Glenn Hegar
Texas Comptroller of Public Accounts
Glenn Hegar
Texas Comptroller of Public Accounts
Skip navigation
Glenn Hegar
Texas Comptroller of Public Accounts
Skip navigation
Top navigation skipped


Tax Policy News

December 2021

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...


Certification of the Single Local Use Tax Rate for Remote Sellers – 2022

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 Texas during the preceding state fiscal year ending August 2021 is 1.75 percent. This rate will be in effect for the period of Jan 1, 2022, to Dec. 31, 2022.

Sales and Use Tax

2021 Federal Income Tax Returns – Sales Tax Deductions

If you itemize deductions on your 2021 income tax return, you have the option of claiming a deduction for state and local sales taxes paid during 2021. 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.

Direct Pay Permit

A direct payment permit allows a business to purchase taxable goods and services without paying tax to the vendor, and instead remit the correct use tax directly to the Comptroller’s office. This process allows businesses the necessary time to accurately determine how much tax to assess on their purchases.

If you purchase at least $800,000 of taxable items (i.e., tangible personal property and taxable services) annually, you can complete Form AP-101, Application for Direct Payment Permit (PDF) to apply for a direct payment permit. Once the application is approved, your status can be verified with our Direct Pay Taxpayer Search.

As a direct payment permit holder, you can issue Form 01-919, Texas Direct Payment Exemption Certificate (PDF) to vendors instead of paying tax at the time of purchase when you purchase taxable items. You cannot issue a direct payment exemption certificate in lieu of paying sales or use tax on taxable items that you resell; instead, you would need to issue a resale certificate for those purchases. The direct payment exemption certificate can only be used for purchases of taxable items for your own use.

Direct payment permit holders must accrue all applicable tax and remit it monthly directly to the Comptroller’s office with a direct payment use tax return (PDF). Your accounting methods must clearly distinguish between taxable and nontaxable purchases, and you may not authorize any other person or firm to purchase any taxable items under your permit. Your permit may be cancelled if used by others.

If a direct payment permit holder pays sales tax to a vendor instead of using the direct payment exemption certificate, the vendor must remit the collected tax to the comptroller. However, the direct payment permit holder or the vendor may later be able to obtain a refund of the tax if collected in error.

As stated above, a direct payment permit is useful in allowing businesses to determine their tax responsibility before remitting use tax to the Comptroller’s office, rather than paying the vendor directly at the time of purchase. If you have any questions about applying for a direct payment permit, contact 800-252-5555 or 512-463-4600.

More Information

Keeping Warm This Winter

Even though February’s winter storm is in our rearview mirror, it’s hard to forget just how cold it was. For those who were greatly affected by the frigid extremes, the storm was especially memorable. As we prepare for cooler temperatures, here are some reminders about the taxability of some things Texans use to warm their homes or businesses and stay safe.

Natural Gas and Electricity

The sale of natural gas and electricity used to heat or power homes is not subject to state sales tax. Some local cities and special purpose districts associated with those cities can, however, choose to impose local sales tax on those sales.

The sale of natural gas and electricity is taxable when sold for commercial use, unless an exemption applies.

Propane, Butane and Kerosene

The use of propane for residential and nonresidential real property is exempt. In addition, butane and kerosene are exempt from tax by law. For example, sales of propane for a barbecue pit, kerosene for a lantern or butane for a portable heater are not taxable sales. An exemption certificate is not required.


The sale of firewood is taxable, including any additional fees for delivering, packing and stacking. Sales tax is also due when hiring someone to cut down or cut up a tree for firewood.


A whole home or business generator keeps systems and appliances powered when there is a separation from the power grid. Generally, these generators must be installed at a structure. A whole home or business generator would be considered an improvement to realty if it is permanently affixed or embedded to the land or the building, and after installation is necessary to the intended usefulness of the structure.

New and Existing Residential Property and New Nonresidential Property

A contractor improving new or existing residential property or new nonresidential property with a generator may enter into either a lump-sum or separated contract with its customers.

Under a lump-sum contract where the contractor charges the customer one price for labor and materials, the contractor is considered the consumer of all materials (e.g., generators, transfer switches and wiring) and owes tax on those materials at the time of purchase. The labor for the construction is not taxable; therefore, no tax is charged to the residential customer for the lump-sum contract.

Under a separated contract, the contractor identifies separate labor and material charges to the customer. The contractor is reselling the materials such as the generators that are incorporated into the customer’s residential property. Therefore, the contractor may issue a resale certificate to vendors to purchase materials tax free that will be incorporated into the home. The contractor will then charge its customer tax on the materials but not on the labor.

Existing Nonresidential Real Property

A service provider installing a generator at an existing nonresidential building is performing a real property improvement and must charge tax on both labor and materials. The service provider can use either a lump sum or separated contract and should collect state sales tax plus any local tax on the total charge for the job.

More Information

Publications and Webpages

Latest Updates

Information about the credit for 2021 is now available in both English and Spanish on the Comptroller’s Earned Income Tax Credit (EITC) webpage.


Adopted Rules

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

Sales Tax

Rule 3.302, Accounting Methods, Credit Sales, Bad Debt Refunds, Repossession Refunds, Interest on Sales Tax, and Trade-Ins
Publication date – Dec. 31, 2021
Effective date – Jan. 6, 2022

State Tax Automated Research System

STAR Watch

To see the latest items added to our State Tax Automated Research (STAR) system, click New Documents in the blue menu bar 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.


The Taxes webpage has links to:

  • All Texas taxes and fees.
  • Resources for taxpayers.
  • Filing and paying taxes.
  • Tax laws and rules.
Account Update Tools

Our Account Update Tools make it easy for you to:

Resources for Texas Taxpayers

The Comptroller’s office offers video tutorials on filing and paying sales tax through Webfile. View them on our Video Tutorials webpage.

Our office also offers virtual Sales and Use Tax Seminars conducted via 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.
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.

Agency Calendars