Tax Policy News

In response to the U.S. Supreme Court’s decision on South Dakota v. Wayfair, Texas-based businesses selling items or services into other states may be required to collect taxes for those states. Additionally, 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 in late 2019. Generally, a "remote seller" is a seller that does not have a physical presence in a state, but who sells products or services for delivery into that state.

The Comptroller’s office is currently updating sales and franchise tax rules to provide details about remote seller tax responsibilities. We are not applying the Wayfair decision to additional taxes at this time, and any new tax responsibilities will be prospective.

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

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, will be effective Jan. 1, 2019. The amendments establish a safe harbor for remote sellers whose Texas revenues are below $500,000 from 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.

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, 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

Our podcast covers popular tax topics and other helpful information. Listen to our current series highlighting exempt organizations, including religious, charitable and educational organizations. Learn about the application process and exempt purchases and sales for qualified organizations in Texas.

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

Webinars

Our latest webinar, "Franchise Tax and Closing Your Business in Texas," covered the franchise tax responsibilities of entities registered with the Texas Secretary of State and provided the steps for closing a business and ending reporting responsibilities. A recording of the webinar will soon be available through our Tax Training Resources page.

Our next Webinar will cover what taxpayers need to know when starting a new business. The webinar highlights the tax responsibilities of doing business in Texas and provides steps for the registration process along with how to collect and report tax. Registration will open sometime in February. Check our Tax Training Resources webpage for updated information.

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.

Property and casualty insurance companies authorized by the Texas Department of Insurance to write automobile insurance under Insurance Code, Art. 5.01(e) must report and pay this assessment on or before March 1, 2019, for policies effective from July 1, 2018, through Dec. 31, 2018. Companies licensed to write automobile coverage must file the tax form, even if no assessment is due. Refer to Form 25-107 (PDF) and the Insurance FAQs for additional information.

The annual insurance premium and maintenance tax reports and payments for licensed insurance companies and miscellaneous organizations are due on or before March 1, 2019.

Also due March 1, 2019, are the annual insurance premium tax reports and payments for Texas licensed surplus lines agents and agencies, and for entities required to report unauthorized insurance premium taxes.

Taxpayers required to report electronically and those who voluntarily reported their taxes electronically for two consecutive years do not receive a paper tax report. Instead, the insurance company receives an email reminder about the filing deadline.

Taxpayers who are not required to file electronically will receive paper tax reports before the end of January 2019.

In January 2019, for tax year 2018, all licensed insurance companies will receive a statement showing the available guaranty association assessment credits, including any remaining Texas Windstorm Insurance Association (TWIA) and Certified Capital Company (CAPCO) credits.

Veterinarians may offer a variety of services from animal treatments to boarding. In addition to services, they may also sell a variety of items to patients in their clinics, as well as to customers who walk in for purchases. This article explains the taxability of their services, as well as the taxability of the items they purchase and sell when performing their services.

Medical Services – Not Taxable

A veterinarian’s professional medical services are not taxable.

Examples of nontaxable veterinarian services include:

• acupuncture
• chiropractic treatment
• counseling (nutritional, behavioral)
• cremation
• dental treatment
• euthanasia
• grooming due to medical necessity
• laboratory services
• medical exams, procedures and surgeries
• radiology
• reproductive services (semen collection, semen analysis, artificial insemination, embryo transfer, embryo freezing)

Nonmedical Services – Taxable

Nonmedical grooming services are taxable, even when done by a veterinarian or veterinary staff.

Examples of taxable nonmedical grooming services are baths that include routine expressing of anal glands, nail trimming and similar pet maintenance services.

Medically Necessary Services – Not Taxable

• Grooming services that are medically necessary are not taxable. These include:
  • shaving an animal to control or treat mange, scabies or similar disease;
  • shaving an animal that is so severely matted that the hair must be removed in order to provide medical examination or service; and
  • nonroutine expressing of impacted anal glands.
• Animal boarding and pet sitting are not taxable services. Unless another exemption applies, persons who provide boarding and pet sitting services owe tax on supplies, materials and equipment used to provide their services.

Supplies

Even though veterinarians’ medical services are not taxable, they must pay tax on most of the equipment, materials and supplies used to provide their nontaxable services. For example, tax is due on office equipment, as well as X-ray machines, scalpels and similar medical tools.

Exempt Items

Pet Sales

Sales of pets are taxable, unless the pet is adopted from a nonprofit animal shelter. Pets are animals such as dogs, cats, guinea pigs, mice, rabbits, fish (that do not ordinarily constitute food for human consumption) and reptiles.
[Editor's note: This also includes pets adopted from animal rescue groups effective 10/01/2021, S.B. 197, 87th Reg. Legislative Session (2021).]

Sales of horses, mules and work animals, as well as livestock that ordinarily constitutes food for human consumption, are not taxable.

Agricultural Items – Exempt

Equipment exclusively used on a farm or ranch to produce agricultural products for sale is exempt. This includes the production of horses held for sale.

This exemption also includes veterinary tools used exclusively on a farm or ranch for the care or treatment of farm and ranch animals, such as cattle, goats, swine, horses and herd dogs. Veterinarians who make farm and ranch calls can give an exemption certificate (PDF) to their suppliers when claiming the exemption for equipment used exclusively for such care or treatment on a farm or ranch.

Agricultural Items – Not Exempt

Items used to provide treatment for pets or wildlife that are not agricultural products are taxable, even if the animals are on a farm or ranch.

Veterinarians buying taxable items for use in their offices or other locations outside of a farm or ranch, such as a show arena or boarding facility, must pay tax on those items, even if those items are sometimes used on a farm or ranch to care for qualifying agricultural animals.

For example, a veterinarian can give an exemption certificate to their supplier for diagnostic testing kits that will be exclusively used on a farm or ranch. If the veterinarian also uses them on non-agricultural animals or away from the farm or ranch, then tax is due.

More Information

• Texas Tax Code Section 151.313 – Health Care Supplies
• Rule 3.284 – Drugs, Medicines, Medical Equipment, and Devices
• Publication 94-101 – Tax Exemptions for Agriculture

Wood shavings are used at many fairs and festivals for animal comfort and bedding. As a convenience, these types of events sometimes sell wood shavings to the participants.

There is an agricultural exemption for wood shavings used exclusively on a farm or ranch. This exemption does not extend to wood shavings, or other agricultural products, sold to participants for use at fairs, festivals and events.

More Information

• Texas Tax Code Section 151.316 – Agricultural Items
• Publication 94-101 – Tax Exemptions for Agriculture

The Earned Income Tax Credit (EITC) is a federal program for working people with low to moderate income, even if they do not owe tax or are not required to file a tax return. The credit reduces the amount of tax owed and could provide a refund.

Information about the credit for 2018 is now available in both English and Spanish on our Earned Income Tax Credit (EITC) webpage. We also provide printable EITC posters for employers to share with their employees.

Delinquent taxes accrue interest beginning on the 61st day after the due date until paid. For 2019, the interest rate on taxes owed is 6.5 percent. 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.

To see the latest items added to our State Tax Automated Research (STAR) system, use the New Documents link on the STAR home page for access to the Monthly Updates Search Form.

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.

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