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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

February 2020

The Comptroller's office publishes this online 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...

Announcements

New Veteran-Owned Businesses and Texas Franchise Tax

An entity formed on or after Jan. 1, 2020 cannot qualify as a new veteran-owned business, eligible for the franchise tax exemption. The provision has expired. A new veteran-owned business that first qualified before Jan. 1, 2020, continues to be exempt for its initial 5-year period. Visit our New Veteran-Owned Businesses and Texas Franchise Tax page for more information.

Cigarette/Tobacco Non-Retailer Permit Renewals

Current cigarette and tobacco products non-retailer permits expire Feb. 29, 2020.

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, 2020, through Feb. 28, 2021.

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.

Since March 1, 2020 is a Sunday, the renewal fee is due March 2, 2020. A $50 late filing fee will be assessed on non-retailer renewals postmarked after March 2, 2020.

Federal Income Tax Returns – Sales Tax Deductions

If you itemize deductions on your 2019 income tax return, you have the option of claiming a deduction for state and local sales taxes paid during 2019. See the IRS Sales Tax Deduction Calculator for more information on claiming the deduction.

Tax Training Resources

Podcast Episodes, Webinars, Videos and Seminars

Webinars

Our last webinar, "Online Sales and Remote Sellers," was held on Dec. 10, 2019. This webinar highlighted updates from the 86th Texas Legislature. A recording of this webinar is available on our Tax Training Resources webpage.

Videos

We also offer video tutorials on filing and paying sales tax through Webfile. View them on our 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, see 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

Cigarette and Tobacco Tax

Minimum Age for Sale of Tobacco Products – Federal Update

On Dec. 20, 2019, President Trump signed legislation amending the Federal Food, Drug, and Cosmetic Act to increase the federal minimum age from 18 to 21 for the sale of tobacco products, including cigarettes, cigars and e-cigarettes, with no exceptions. This legislation became effective immediately.

The Texas Legislature increased the legal age from 18 to 21 for the sale, distribution, possession, purchase, consumption or receipt of cigarettes, e-cigarettes or tobacco products. This legislation was effective Sept. 1, 2019. See Senate Bill 21.

Although Texas law provides exceptions to the 21-year age requirement for individuals who are 18 and in the United States or state military forces and individuals who were born on or before Aug. 31, 2001, these exceptions are not found in the federal statute. Based on the new federal legislation, selling to any person under 21 is a violation of federal law. See the FDA website for more information.

The Comptroller of Public Accounts will continue to enforce state law, including requiring the posting of warning notice signs with the statutory language and completion of employee notification forms. The Comptroller will provide new or supplemental signage to retailers to address the federal age requirements. Please visit our Tobacco Taxes and Fees page for updated information.

Sales and Use Tax

Educational Products and Services
There are many resources available in stores and online for people looking to increase their knowledge or get additional learning materials for their classroom. In this article, we will discuss the tax treatment for retailers or sellers of educational products and services. Depending on the items and services you sell or provide, you may be required to collect, remit, and report Texas sales and/or use tax.

Taxable Items

Some common taxable educational materials that you may sell include

  • books or textbooks
  • learning manipulatives (geometric shapes, pattern blocks, etc.)
  • lesson plans
  • other handouts or materials

In Texas, these educational materials, whether digital or physical, are taxable items. Any related fees (such as shipping or handling charges) billed in connection with the sale of the taxable item are also taxable.

Local sales and/or use taxes may also be due on the sale of these items depending on where you receive the order, where you fulfill the order, or where you ship or deliver the taxable item. For additional information on local sales and use tax see Pub. 94-105, Local Sales and Use Tax – A Guide for Sellers (PDF). You can use our online Sales Tax Rate Locator to find the tax rate for a specific address.

Items delivered out-of-state are not subject to Texas sales tax. However, a seller may need to collect another state’s sales or use tax if the seller is considered “engaged in business” in that state. All states have different tax regulations for the collection of sales and use tax.

The Multistate Tax Commission website provides links to other state’s tax websites. You may also visit the Streamlined Sales Tax Governing Board’s website for remote seller guidelines for each state.

Out-of-State Sellers and Safe Harbor

If you are an out-of-state seller with no physical presence in Texas, then you are a remote seller. If you, as a remote seller, have $500,000 or more in total sales into Texas during the prior twelve months, you must apply for a Texas use tax permit and collect use tax from Texas customers. All sales, including items shipped to and downloaded within Texas, contribute to this total sales amount.

If you are a remote seller and you have less than $500,000 in total sales into Texas during the prior twelve months, you meet the safe harbor provision and are not responsible for collecting Texas tax and are not required to have a Texas use tax permit. Instead, your Texas customer is responsible for remitting Texas use tax directly to the Comptroller’s office using Form 01-156, Texas Use Tax Return.

Nontaxable Services

In general, standalone charges for training or educational services, which are primarily instructional in nature, are not taxable. Some examples of nontaxable training or educational services include

  • a course that provides accreditation, certification, or continuing education credit based on the learner’s final test (or assessment)
  • online training courses
  • webinar training programs during which participating viewers can submit and receive responses on questions from the presenters

If you provide nontaxable training or educational services and include complimentary instructional materials or other items, or include the items in the sales price of the training, you must pay tax on these items when you purchase them. If you create the materials yourself, you owe tax to your suppliers when buying any items (i.e., paper, ink, printing, and binding charges, etc.) used to create the training materials. If you separate the price of the training materials from the price of the training, you can give a properly completed resale certificate for any items that you resell to your customers, and you must collect tax on these items. You must have an active sales tax permit to sell taxable items and to give a resale certificate to your suppliers in lieu of paying tax on these purchased items.

Note the following example:

Lump Sum
Class + Materials $100.00*
Total $100.00 

*You owe tax on the materials.

Separated
Class $90.00   
Materials $10.00**
Tax (8.25 percent) $0.83   
Total $100.83   

**You can give a resale certificate to your supplier in lieu of paying tax on the materials you purchased.

More Information

Off-Highway Vehicles

This article discusses the separate responsibilities for buyers, manufacturers and county tax assessor-collectors (CTACs) regarding new off-highway vehicles (OHVs) purchased outside Texas for use in this state.

So, what are OHVs? Types of OHVs include

  • all-terrain vehicles (ATVs)
  • off-highway motorcycles
  • off-highway recreational vehicles (OHRVs)
  • sand rails
  • utility vehicles (UTVs)

Buying Off-Highway Vehicles

Are you considering purchasing an off-highway vehicle (OHV)? You may not know that unless a valid exemption applies (which you must document and claim), you owe

  • sales tax when buying from a Texas retailer or dealer; or
  • use tax to the Texas Comptroller’s office when buying from an out-of-state retailer or dealer for use in this state.

Everyone buying a new or used OHV from an out-of-state retailer or dealer is responsible for paying the use tax due to the Comptroller’s office, unless an exemption applies. Due to recent legislation, however, if you buy a new OHV from an out-of-state retailer or dealer, you are required (as of March 1, 2020) to do the following to obtain a title for the OHV:

  • pay the use tax to the Comptroller’s office; and
  • present the tax-paid receipt to your local county tax assessor collector to prove tax was paid.

To receive a receipt acknowledging your payment of the use tax for a new OHV purchased from an out-of-state retailer, you can file and pay online; or submit Form 01-163, Texas Use Tax Return – For New Off-Highway Vehicles Purchased From Out-Of-State Retailers (PDF)

  • in person at a local field office; or
  • by mail to:
    Texas Comptroller of Public Accounts
    Attn: Off-Highway Vehicle Use Tax
    111 E 17th Street
    Austin TX 78774-0100

The use tax due includes the state use tax rate of 6.25 percent and up to 2 percent local use taxes. Where the buyer first uses or stores the OHV determines which local use tax rates apply. Use our tax rate locator to determine the state and local use tax rate.

Note: Buyers can take a credit against the use tax due to Texas for sales and use tax due and paid to other states.

Use tax does not apply to exempt purchases that a buyer claims and properly documents. Examples of valid exemptions include purchases made

The Use Tax for New Off-Highway Vehicles Purchased From Out-of-State Retailers webpage has additional information. For information regarding titling your OHV with the TxDMV, visit the TxDMV website.

Off-Highway Vehicle Manufacturers’ Reporting

Beginning March 1, 2020, Texas law requires a manufacturer of off-highway vehicles (OHVs) to file an annual information report with the Comptroller’s office when the OHV manufacturer is licensed by the Texas Department of Motor Vehicles (TxDMV).

This annual report is due on March 1* and must include warranty information for OHVs purchased from retailers or dealers located outside Texas and warrantied for use in this state during the previous calendar year. The OHV manufacturer must file the report electronically using the Comptroller’s eSystems program, regardless of whether it warrantied any OHVs in Texas during the previous calendar year.

*Please note that the deadline for 2020 reporting has been extended to April 1, 2020.

For more information, see the Manufacturer’s Off-Highway Vehicle Warranty Report webpage.

County Tax Assessor-Collectors

As of March 1, 2020, when the buyer of a new off-highway vehicle (OHV) purchased from an out-of-state retailer submits an Application for Texas Title to their local county tax assessor collector (CTAC) to title the OHV, the buyer must provide proof they paid use tax to the Comptroller’s office (CPA).

While the CTAC is responsible for verifying tax was paid using a CPA-issued tax-paid receipt before titling the OHV, it is not responsible for collecting the use tax due for the OHV, or issuing the tax-paid receipt. Taxpayers may claim tax exemptions (as stated above). CTACs can verify those claiming exemptions using the following search tools:

More Information

Rules

Proposed

The Comptroller's office proposed the following rules for public comment through the Texas Register:

Cigarette Tax

Rule 3.101– Cigarette Tax and Stamping Activities
Publication date – Feb. 28, 2020
Comment period end date – March 29, 2020

Oil Field Cleanup Regulatory Fee

Rule 3.731– Imposition and Collection of the Oil Fee
Publication date – Feb. 7, 2020
Comment period end date – March 8, 2020

Rule 3.732– Reporting Requirements for the Gas Fee
Publication date – Feb. 7, 2020
Comment period end date – March 8, 2020

Adopted

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

Cigar and Tobacco Tax

Rule 3.121– Definitions, Imposition of Tax, Permits, and Reports
Publication date – March 13, 2020
Effective date – March 16, 2020

Cigarette Tax

Rule 3.102– Applications, Definitions, Permits, and Reports
Publication date – March 13, 2020
Effective date – March 16, 2020

Mixed Beverage Tax

Rule 3.1002– Mixed Beverage Sales Tax
Publication date – March 13, 2020
Effective date – March 16, 2020

Motor Fuel Tax

Rule 3.441– Documentation of Imports and Exports, Import Verification Numbers, Export Sales, and Diversion Numbers
Publication date – March 13, 2020
Effective date – March 16, 2020

Natural Gas

Rule 3.30– Natural Gas Tax Managed Audits and Determination of Overpaid Amounts
Publication date – Feb. 28, 2020
Effective date – March 2, 2020

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.

We support: