Tax Policy News

If you are a Texas-based business selling into other states you may now be required to collect taxes for those states. Beginning Oct. 1, 2018, some states require remote sellers to collect taxes if they have more than $100,000 in gross sales or 200 individual transactions into that state. You must contact the state taxing agency or authority directly for exact tax responsibilities.

For more information about Texas businesses’ collection responsibilities for other states, see these websites:

• Federation of State Tax Administrators – State Tax Agencies
• Multistate Tax Commission – Member States
• Streamlined Sales Tax Governing Board, Inc. – Remote Sellers: SD v. Wayfair Decision

Disclaimer: Each website listed is responsible for its own information, and the Texas Comptroller of Public Accounts is not responsible for maintaining the information provided on these websites.

As part of our Wayfair implementation, amendments to Rule 3.286, concerning Seller’s and Purchaser’s Responsibilities, became effective Jan. 1, 2019. The amendments establish a safe harbor for remote sellers whose Texas revenues are below $500,000 in sales of tangible personal property and services in the preceding 12 calendar months. Remote sellers with Texas revenue below the safe harbor amount will not have to register and collect tax. Remote sellers whose Texas revenue exceeds the safe harbor amount shall register and begin collecting tax.

To allow time for remote sellers to prepare for these changes, the amendments postpone the permitting and tax collection requirements for remote sellers until Oct. 1, 2019. The initial 12 calendar months for calculating a remote seller’s Texas revenues will be July 1, 2018, through June 30, 2019.

You can learn more about tax requirements on our new webpage, Texas Tax Responsibilities and Resources for Sellers After Wayfair.

The State Bar of Texas Tax Section is hosting its second annual Advanced Tax Workshop on Friday, March 22, at the Belo Mansion in Dallas.

This year’s workshop addresses legislative and administrative responses to Wayfair, and what tax practitioners and their clients are doing to comply. The Comptroller’s office is proud to be participating in this event.

Highly sought-after, nationally recognized speakers drawn from government, industry and private practice will lead insightful discussions ranging from policy issues to practical responses.

Panel topics include:

• An Overview of Substantial Nexus and Issues to Consider for Litigation Exposure
• State and Federal Legislative Update
• Tax Administrators Roundtable
• The Role of Marketplace Providers
• Removing Undue Burden From Sellers
• What Does the Future Hold for International Sellers?
• A Practical Roadmap for Businesses Operating in Multiple States or Serving a Multistate Customer Base

You can register online as well as view the agenda and additional information for the Advanced Tax Workshop.

The Comptroller’s office has completed an overall update to the Comptroller’s Rules of Practice and Procedure, new 34 Texas Administrative Code Section 1.1-1.35, which was effective Jan. 1, 2019.

Taxpayers paying less than $500,000 per year can now use Webfile to pay by electronic check or credit card. Paying through TEXNET is not required, but is still an option.

Payment option deadlines:

• TEXNET payments and TEXNET payments via Webfile – For payments of $25,000 or less, a payor has until 10:00 a.m. (CT) on the due date to initiate the transaction in the TEXNET System. Payments above $25,000 must be initiated in the TEXNET System by 8:00 p.m. (CT) on the business day before the due date.
• Electronic check and credit card payments – Payments must be submitted by 11:59 p.m. (CT) on the due date (if paying by credit card, you will be assessed a processing fee).

For more information on filing and payment requirements, visit our File and Pay webpage.

The Comptroller’s office offers several training resources that provide in-depth information on tax topics that affect your business today. These include live and on-demand training sessions, as well as tax seminars.

Visit our Tax Training Resources page 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.

Podcast Episodes

Listen to our current podcast episode about the sales tax return form and what to include when reporting your total sales, taxable sales and taxable purchases.

Podcast episodes soon to be released on our Tax Training Resources webpage:

• Mixed Beverage Taxes
• Mixed Beverage Sales Tax
• Mixed Beverage Gross Receipts
• Mixed Beverage Record Keeping

Webinars

Our last Webinar was held on Feb. 21 and covered what taxpayers need to know when starting a new business. The one-hour webinar highlighted the tax responsibilities of doing business in Texas and provided steps for the registration process along with how to collect and report tax. A recording of the Webinar will soon be available on our Tax Training Resources webpage.

Videos

Our current video series covers contractors, repairpersons and Texas Sales Tax:

• Sales Tax Overview for Contractors
• Tax Responsibilities for Contractors Working with Exempt Organizations
• Residential Construction Tax Responsibilities for Contractors
• New Construction Tax Responsibilities for Contractors
• Non-Residential Construction Tax Responsibilities

We also offers 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.

Current cigarette and tobacco products non-retailer permits expire Feb. 28, 2019.

In November, the Comptroller's office mailed renewal packets with preprinted applications to all cigarette, cigar and/or tobacco products manufacturers, importers, distributors, bonded agents and wholesalers to renew their cigarette and tobacco products non-retailer permits for March 1, 2019, through Feb. 28, 2020. If you did not receive your packet, call us at 1-800-862-2260 to request one.

Non-retailers should review the preprinted information, make any corrections, sign the renewal form and return all pages of the packet (and any other documentation) with the applicable permit fee to our office by the date printed on the application form.

A $50 late filing fee will be assessed on non-retailer renewals postmarked after Feb. 28, 2019.

If you itemize deductions on your 2018 income tax return, you have the option of claiming a deduction for state and local sales taxes paid during 2018. See the IRS Sales Tax Deduction Calculator for more information on claiming the deduction.

In this month’s issue, we introduce the first of a four-part series that will help guide you through some common transactions related to motor vehicle sales tax.

This series will include the following topics:

• Part 1 – Motor Vehicle Gift Tax
• Part 2 – Salvage Motor Vehicles
• Part 3 – Motor Vehicle Exemptions
• Part 4 – Motor Vehicle Leases and Rentals

Part 1 – Motor Vehicle Gift Tax

What is gift tax?

A $10 gift tax is imposed on the receipt of a motor vehicle given as a gift to an eligible recipient. The gift tax is due instead of the 6.25 percent motor vehicle sales or use tax.

What is a gift?

A gift is the transfer of a motor vehicle in which an eligible party receiving the vehicle pays no consideration. Consideration means any amount paid or to be paid for a motor vehicle, valued in money, or anything of monetary value including cash, the assumption of a lien or other debt, or the acceptance of a motor vehicle instead of payment for providing services or in exchange for real or tangible personal property.

Who is eligible to receive a motor vehicle as a gift?

To qualify for the $10 gift tax, the motor vehicle must be given by the following eligible parties:

• spouse (if separate property)
• parent or stepparent
• father/mother-in-law or son/daughter-in-law
• grandparent/grandparent-in-law or grandchild/grandchild-in-law
• child or stepchild
• sibling/brother-in-law/sister-in-law
• guardian
• decedent’s estate (inherited)
• a nonprofit service organization qualifying under Internal Revenue Code, Section 501(c)(3) (gift tax applies when the entity is either the donor or recipient)

Who is responsible for the tax?

The eligible person receiving the motor vehicle is responsible for the gift tax. The recipient pays the tax to the county Tax Assessor-Collector (TAC) at the time they title and/or register the motor vehicle.

What documentation, if any, is required?

In addition to the Texas Department of Motor Vehicles (TXDMV) Form 130-U, Application for Texas Title and/or Registration (PDF), you must also provide the Comptroller Form 14-317, Affidavit of Motor Vehicle Gift Transfer (PDF), that describes the relationship between the donor and the recipient. The county TAC or a staff member can accept the donor or recipient’s signature instead of formal notarization, as long as the person whose signature is being acknowledged is present, and signs the affidavit in front of the county TAC or staff member.

In cases when either the donor or recipient are unable to take the documentation to the TAC's office, a designated agent (for either the donor or recipient) must provide a signed power of attorney and present the gift affidavit on their behalf.

The person who files the Form 14-317 must present to the TAC an unexpired photo identification, such as a driver's license or personal identification card issued by Texas or another state.

Transactions often mistaken as qualifying motor vehicle gift transfer

Gift transfers do not include transfers from:

• aunt/uncle to niece/nephew
• corporation/LLC to corporation/LLC (does not include mergers, terminations or the registration of new entities)
• corporation/LLC to individual (does not include terminations)
• individual to corporation/LLC (does not include newly formed corporation/LLC)

Looking ahead

Next month’s motor vehicle tax topic will discuss salvage motor vehicles, including defining what a salvage motor vehicle is and what happens when you repair a salvage vehicle.

More Information

• Motor Vehicle Tax Guide
• Rule 3.80 – Motor Vehicles Transferred as a Gift or for No Consideration

Gym Memberships

Initiation and membership fees to gyms, athletic clubs, health clubs and physical fitness centers are taxable.

Sales tax is not due on a membership bought with a doctor's prescription. The prescription must be dated on or before the sale date and specify the type of health treatment required. A new prescription is required for each membership renewal.

Vitamins, Minerals and Dietary Supplements

Sales tax is not due on the sale of vitamins, minerals and dietary supplements.

Dietary supplements:

• contain one or more vitamins, minerals, herbs, botanicals, amino acids or substances that supplement daily dietary intake;
• are not represented as “food or the sole item of a meal or diet” (such as a meal replacement); and
• are labeled as “dietary supplements” or “supplements.”

A product that does not meet these criteria is also considered a nontaxable dietary supplement if the product is labeled, or required to be labeled, with a Supplement Facts panel by the Food and Drug Administration.

More Information

• Rule 3.284 – Drugs, Medicines, Medical Equipment, and Devices
• Rule 3.298 – Amusement Services

Delinquent taxes accrue interest beginning on the 61st day after the due date until paid. Refund claims filed with the Comptroller's office accrue credit interest at either Treasury Pool rate or Prime +1, whichever is less. The interest begins to accrue 60 days after the date of the payment or the due date of the tax report, whichever is later.

For more information about how the interest rate is applied (as well as the interest rates for this year and previous years), see Interest on Credits and Refunds and on Tax Due.

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

Central Administration – New Subchapter B, Division 1

General Rules

The Taxes webpage has links to:

• All Texas taxes and fees.
• Resources for taxpayers.
• Filing and paying taxes.
• Tax laws and rules.

Our Account Update Tools make it easy for you to:

• Change your address.
• Add a location.
• Close a location.
• Change return/email notifications.

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.

The Practitioners’ Corner is a one-stop resource for information about filing and paying taxes, links to tax research sources and searchable databases.

• Tax Due Dates
• Holiday Schedule