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.
The Texas Legislature made progress this year on bread-and-butter issues we have identified as key to the future of our growing state.
School finance and property taxes dominated the regular session, as lawmakers boosted public education funding and worked to rein in the growth of property tax bills. Our office analyzed the complicated issue of school funding in a special Fiscal Notes report that we released early in the session.
Our office also received more flexibility in overseeing the Economic Stabilization Fund (ESF), often referred to as the Rainy Day Fund. Lawmakers allowed us to put a larger portion of the fund into investments that will yield bigger returns for the state. It is a step toward our goal of fully utilizing the power of the ESF, which we project will exceed $9 billion at the end of the 2020-21 biennium.
Many of our other priority issues saw action as well. Among them, lawmakers bolstered the Teacher Retirement System and TRS-Care, its health care program; ensured we have the funds to meet our commitments under the Texas Tomorrow Fund college savings plan; and gave us the authority to set a uniform sales and use tax rate for out-of-state sellers on the internet, allowing us to properly implement the U.S. Supreme Court’s decision in the Wayfair case.
Much of the progress was made easier by our strong economy. In delivering the Biennial Revenue Estimate (BRE) at the beginning of the session, we forecast an 8.1 percent increase in state revenue available for general-purpose spending, for a total of $119.1 billion. We increased that by another $518 million late in the session.
We are continuing to keep a close eye on the economy as we lay the groundwork for the next BRE and the 2021 legislative session, which will be here before we know it.
House Bill 4542 defines “individual” as a natural person. This definition applies to taxes imposed under Title 2, Tax Code.
Adds Tax Code Section 111.0023 (Definition of Individual)
House Bill 4032 changes the definition of a boat to include all vessels 115 feet or shorter in length, measured from the tip of the bow in a straight line to the stern. This includes both commercial and noncommercial boats, regardless of who sold the boat.
The bill creates an exemption for boats and motors sold for use in another state if the boat or motor
The bill also provides for the issuance of a temporary use permit allowing exempt use in Texas of a taxable boat or boat motor purchased outside of Texas. The fee for the permit is $150 and is valid for 90 days. An owner can obtain two permits per calendar year. The second permit cannot be issued before the 30th day after the date the first permit expires.
Lastly, the bill limits the amount of boat sales tax on the sale of a taxable boat or motor to $18,750 (300,000 taxable sales price). The bill also changes the due date for boat and boat motor sales and use tax to 45 working days (previously 20) after the taxable boat or motor is delivered to the purchaser or brought into Texas for use.
Amends Parks and Wildlife Code Sections 31.003 (Definitions), 31.006 (Appointment of Authorized Agent), 31.037 (Change in Ownership Interest; Notice to Department), 31.041 (Dealer's, Distributor's, and Manufacturer's License), 31.046 (Application for Certificate of Title), and 31.053 (Transfers of Vessels and Outboard Motors)
Amends Tax Code Sections 160.001 (Definitions) and 160.041(Collection Procedure)
Adds Tax Code Sections 160.0246 (Exemption for Certain Boats and Motors Temporarily Used In This State), 160.0247 (Temporary Use Permit), and 160.026 (Limitation on Amount of Tax)
Senate Bill 21 increases the legal age from 18 to 21 for the sale, distribution, possession, purchase, consumption, or receipt of cigarettes, e-cigarettes, or tobacco products. The bill exempts the following from the new age requirement:
The bill removes the provision allowing minors to have tobacco products in the presence of a parent, guardian, or a spouse.
The Comptroller’s office will mail information packets prior to Sept. 1, 2019, including new warning notice signs, to all cigarette and tobacco products retailers reflecting Senate Bill 21 legislative changes.
Amends Health and Safety Code, Subchapters H (Distribution of Cigarettes, E-Cigarettes or Tobacco Products), N (E-Cigarette and Tobacco Use by Minors), and R (Delivery Sales of Cigarettes and E-Cigarettes) and makes other conforming changes
The bills modernize Chapters 154 (Cigarette Tax) and Chapter 155 (Cigar and Tobacco Product Tax) to reflect developments and current industry practices, by adding and amending definitions of terms that are instrumental in interpreting taxability, enforcing violations, and resolving issues arising from litigation or general inquiries received by the Comptroller’s office.
Both House Bills 3475 and 4614
House Bill 4614
Amends Tax Code, Chapters 154 (Cigarette Tax) and 155 (Cigars and Tobacco Products Tax)
Senate Bill 1824 allows a taxable entity that is a performing rights society to exclude from total revenue, to the extent included in its total revenue, payments made to the public performance rights holder and copyright owner for whom the taxable entity licenses the public performance.
Amends Tax Code, Section 171.1011, (Determination of Total Revenue from Entire Business), to add Section (g-12)
House Bill 1607 allows certain taxable entities in the aerospace industry, when determining margin, to deduct costs properly allocated and incurred under the Federal Acquisition Regulation for the sale of goods or services to the federal government that the taxable entity has not already subtracted under either the cost of goods sold or compensation deduction. The deduction of these costs will be phased in over a five-year period.
Amends Tax Code, Section 171.101, (Determination of Taxable Margin), to add Sections (e) and (f)
The bill defines
There are currently 29 cities eligible to create hotel projects. The bill creates four different types of projects and adds 19 new cities for a total of 48 cities. The new types of projects are
Amends Tax Code Sections 351.001 (Definitions) and 351.102 (Pledge for Bonds)
Amends Sections 351.102(d) and 351.102(f), and redesignates those Sections as 351.1063 (Allocation of Revenue for Advertising and Promotion: Certain Municipalities with Certain Projects) and 351.1064 (Allocation of Revenue for Certain Sporting Event Expenses: Certain Municipalities with Qualified Project)
Adds Sections 351.1021 (Pledge or Commitment of Certain Tax Revenue); 351.1022 (Pledge or Commitment of Certain Tax Revenue by Certain Municipalities with Sports Stadiums); 351.10712 (Allocation of Revenue for Construction and Maintenance of Sports-Related Facilities by Certain Municipalities)
Adds Tax Code Subchapter 351 C (Municipal Hotel and Convention Center Projects)
Repeals Tax Code Sections 351.102 (b-1), (c-1), and (g) (Pledge for Bonds)
House Bill 2048 increases the fee from $2 to $4 per motor vehicle year, and allocates the fee to the authority, to the general revenue fund, and to medical facilities providing trauma and emergency medical services to victims of accidents resulting from traffic offenses.
Amends Section 10(b) of V.T.C.S. Art. 4413(37) (Fee)
House Bill 2587 provides regulatory guidance regarding the business of travel insurance, which includes a definition of “travel insurance.” The bill provides that only travel insurance is subject to premium tax and not other related services sold with the travel insurance.
Adds Chapter 3504 (Travel Insurance) to and amends Chapter 4055 (Specialty Agents) of the Insurance Code
Adds Subsection (b)(15) to Section 221.002 (Tax Imposed; Rate) of Insurance Code
Senate Bill 1623 exempts Nonprofit Legal Services Corporations from regulation by the Texas Department of Insurance. As a result, these corporations are no longer subject to the Office of Public Insurance Counsel (OPIC) assessment and will no longer report the applicable maintenance tax.
Amends Insurance Code, Section 501.204(a) (Assessment on Life, Health, and Accident Insurers and Related Entities)
Repeals Insurance Code, Chapter 260 (Nonprofit Legal Services Corporations)
House Bill 2263 provides an exemption for gross receipts received from the sale of electricity to a public school district customer.
Amends Tax Code, Section 182.022 (Imposition and Rate of Tax), by adding subsection (d)
House Bill 3006 requires mixed beverage sales tax returns and payments to be filed monthly, no later than the 20th day of each month. Taxpayers can no longer file quarterly mixed beverage sales tax returns. The bill also provides that mixed beverage sales tax returns are public information.
Final quarterly reports for the period ending Sept. 30, 2019 are due no later than Oct. 21, 2019. Monthly reports reflecting October sales are due no later than Nov. 20, 2019.
Amends Tax Code Section 183.043 (Applicability of Other Law)
Adds Tax Code Sections 183.0421 (Tax Return Due Date) and 183.0422 (Payment)
The bill requires brewpubs, as licensed under Chapter 74 of the Alcoholic Beverage Code, to report monthly alcoholic beverage sales to retailers to the Comptroller’s office.
The bill also requires a Retail Inventory Tracking System (RITS) request to be sufficiently detailed to protect the confidentiality of another person’s sales information. The bill gives authority to the Comptroller’s office to adopt administrative rules for RITS, including rules requiring a person requesting RITS reports to file reports on the distribution of their products to other persons.
Adds Tax Code Section 151.4661 (Applicability to Certain Brewpubs)
Amends Tax Code Sections 111.006 (Confidentiality of Information), 151.461 (Definitions), 151.462 (Reports by Brewers, Manufacturers, Wholesalers, and Distributors), 151.468 (Civil Penalty; Criminal Penalty), and 151.470 (Audit; Inspection)
House Bill 791 adds the definition of “volunteer fire department” to mean a fire department operated by its members, including a part-paid fire department composed of at least 50 percent volunteer firefighters. Previous Comptroller’s office policy required that a volunteer fire department must be wholly volunteer in order to qualify for a refund of the motor fuels tax.
Amends Tax Code, Section 162.001 (Definitions) by adding subdivision (63)
House Bill 3954 expands the definition of the term “bulk transfer/terminal system” to include “marine vessel” and “motor fuel storage facility” and specifies that a “bulk transfer” must occur within the United States.
The bill imposes tax on gasoline and diesel fuel sold and loaded into a marine vessel in Texas to a person who does not hold an appropriate license and requires the seller to collect and remit the tax due.
The bill provides that shipping documents, in lieu of a bill of lading, may be used to document the export of diesel fuel to a foreign destination for the purposes of exemption.
Amends Tax Code, Sections 162.001 (Definitions), 162.101 (Point of Imposition of Gasoline Tax), 162.104 (Exemptions), 162.201 (Point of Imposition of Diesel Fuel Tax) and 162.204 (Exemptions)
House Bill 2338 redefines “motor vehicle used for religious purposes” to mean a motor vehicle used by a church or religious society and not used primarily for the personal or official needs or duties of a minister. A motor vehicle used for religious purposes is not limited to a certain number of passengers and can be a trailer.
Amends Tax Code Section 152.001 (Definitions)
The Texas Emissions Reduction Plan (TERP) Surcharge is a surcharge imposed on the retail sale, lease, or use in this state of every on-road diesel motor vehicle that is over 14,000 pounds.
The surcharge is imposed at a rate of
House Bill 3745 extends the expiration of the TERP Surcharge from Aug. 31, 2019 to the last day of the fiscal biennium in which the state attains compliance with federal ambient air quality standards for ground-level ozone.
Amends Tax Code Section 152.0215 (Texas Emissions Reduction Plan Surcharge)
Senate Bill 533 reinstates a program under which the Railroad Commission of Texas (RRC) may certify two-year inactive wells for the purpose of a severance tax exemption. The bill repeals the definition of a three-year inactive well. The bill reduces the time period for the tax exemption from 10 years to 5 years. The bill also clarifies that this tax exemption does not apply to wells used for enhanced oil recovery, drilled wells that are not completed, and wells that do not have a record of production on file with the RRC.
Amends Tax Code, Section 202.056 (Exemption for Oil and gas from Wells Previously Inactive)
Senate Bill 925 codifies current Comptroller’s office practice of using the greater of either the monthly production reported to the Railroad Commission of Texas or the Comptroller’s office in determining qualifications for a low-producing well or lease.
Amends Tax Code, Sections 201.059(a)(3) (Credits for Qualifying Low-Producing Wells) and 202.058(b) (Credits for Qualifying Low-Producing Oil Leases)
House Bill 2256 authorizes the Comptroller’s office to enter into an agreement with a taxpayer to perform a managed audit of a natural gas tax return. The bill permits a computation of an overpayment using a sampling of marketing cost transactions if the Comptroller’s office approves the taxpayer’s sampling method. The bill also provides the Comptroller’s office with rule-making authority to specify additional procedures relating to claiming a credit.
Amends Tax Code, Chapter 201, Subchapter E, by adding Section 201.207 (Determination of Overpaid Amounts)
Amends Tax Code, Chapter 201, Subchapter G, by adding Section 201.3021 (Managed Audits)
House Bill 2675 amends Chapter 81 of the Natural Resources Code by repealing the provisions providing for the suspension of the collection of oil-field cleanup regulatory fees when the balance of the fund exceeds a specified amount.
Amends Natural Resources Code, Sections 81.116(d) (Oil-Field Cleanup Regulatory Fee on Oil) and 81.117(d) (Oil-Field Cleanup Regulatory Fee on Gas)
House Bill 1525 defines “marketplace,” “marketplace provider,” and “marketplace seller.” A marketplace is a physical or electronic medium through which persons other than the owner or operator of the medium make sales of taxable items. The term includes a store, internet website, software application, or catalog.
A marketplace provider is a person who owns or operates a marketplace and processes sales or payments for marketplace sellers.
A marketplace seller is a seller, other than the marketplace provider, who makes a sale of taxable items through a marketplace.
The bill specifies that a marketplace provider is the seller of the items sold on their marketplace platforms. The bill requires a marketplace provider to certify to each individual selling taxable items through the marketplace that the provider assumes the statutory rights and duties of a seller or retailer. A marketplace provider is required to collect, report and remit taxes to the Comptroller’s office on all sales of taxable items made through the marketplace. Local sales and use taxes on taxable items sold through a marketplace are due based on the location where the items are delivered.
Amends Tax Code Sections 151.008 (“Seller” or “Retailer”), 321.203 (Consummation of Sale), and 323.203 (Consummation of Sale)
Adds Tax Code Section 151.0242 (Marketplace Providers and Marketplace Sellers)
House Bill 1543 requires purchasers of off-highway all-terrain vehicles, motorcycles, and utility vehicles to present to the county tax assessor-collector's office acceptable documentation that shows use tax has been paid to the Comptroller's office when an application for title is presented.
The bill also requires manufacturers licensed under Texas Occupations Code, Chapter 2301, to file a report with the Comptroller's office indicating new off-highway vehicles purchased out of state and warrantied in Texas. The first report is due by March 1, 2020.
Adds Tax Code Subchapter 151 I-2 (Reports by Manufacturers of Certain Off-Highway Vehicles Purchased Outside This State)
Adds Transportation Code Section 501.0301 (Certain Off-Highway Vehicles Purchased Outside This State)
Tax Code Section 151.3101 exempts the sale of amusement services from sales and use tax if the services are exclusively provided by certain governmental and non-profit entities. House Bill 1965 allows those entities to contract with another organization to provide touring theatrical productions that qualify for the exemption.
A theatrical production is defined as a live staged play, musical play, opera, or ballet.
In order to qualify for the exemption, the entity providing the production must enter into a contract with an eligible organization to provide a least five productions a year for a term of a least five years. The productions must be held at a location either owned by or leased or licensed to the eligible organization for at least one year.
Amends Tax Code Section 151.3101 (Amusement Services Exemptions)
In response to the U.S. Supreme Court’s decision on South Dakota v. Wayfair, remote sellers who were previously not required to collect and remit sales and use tax may have to begin collecting Texas tax on their sales into Texas. Generally, a “remote seller” is a seller who does not have a physical presence in a state, but who sells products or services for delivery into that state.
House Bill 2153
Adds Tax Code Section 151.0595 (Single Local Tax Rate for Remote Sellers)
Repeals Tax Code Sections 151.059 (Fee Imposed in Lieu of Local Sales and Use Taxes) and 151.107(c) (Retailer Engaged in Business in This State)
Amends Government Code Section 403.107 (Local Sales and Use Tax Fees)
House Bill 2358 allows that a retailer may directly or indirectly advertise, hold out, or state to a customer or to the public that the retailer will pay the sales or use tax for the customer provided that
A retailer that advertises, holds out, or states to a customer or to the public that the retailer will pay the tax
Amends Tax Code Sections 111.016 (Payment to the State of Tax Collections) and 151.704 (Prohibited Advertising; Criminal Penalty)
House Bill 2684 exempts the sale of a taxable item from sales and use tax if the seller is a 501(c)(3) nonprofit organization, the sale takes place at a county fair, and the purchaser is a person attending or participating in the fair.
Amends Tax Code Section 151.3102 (Sale by Nonprofit Organization at County Fair)
House Bill 3086 clarifies the existing exemption for certain items used in the production of motion picture, video, and audio master recording. Items that are necessary and essential to or that become a component of a master recording are exempt from sales and use tax if a copy of the master recording is sold, offered for ultimate sale, licensed, distributed, broadcast, or otherwise exhibited for consideration.
The bill defines a “master recording” as “the principal media on which images, sound, or a combination of images and sound were first fixed and from which copies were commercially made available.”
Amends Tax Code Section 151.3185 (Property Used in the Production of Motion Pictures or Video or Audio Recordings and Broadcasts)
Tax Code Section 151.3101(a)(4) provides an exemption from sales and use tax for certain amusement services. House Bill 3386 provides that amusement services are exclusively provided under that section if provided at a specified multipurpose arena or venue located within or adjacent to a recognized cultural district under Tax Code Chapter 351.1015(a)(5)(B).
Amends Tax Code Section 151.3101 (Amusement Services Exemptions)
The Texas Emissions Reduction Plan (TERP) Surcharge is a 1.5 percent surcharge imposed on the retail sale, lease, or rental of specified off-road heavy-duty diesel equipment. House Bill 3745 extends the expiration of the TERP Surcharge from Aug. 31, 2019 to the last day of the fiscal biennium in which the state attains compliance with federal ambient air quality standards for ground-level ozone.
Amends Tax Code Section 151.0515 (Texas Emissions Reduction Plan Surcharge)
Senate Bill 1214 removes the 30 mile limitation for travel to and from a location to perform specified agricultural services from the determination of whether an aircraft is exclusively used for agricultural purposes.
Amends Tax Code Section 151.328 (Aircraft)
Senate Bill 1525 is a cleanup of legislative changes made in Senate Bill 1, 82nd Legislative Special Session (2011). It clarifies and codifies current Comptroller policies and practices related to the sales and use tax exemption for sale for resale. The bill
Amends Tax Code Sections 151.0028 (“Amusement Service”), 151.0045 (“Personal Services”), 151.006 (“Sale for Resale”), and 151.338 (Environment and Conservation Services)
Repeals Tax Code Section 151.335 (Coin-operated Services)
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