The Comptroller's office publishes this 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.
We’re thankful to those businesses that have and continue to remit state and local sales taxes they collected from customers during the time periods prior to April 1, 2020. We understand that virtually all of our taxpayers are doing their best to remain in compliance and be responsible in submitting the taxes they collected from their customers prior to the imposition of the changes related to addressing the impact of the COVID-19 virus.
Our agency is here to offer assistance to those businesses that are struggling to pay the full amount of sales taxes they collected from their customers prior to April 1, 2020, as a result of COVID-19 restrictions. For businesses that find themselves in this situation, our agency is offering assistance in the form of short-term payment agreements and, in most instances, waivers of penalties and interest.
We ask that you file the sales tax returns that were due on April 20, 2020, make a good faith partial payment and contact our Enforcement Hotline at 800-252-8880 to learn about your options for remaining in compliance and avoiding interest and late fees on taxes due.
We understand the closures and/or reduced ability to operate was unexpected and sudden, impacting taxpayers’ business finances and operations. But it is important to remind all taxpayers that state and local sales taxes collected from their customers are trust fund revenues and, by law, are not intended to be used by businesses as operating funds. Please keep in mind that the sales taxes that taxpayers are continuing to collect from consumers in their current ongoing limited operations after April 1, 2020, will be due on the applicable future due dates with an expectation of full payment of the collected taxes.
We strongly encourage you to use our online tools, tutorials and other resources for tax services, and establish 24/7 account access on Webfile.
We’re standing by to help Texas businesses during these difficult times.
Please visit our COVID-19 News page for updated information on
Webfile makes it easy to submit tax reports, make payments, request extensions, 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:
See our Insurance Premium Tax (Independently Procured) page for information on requesting an extension due to COVID-19.
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.
Natural disasters will continue to happen, even while we battle COVID-19. Prepare yourself during the 2020 Emergency Preparation Supplies Sales Tax Holiday for emergencies that can cause physical damage like hurricanes, flash floods and wildfires. You can purchase certain emergency preparation supplies tax free during the sales tax holiday. There is no limit on the number of qualifying items you can purchase, and you do not need to issue an exemption certificate to claim the exemption.
This year’s holiday begins at 12:01 a.m. on Saturday, April 25, and ends at midnight on Monday, April 27.
To encourage social distancing, the Texas Comptroller’s office wants all taxpayers to know that during the Emergency Preparation Supplies Sales Tax Holiday, the sale of emergency preparation supplies purchased online or by telephone, mail, custom order, or any other means other than in person qualifies for sales tax exemption when either
A retailer accepts an order when the retailer has acted to fill the order for immediate shipment.
An order is for immediate shipment regardless of whether the shipment is delayed due to a backlog of orders, or because stock is currently unavailable to, or on back order by, the retailer.
The Comptroller strongly encourages all taxpayers buying emergency preparation supplies at their local retailers during the sales tax holiday to practice appropriate social distancing as described in the Center for Disease Control and Prevention guidelines.
These emergency preparation supplies qualify for tax exemption if purchased for a sales price:
Less than $3000
Less than $300
Less than $75
Note: Several over-the-counter self-care items, such as antibacterial hand sanitizer, soap, spray and wipes, are always exempt from sales tax if they are labeled with a “Drug Facts” panel in accordance with federal Food and Drug Administration (FDA) regulations.
These supplies do not qualify for tax exemption:
Delivery, shipping, handling and transportation charges are part of the sales price. If the emergency preparation supply being purchased is taxable, the delivery charge is also taxable. Consider these charges when determining whether an emergency preparation supply can be purchased tax free during the holiday.
For example, you purchase a rescue ladder for $299 with a $10 delivery charge, for a total sales price of $309. Because the total sales price of the ladder is more than $300, tax is due on the $309 sales price.
Our last webinar, "Online Sales and Remote Sellers," highlighted the changes that occurred in Texas resulting from the U.S. Supreme Court’s decision in South Dakota v. Wayfair. A recording of this webinar is available on our Tax Training Resources webpage.
Our next webinar, “Sales Tax Exemptions for Healthcare Items,” will highlight the sales tax exemptions available for a variety of healthcare items such as medicines, medical equipment and devices. We will also discuss what is needed to claim an exemption for these purchases. The webinar will be held on Wednesday, June 24, 2020. This webinar is available at the following times:
We also offer video tutorials on filing and paying sales tax through Webfile. View them on our Video Tutorials webpage.
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, see the Taxpayer Seminars webpage.
Please note that in response to Governor Abbot’s directive that all state agency-related conferences should be postponed until further notice, all taxpayer seminars originally scheduled for March and April are canceled. We will provide information related to future seminars on the Taxpayer Seminars webpage as they are scheduled..
Visit our Tax Training Resources webpage to
In the November issue of Tax Policy News, we highlighted a policy change regarding medical billing services. Texas Comptroller Glenn Hegar has determined that we will delay implementation of the policy change until after the 2021 legislative session, allowing industry time to seek a legislative change. Until that time, the policy remains that medical billing services that occurred before a claim was submitted are not taxable insurance services.
Medical billing services involve multiple functions, such as: assigning codes for the preparation of claims, verifying insurance eligibility, preparing claim forms for filing, filing claims, resubmitting and adjusting claims, reviewing and appealing denied claims, settling claims, and posting payment for a claim. These services are sometimes performed by an in-house employee, but they are often outsourced to a third-party vendor.
Until 2002, the Comptroller considered medical billing services to be taxable. However, in 2002 the agency determined that claim processing does not begin until receipt of a claim by an insurance company. Therefore, medical billing services that occurred before the claim was submitted were not taxable. The reason for this policy change is unknown.
The policy was revisited in 2019 and it was determined that the preparation of a claim is considered an insurance service in every scenario except medical billing. The 2002 policy change resulted in disparate treatment between medical insurance and other types of insurance. Neither Tax Code Section 151.0039 or Rule 3.355(a)(8) exclude the completion of the form for the insured for a medical insurance claim from the definition of insurance claims adjustment for processing.
As stated above, the Comptroller will delay implementation of the policy change on medical billing services until after the 2021 legislative session, allowing industry time to seek a legislative change. This policy will go into effect on Oct. 1, 2021 if a legislative change is not enacted.
Pet boarding and pet day care are not taxable services, but the items pet boarders sell or other services they offer may be taxable.
When providing nontaxable pet boarding services, service providers owe tax when buying items they use to provide those services, including
If pet boarders sell items to their customers, the boarders must have Texas Sales and Use Tax Permits and collect sales tax on the charges for the taxable items.
These items include
When buying items to resell to customers, pet boarders may give resale certificates to their suppliers instead of paying the sales tax.
Pet grooming and cleaning are taxable services. These service providers must also have Texas sales tax permits and collect and remit sales tax on their services.
Taxable grooming services include
There are two instances when animal grooming is not taxable. If the animal being groomed is a work animal (e.g., service animal) or the grooming is medically necessary and performed as part of veterinary services, these services are not taxable (See January 2019 Tax Policy News article – Veterinarian Sales and Services). Groomers may accept valid and properly completed exemption certificates from clients claiming an exemption for a work animal instead of collecting sales tax.
The Comptroller’s office filed the following rules for adoption with the Secretary of State:
Rule 3.711– Battery Sales Fee Collection and Reporting Requirements
Publication date – May 1, 2020
Effective date – May 1, 2020
Rule 3.101– Cigarette Tax and Stamping Activities
Publication date – April 17, 2020
Effective date – April 20, 2020
Rule 3.74– Seller Responsibility
Publication date – April 10, 2020
Effective date – April 19, 2020
Rule 3.731– Imposition and Collection of the Oil Fee
Publication date – March 27, 2020
Effective date – March 30, 2020
Rule 3.732– Reporting Requirements for the Gas Fee
Publication date – March 27, 2020
Effective date – March 30, 2020
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