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.

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 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.

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.

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 will be available on our Tax Training Resources webpage in April.

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 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.

Annual franchise tax reports are due May 15. Beat the rush to file your franchise tax report or request an extension of time to file – Webfile is available now!

Webfile makes it easy to request extensions, submit tax reports, make payments, file final reports or request tax clearance letters. Your Webfile account allows you to view a summary of your transactions. You can find your franchise tax Webfile number (which starts with "XT") on the franchise tax upcoming due date reminder letter we mailed in February.

You can also call 800-442-3453 at any time to get your XT number via an automated system. When you call, be sure to have your 11-digit taxpayer number and identifying information, such as total revenue from a previous report or the amount of the last tax payment you made (cannot be zero).

The following video tutorials will help you with filing Franchise Tax:

• How to Create Webfile Account, Electronically File and Pay Franchise Taxes
• How to File a No Tax Due Information Report
• How to Find Your 11-Digit Franchise Taxpayer Number

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. You can refer to the February Tax Policy News for the first article in our series.

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 2 – Salvage Vehicles

What is a salvage vehicle?

A salvage vehicle is a motor vehicle that:

• has damage to, or is missing, major component parts – and the cost of repairs exceeds the actual cash value of the motor vehicle; or
• is brought into Texas with an out-of-state salvage motor vehicle title or similar out-of-state ownership document.

For tax purposes, an unrepaired salvage vehicle is not considered a motor vehicle when it has:

• a salvage vehicle title issued under Chapter 501, Transportation Code;
• a certificate of authority for an abandoned motor vehicle issued under Chapter 683, Transportation Code; or
• been declared a total loss by an insurance company as part of a settlement or adjustment of a claim.

An unrepaired salvage vehicle is not a motor vehicle and is instead tangible personal property.

What tax is due on a salvage vehicle?

Since an unrepaired salvage vehicle is tangible personal property, the purchase of an unrepaired salvage vehicle is subject to Texas limited sales and use tax. The sales tax rate is composed of the state tax rate (6.25 percent) and any local tax due (up to 2 percent). The amount of sales tax due is based on the salvaged unit’s purchase price.

Who is responsible for the tax?

The person who purchased the unrepaired salvage vehicle is responsible for paying sales tax to the Texas seller, if the seller is a dealer or an individual who holds a Texas sales and use tax permit. If you buy an unrepaired salvage vehicle from a Texas seller who is a dealer or an individual who holds a permit, and they do not collect sales tax, or you buy an unrepaired salvage vehicle outside Texas for use here, you must pay use tax directly to the Comptroller’s office.

If, however, the transaction meets the definition of an occasional sale, no sales or use tax is due.

The seller, in an occasional sale, will fill out Form 01-917, Statement of Occasional Sale (PDF) to keep in their records.

What happens when I repair a salvage vehicle?

When you repair a salvage vehicle, you are repairing tangible personal property. The total charge for these repairs (including labor) is taxable.

When you have completely repaired a salvage vehicle, and you are ready to get a motor vehicle title from your Texas County Tax Assessor-Collector (TAC), you do not owe motor vehicle tax or limited sales and use tax.

What documentation is required?

A person who repairs a salvage vehicle needs to identify the repair work done to the vehicle using Texas Department of Motor Vehicles (TxDMV) Form VTR-61, Rebuilt Vehicle Statement. The completed form must be submitted to the county TAC with Form 130-U, Application for Texas Title and/or Registration, ownership evidence, and any other documents required by TxDMV.

If I decide to sell my vehicle, is tax due?

Once you have repaired the vehicle, a sale of the rebuilt salvage vehicle is subject to motor vehicle sales and use tax. The purchaser is responsible for paying the motor vehicle tax to the county TAC upon titling and registering the motor vehicle.

Looking Ahead

In Part 3 of our motor vehicle tax series, we will discuss motor vehicle exemptions, including who qualifies for exemption, and the different types of exemptions.

More Information

• Motor Vehicle Tax Guide
• Rule 3.292 - Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property
• Rule 3.286 - Seller's and Purchaser's Responsibilities, including Nexus, Permits, Returns and Reporting Periods, and Collection and Exemption Rules

Sometimes, the process to purchase a motor vehicle can be challenging and time consuming. Our office regularly receives questions about how to handle military, diplomatic, consular and NATO personnel motor vehicle purchases.

Vehicle Purchases by Military Personnel

When a dealership sells a motor vehicle to United States military personnel and most foreign military personnel (other than NATO personnel), the purchase is subject to motor vehicle tax when the dealer registers the vehicle in Texas for the owner.

The domicile and legal residence for United States military personnel is the person's "home of record" as designated in the person's military records. When a dealer sells a motor vehicle to military personnel residing in Texas, or with Texas as the home state of record, motor vehicle sales tax is due on the purchase.

Note that a Texas military person who is stationed outside Texas, but chooses to register a vehicle in Texas, is also subject to motor vehicle tax, since the motor vehicle is presumed to be for use in Texas.

Vehicle Purchases by Foreign Diplomatic Officials and Consular Officers

An exemption from motor vehicle tax applies to foreign consular officers, consular administrative technical employees and certain consular family members.

The U.S. Department of State’s Office of Foreign Missions handles all diplomatic tax exemptions. The Department of State issues tax exemption cards to foreign consulates and certain consulate family members who qualify for diplomatic exemption from state and local taxes. An exemption card includes picture identification and an explanation of exemption(s), and is color-coded. The Department of State, not a local government office, determines all tax exemptions and the consulates that qualify for specific tax exemptions.

The Comptroller’s Motor Vehicle Tax Guide (PDF) explains the exemption in relation to motor vehicle tax. To grant a motor vehicle tax exemption, foreign consular officers, consular administrative technical employees or certain consular family members must apply directly to the Office of Foreign Missions for motor vehicle titles and registration. Motor vehicle tax would be due if the consular official obtained a Texas Certificate of Title and regular registration from a dealership via the Texas County Tax Assessor-Collector (TAC). The Office of Foreign Missions completes the required motor vehicle titling and registration, not a local government office.

Dealerships must contact the Office of Foreign Missions for a determination on the tax-exempt status of their customer. The Office of Foreign Missions will provide dealerships a statement indicating the tax-exempt status of the purchaser. Once a dealer has that statement, they can exempt motor vehicle tax from the purchase of the vehicle. For questions regarding titling and registration of these vehicles, contact the Diplomatic Motor Vehicle Office.

Note there is an exception for motor vehicles purchased by Taiwan consulate officials. Dealerships, via the county TAC, can title and register these vehicles. If a Taiwanese official has an appropriate tax-exemption card, motor vehicle taxes will not be due.

Dealerships must keep a copy of the Office of Foreign Mission’s statement in their records for four years from the date of purchase. If there is a denial of the exemption, then dealerships must collect and remit the motor vehicle tax.

Vehicle Purchases by Members of NATO

Foreign NATO personnel stationed in Texas on official orders are exempt from motor vehicle sales tax. Persons qualified under the NATO exemption include foreign military personnel, foreign military dependents and military-employed civilians attached to the NATO forces of certain countries.

Any persons claiming a NATO exemption must provide dealerships proof that they are qualified, and they must have identification indicating they are qualified.

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