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Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts

taxes

Tax Policy News

December 2020

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.

In This Issue...

COVID-19 News

Comptroller COVID-19 Response

The Comptroller’s office understands the tremendous strain the pandemic and its related closures have placed on businesses throughout our state. We’re grateful that virtually all our taxpayers are doing their best to remain in compliance with Texas tax requirements, and we want to ease this burden whenever possible.

We will continue to extend the payment deadline for the motor vehicle tax due on purchases until the Governor’s state disaster declaration expires. Any tax penalty will be automatically waived if the tax payment is received within 60 days of the expiration of the state disaster declaration.

For businesses struggling to pay the full amount of sales taxes they collect from customers, a short-term payment agreement may be available.

We continue to stand with and assist our Texas businesses during these difficult times.

For more information on these accommodations in addition to other COVID-19 related information, please see

Notifications

Certification of the Single Local Use Tax Rate for Remote Sellers – 2021

The Comptroller of Public Accounts, administering agency for the collection of the Single Local Use Tax Rate for Remote Sellers, has determined, as required by Tax Code, Section 151.0595 (e), that the estimated average rate of local sales and use taxes imposed in this state during the preceding state fiscal year ending August 2020 is 1.75%. This rate will be in effect for the period of January 1, 2021 to December 31, 2021.

Permitted Terminal Operators Search – Available Online!

The Permitted Terminal Operators Search is now available! Taxpayers can verify terminal operator status prior to filing their fuel returns, which will help reduce reporting errors. The Permitted Terminal Operators Search can be found on the Diesel Fuel webpage, under Additional Resources on the Fuels Tax Licenses and Signed Statement Number Registration section. Taxpayers can search for permitted terminal operators by name, taxpayer number or terminal number.

Reminders

Certificate of Account Status – Webfile

Recent upgrades to the Webfile system make it easier to obtain a Certificate of Account Status online. Taxpayers can file their annual and final reports and then request a Certificate of Account Status the same day. If you do not owe any outstanding reports or payments, you may also conveniently obtain your certificate using Webfile.

The certificate will be available for immediate download. Using this self-service option is more convenient and avoids the delays of mailing and processing.

Due Date for 2020 Franchise Tax Extended Filers

As a reminder, due to the COVID-19 pandemic, non-electronic funds transfer (non-EFT) franchise taxpayers that did not file their franchise tax return by July 15 but requested an extension before that date; and paid 90 percent of the tax due for the current year, or 100 percent of the tax reported as due for the prior year; have until Jan. 15, 2021, to file their report and pay the remainder of the tax due.

Additionally, franchise taxpayers that are mandatory electronic funds transfer taxpayers that requested a second extension of time to file their return by Aug. 15 and paid their tax due; have until Jan. 15, 2021, to file their report.

Notice for 2021 Franchise Tax Filers

Most franchise tax filers will receive an email in lieu of a mailed reminder to file or seek an extension on or before the May 17, 2021 due date. If we do not have your email address on file (if you are a first-year filer, for example), we will mail a reminder notice to you. Electronic filing is highly encouraged for faster account updates and is mandatory for no-tax-due returns.

Is your contact information up to date?

If your contact information is outdated, you might be missing out on important news. Take a few minutes today to make sure your information is accurate.

  • Visit our Webfile eSystems Login webpage.
  • Sign in and select "WebFile/Pay Franchise Tax." Select the taxpayer number from the list.
  • Access "Change Franchise Tax Mailing Address" to update your email address and/or mailing address if needed.

Sales and Use Tax

Solar Energy Devices – Sales and Installation

Many Texans are making the switch to solar energy devices as a source of renewable energy for their residential or commercial buildings, which means more companies are involved in the solar business than ever before. If you sell or install solar energy devices, this article provides need-to-know information about your sales tax responsibilities.

Solar Energy Device Sales

Sales of solar energy devices are taxable as tangible personal property. If your business sells these devices (e.g., solar panels, solar arrays), you must apply for a Texas sales and use tax permit and collect sales tax from your Texas customers as discussed below.

Solar Energy Device Installation

The tax treatment of solar energy device installation and the materials providers purchase to provide this service depends on the following:

  • the type of property being worked on
  • the type of job (e.g., repair, new construction)
  • the type of contract given to your customer

Existing Nonresidential Installation

If you are selling solar energy devices and installing them on an existing nonresidential (i.e., commercial) building, the total charge (i.e., labor and materials) is taxable as nonresidential remodeling. You can issue a resale certificate, Form 01-339 (front) (PDF), to your vendor to purchase incorporated items (such as solar energy devices) tax free, and must collect sales tax from your customer on your total charge. It makes no difference whether you use a lump sum or separated contract with your customer.

Local sales tax is due based on the taxing jurisdictions in effect at the jobsite. You can use our online Sales Tax Rate Locator to verify the tax rate for a specific address.

New Construction or Residential Installation

If the installation is performed on a residential structure or is part of a new construction job (either residential or nonresidential), your tax responsibility depends on how you invoice your customer.

Lump-Sum Contract – If you use a lump-sum contract (i.e., one price for labor and materials), you owe sales tax on the incorporated materials and you do not collect sales tax from your customers on the lump-sum charge.

Separated Contract – Under a separated contract (i.e., labor and materials), you are reselling any materials incorporated into your customer’s realty. This means that you can purchase the incorporated items tax free by issuing a resale certificate (PDF) to your vendor, and will collect tax from your customer on the materials charge only. Local sales tax is due based on the taxing jurisdictions in effect at the jobsite. You can use our online Sales Tax Rate Locator to verify the tax rate for a specific address.

More Information

Tire Disposal – What Retailers and Consumers Need to Know

Texas does not impose a tire disposal fee. Texas tire retailers may choose, however, to charge a disposal fee when selling new or used tires to cover their expenses for disposing of scrap tires.

The sale of a tire is a taxable sale of tangible personal property. If a tire retailer sells and installs new or used tires under a separated contract (i.e., labor and materials separately stated) and charges a "tire disposal fee" to dispose of the old tire, the retailer collects sales tax on the amount billed the customer for the tire, disposal fee and any other charges or fees related to the tire sale. The retailer does not collect sales tax on the separately billed labor charge to install the tire or on labor charges to repair or maintain the motor vehicle.

For example, a repair shop services a customer’s vehicle. They perform a vehicle diagnostic check and replace a worn tire with a new one. Their invoice itemizes their services and fees (i.e., separately states) to include

  • $90 labor fee for the vehicle diagnostic check
  • $200 for a new tire
  • $45 labor fee for tire installation
  • $2 tire disposal fee to scrap the old tire

Using a separated contract, the retailer collects sales tax for the new $200 tire charge and $2 tire disposal fee for the scrap tire. No sales tax is collected on the $90 vehicle diagnostic check or the $45 labor for tire installation.

If a retailer uses a lump-sum contract for their tire sale and installation, without listing the separated charges on their invoice, then the retailer owes use tax on the new tire and any other materials purchased to repair or maintain the motor vehicle. No sales tax is collected from the customer.

More Information

State Tax Automated Research (STAR) documents 9712119L and 200504141H
2020 Federal Income Tax Returns – Sales Tax Deductions

If you itemize deductions on your 2020 income tax return, you have the option of claiming a deduction for state and local sales taxes paid during 2020. See the IRS Sales Tax Deduction Calculator for more information on claiming the deduction. For guidance regarding U.S. taxes, please consult the IRS website, or contact an IRS representative by phone at 800-829-1040.

Tax Training Resources

Resources for Texas Taxpayers

Our office offers video tutorials on filing and paying sales tax through Webfile. View them on our Video Tutorials webpage.

The Texas Comptroller's office also offers virtual Taxpayer Seminars using Webex Events. New taxpayers are especially encouraged to attend these overviews of tax responsibilities for buyers, sellers, and service providers. For more information, visit the Taxpayer Seminars webpage.

Visit our Tax Training Resources webpage to

  • find out more about our training resources
  • register for upcoming webinars
  • view the Podcast and Webinar Archive sections for previous recordings

State Tax Automated Research System

STAR Watch

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

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.

More Information

Help is just a click away! Use our website to take care of business.

Taxes

The Taxes webpage has links to

  • all Texas taxes and fees
  • resources for taxpayers
  • filing and paying taxes
  • tax laws and rules
Taxpayer Seminars and Videos

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.

Practitioners’ Corner

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

HB855 Browser Statement

In 2015, the Texas Legislature passed House Bill 855, which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Texas Comptroller’s most commonly used Web browsers are Google Chrome, Microsoft Internet Explorer and Apple Safari.

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