its operating time) on a qualified farm or ranch.

The motor vehicle cannot be used for transporting people or property and must be specially adapted for distributing and applying:

  • plant-food materials;
  • agricultural chemicals; or
  • feed for livestock.

Qualifying farm machines include:

  • a truck cab chassis with a tank and equipment designed to apply liquid fertilizer;
  • a truck cab chassis with a hopper and auger designed to distribute feed in a feedlot; and
  • a truck modified with a flat bed, feed distributor, and hay bale roll-out distribution device.

A flatbed truck modified solely with a hay spear/spike, hay bale roll-out distribution device, or cube feeder of a size allowing the truck bed to be used for transporting people or property does not qualify as a farm machine.

A standard pickup truck is not a farm machine, even though it can have a farm registration and be operated with farm plates. Likewise, the cab type and tonnage do not determine the pickup truck’s eligibility.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Agricultural exemption” and the 11-digit Texas Ag/Timber Number.

Timber Machines and Trailers

A specially adapted motor vehicle used primarily in commercial timber operations is a timber machine.

Timber machines and trailers used in commercial timber operations qualify for exemption when used to:

  • prepare the land for timber production; or
  • plant, cultivate or harvest timber to sell.

Qualifying timber machines include:

  • a cab chassis with grappling arm for moving logs; and
  • a wheeled chassis with timber equipment attached that is not designed to transport people or property.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Timber exemption” and the 11-digit Texas Ag/Timber Number.

Driver Training Motor Vehicles:

A dealer-provided, driver training motor vehicle is exempt from tax if the vehicle is:

  • titled in a dealership’s name;
  • bought in Texas;
  • loaned free of charge to a public school for use in an approved standard driver training course; and
  • operated with exempt license plates.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Driver training.”

Federal Instrumentalities

These organizations are exempt from motor vehicle taxes by various federal laws or court rulings:

  • American Red Cross
  • Boy Scouts of America, Girl Scouts, Camp Fire, Boys & Girls Clubs of America, Big Brothers Big Sisters of America
  • Federal Credit Unions
  • Federal Deposit Insurance Corporation (FDIC)
  • Federal Home Loan Mortgage, Inc. and other Federal Home Loan Banks
  • Federal Land Credit Associations
  • Federal Production Credit Association

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as the name of the qualifying organization.

Exempt by Other State Law

These organizations are exempt from motor vehicle taxes by various state laws other than Tax Code Chapter 152:

  • Cotton Growers’ Boll Weevil Eradication Foundation and its board
  • Cultural Education Facilities Finance Corporations
  • electric cooperatives
  • Health Facilities Development Corporation
  • Hospital Laundry Cooperative Association
  • housing authority (local, cities and counties)
  • Local Government Transportation Corporations
  • Local Organizing Committees (LOC)
  • Public Facility Corporations
  • telephone cooperatives
  • TexAmericas Center and its nonprofit corporations
  • Texas Citrus Pest and Disease Management Corporation, Inc. and its board

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as the name of the qualifying organization.

Fire Trucks and Emergency Medical Services Vehicles

Fire trucks or other motor vehicles used exclusively for fire-fighting purposes or for emergency medical services are exempt from motor vehicle tax when rented to or purchased by:

  • a volunteer fire department;
  • a nonprofit emergency medical service provider that receives a federal income tax exemption under Internal Revenue Code (IRC) Section 501(a) as an organization described by Section 501(c)(3); or
  • an emergency medical service provider to which Transportation Code, Section 502.456 applies. The exemption also applies to an emergency medical services chief or supervisor vehicle if used exclusively as an emergency services vehicle.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as:

  • “Fire trucks or other motor vehicles used exclusively for fire-fighting purposes;” or
  • “Emergency services vehicle or other motor vehicles used exclusively for emergency medical services.”

Hydrogen-Powered Motor Vehicles

A qualifying hydrogen-powered motor vehicle that meets Phase II standards established by the California Air Resources Board (ARB) as of Sept. 1, 2007, for an ultra-low-emission vehicle II or stricter established Phase II emission standards is exempt from motor vehicle tax.

Electric cars and trucks, such as those powered by large format Li-Ion or similar batteries, do not qualify for the exemption.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Hydrogen-power” or “Hydrogen-powered vehicle.”

Motor Carriers and Interstate Motor Vehicles

In Texas, interstate motor vehicles such as trucks, tractors (pulling units) and trailers are exempt from tax if they are registered with apportioned plates under the International Registration Plan (IRP) in a state or country that is a member of IRP and apportioned into Texas.

To qualify for the interstate motor vehicle exemption, the vehicle must be:

  • either purchased in Texas or purchased outside of Texas and apportioned into Texas; or
  • a trailer operated interstate on token plates and pulled by an apportioned-plated; or
  • a charter bus operated interstate.

Units rented by contract for 180 days or less are subject to motor vehicle rental tax.

An interstate motor vehicle includes any motor vehicle with a gross registered weight in excess of 26,000 pounds (calculated either separately or in combination with a trailer or semitrailer) that operates in Texas and some other state or foreign country. This includes:

  • a truck;
  • truck tractor; or
  • any other motor vehicle.

The exemption is lost when:

  • a motor vehicle is diverted from interstate use within one year of:
    • purchase in Texas with apportionment to Texas; or
    • entry into and use in Texas after purchase outside of Texas with apportionment to Texas.
  • a leased motor vehicle is diverted from interstate use, regardless of when it is diverted.
    • The owner must pay motor vehicle tax and is responsible for remitting the tax directly to the Comptroller’s office.
    • The amount used to calculate motor vehicle sales or use tax is the lessor’s book value for the vehicle.

Obtaining non-apportioned registration may be proof a unit is being diverted from interstate use. The IRP cab card(s) also indicate(s) use in Texas.

Tax is due and payable to the county tax office at the time the vehicle is titled and/or registered.

No tax credit or allowance is given for depreciation or time operated as an apportioned vehicle.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “For interstate use” or “Interstate motor vehicle with apportioned plates.”

Note: Loss of the interstate motor vehicle sales tax exemption within the first year of registration means tax is due and payable to the county tax office at the time the vehicle was originally titled and/or registered with penalties and interest assessed based on that date.

Native American Tribes

The federally recognized Alabama-Coushatta, Kickapoo and Tigua Native American tribes are exempt from motor vehicle tax.

To qualify, the vehicle must be sold to the tribe (tribal council), not to an individual member of the tribe.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as the qualifying tribe’s name.

Public Agencies

A public agency is exempt from motor vehicle tax.

A public agency is:

  • the federal government;
  • a department, commission, board, office, institution or other agency of the state of Texas or of a county, city, town, school district, hospital district, water district or other special district, authority or political subdivision created by or under Texas law; or
  • an open enrollment charter school.

The motor vehicle must be titled in the public agency’s name.

The motor vehicle must also be operated with exempt license plates, unless sold to:

  • the federal government; or
  • a local center providing services under the authority of the Texas Health and Human Services Commission.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Public agency.”

Vehicles Transported Out of State

A motor vehicle bought in Texas for exclusive use outside Texas is exempt from motor vehicle sales tax. The buyer must:

  • not use the vehicle in Texas, except to drive it directly out of state; and
  • not register the vehicle in Texas.

The county tax office can accept a Form 130-U for a certificate of title only.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Transported out of state.”

At the time of sale, the buyer completes and gives the seller Form 14-312, Texas Motor Vehicle Sales Tax Exemption Certificate – For Motor Vehicles Taken Out of State (PDF).

Orthopedically Handicapped

A motor vehicle bought by an entity (such as a healthcare facility) or an individual is exempt from motor vehicle tax when it is used primarily by or for transporting an orthopedically handicapped person, if the vehicle is modified or will be modified to:

  • enable orthopedically handicapped persons to operate the vehicle; or
  • allow orthopedically handicapped persons to enter the vehicle.

Please note that running boards and ramps for scooters do not qualify for the exemption.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Orthopedically handicapped.” Then submit Form 14-318, Texas Motor Vehicle Orthopedically Handicapped Exemption Certificate (PDF) with Form 130-U.

When an entity such as a healthcare facility or retirement community buys a vehicle that will be used primarily to transport multiple orthopedically handicapped passengers, the entity-buyer is not required to:

Child-Care Facilities

A motor vehicle purchased, used or rented by a qualified residential child-care facility is exempt from tax.

To qualify for the exemption, the child-care facility must:

  • be licensed under Chapter 42 of the Human Resources Code; and
  • provide residential care 24 hours a day to both:
    • children who do not require specialized treatment or services; and
    • children who are emotionally disturbed

Motor vehicle purchased, used, or rented by day care centers, group day care centers, registered family homes or those residential childcare facilities that are not for 24-hour care are not exempt from motor vehicle tax.

Documentation

On Form 130-U under “Exemption claimed under Motor Vehicle Sales and Use Tax Law because,” enter the exempt reason in Item 37 as “Child-care facility.”

Looking Ahead

In the next part of our series, we will review transactions involving motor vehicle leases and rentals.

More Information:

State Tax Automated Research System

STAR Watch

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.

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: