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.
This year the 87th Legislature passed House Bill 1445, which amends Texas Tax Code Section 151.0039 changing the definition of insurance services to exclude medical or dental billing services performed prior to the original submission of a medical or dental insurance claim. Although the bill is not effective until Jan. 1, 2022, the Comptroller’s office will immediately treat these services as excluded from the definition.
Therefore, effective immediately, medical or dental billing services that occur before an original insurance claim is submitted are excluded from the definition of insurance services and are not taxable services. For more information, see State Tax Automated Research (STAR) document 202106003L.
The Comptroller’s office has developed a new feature that will help provide sellers with more information about their tax responsibilities at the time of a sale.
Beginning June 30th, sellers will be able to download files which can be incorporated into their tax reporting and point-of-sale software. These files include
The Comptroller’s office will update these files quarterly to account for new tax jurisdictions and rate changes within jurisdictions. The tax responsibility and rates will be valid for that quarter.
Webfile is a secure, online tool for filing and paying taxes and fees. And now it's even better!
If you file and pay sales tax via Webfile, get ready for a streamlined experience! We've updated this tool with an easy-to-follow user interface, so you can
Webfile users (including franchise taxpayers) who have not accessed their profile since Feb. 1, 2021, will be required to set up three new security questions before they can use the enhanced Webfile system. Taxpayers will also be asked to add an optional mobile number to their profile. Adding a mobile number helps make password resets simple and secure.
If your profile is locked and you haven’t set up security questions in the new system, you will need to contact Taxpayer Services at 800-252-5555 or Electronic Reporting at 800-442-3453 for password assistance.
Don’t forget that beginning Oct. 1, 2021, local tax sourcing will have a few changes:
We will provide additional updates soon.
*As defined in Rule 3.334 – Local Sales and Use Taxes.
Our office offers video tutorials on filing and paying sales tax through Webfile. View them on our Video Tutorials webpage.
The Comptroller's office offers Sales and Use Tax Seminars throughout the year. New taxpayers are especially encouraged to attend these overviews of tax responsibilities for buyers, sellers and service providers.
Currently we are offering virtual Taxpayer Seminars conducted via Webex Events. For more information, visit the Taxpayer Seminars webpage.
Visit our Tax Training Resources webpage to
As temperatures rise in Texas, people enjoy venturing outside to work on their outdoor living spaces. You may be thinking of purchasing seasonal plants and gardening products. This article discusses the tax responsibilities for such items, including some reminders about what is taxable and what is not for items purchased for both the budding gardener and the gardening professional.
Generally, Texas Tax Code Section 151.316 (a)(5), Agricultural Items exempts seeds and annual plants that are
An annual plant normally grows, flowers and dies in a year or season. Annual plants that produce food for humans are exempt from tax. An exemption certificate and Ag/Timber exemption number is not required.
Examples of annual plants that qualify for this exemption include
Perennial plants, which live for more than two years or produce in successive years, including plants that produce food for humans, are taxable.
Examples of perennial plants include
The produce harvested from perennial plants for human consumption is exempt.
Perennial plants qualify for exemption when the buyer is engaged in the business of
Seeds for annual and perennial plants whose products are commonly recognized as food for humans or animals, or are usually only raised to be sold in the regular course of business, are exempt from Texas sales and use tax. See Tax Code Section 151.316 (a)(5). These include corn, oats, culinary herbs, soybeans and cotton seed.
An exemption certificate is not required to purchase these items tax free.
Grass seed is taxable. A farmer or rancher may, however, claim an exemption on grass seed that will be used to produce turf or grass for sale in the regular course of business; or to produce feed for farm or work animals, such as
The farmer or rancher therefore must issue an agricultural exemption certificate or confirmation letter with an Ag/Timber Number to the seed supplier in order to claim the exemption.
Flower bulbs, flower seeds and seeds for non-edible plants are generally taxable. But, persons who grow and sell the agricultural products grown from these seeds in the regular course of business may claim an exemption from the tax by providing the seller with a properly completed agricultural exemption certificate complete with an Ag/Timber Number at the time of purchase.
For example, a garden center that grows and sells flowers may claim an exemption on the purchase of flower seed.
Trees, including fruit and nut trees, are taxable.
A commercial grower who sells the fruit or nuts produced by the trees in the regular course of business may claim the agricultural exemption when buying the trees by providing the seller with an agricultural exemption certificate or confirmation letter complete with an Ag/Timber Number in order to claim the exemption.
Similarly, a commercial timber producer may buy seedlings that are used in the production of timber for sale tax free by providing the seller with a timber exemption certificate or confirmation letter complete with an Ag/Timber Number at the time of purchase. Examples of trees commonly grown for commercial timber include hardwood or pine trees.
In the third article in our series about exempt organizations, we will discuss the taxability of food sales made by religious groups, schools and other nonprofit groups. For previous articles, please see the April and May issues of Tax Policy News.
Many nonprofit organizations hold food sales throughout the year to support their exempt purpose and raise funds for their organization. Generally, these organizations do not have to register for a sales tax permit if they only sell exempt items, or only conduct their sales during tax-free fundraisers. An exempt organization can purchase food items tax free for the fundraiser by issuing to its vendors Form 01-339 (back), Texas Sales and Use Tax Exemption Certificate (PDF).
Exempt organizations do not have to collect sales tax on meals and food products, including candy and soft drinks, if the items are sold by churches or at church functions conducted under the authority of a church. Although such food items are normally taxable, a qualified religious organization that has been granted exempt status by the Comptroller’s office does not collect sales tax. For example, based on this exemption, if a group of church volunteers operate a café in the parish hall and sell prepared breakfast and lunch food items during service times, the food sales are not taxable.
Youth sports organizations engaged exclusively in providing athletic competition among persons under 19 years of age can make nontaxable food sales as part of a fundraising drive sponsored by the organization for its exclusive use. Food sales made at a concession stand during a youth athletic event qualify, as long as all proceeds raised go to the organization. Youth athletic organizations include groups such as peewee sports clubs, but do not include adult athletic groups such as intramural sports leagues or teams.
Sales of meals and food products (including candy and soft drinks) are nontaxable when sold by a public or private elementary or secondary school, school district, student group, parent-teacher association, booster club, or other school support organization. The exemption applies to food sales made during the school day and by agreement with proper school authorities, and includes food and beverages sold through school vending machines. Under this exemption, a bona fide student group such as a varsity football club can sell food items tax free during the school day.
Food sales by PTOs/PTAs, booster clubs or other school organizations conducted outside of the school day are exempt from sales tax if the sales are part of an organization’s fundraising drive and all proceeds go to the group for its exclusive use. An exempt school organization can purchase food items tax free for the fundraiser by issuing to its vendors a fully completed exemption certificate Form 01-339 (back), Texas Sales and Use Tax Exemption Certificate (PDF).
Food sales by a booster club or other school organization during a school-sanctioned or school-sponsored event are also exempt from sales tax. For example, a band booster club is selling snacks and drinks at a concession booth during a school football game. All proceeds will be used to purchase new uniforms for the marching band. In this case, the food sales are exempt from tax.
Any volunteer nonprofit organization (church, youth athletic group, or school) can hold a tax-free food sale (including an annual banquet) as long as the fundraiser
If the organization sells non-food items during the banquet (t-shirts, stickers, etc.) or alcoholic beverages, the exemption does not apply to these items and sales tax must be collected and remitted to the Comptroller’s office, unless the sale qualified as the organization’s two one-day, tax-free sale.
Pest Control Services help to remove unwanted creatures, such as roaches, rats, ants, bedbugs, and termites, from certain structures and surrounding areas. These services typically require inspecting these structures and areas for signs of pests, determining the necessary treatment, and estimating the cost of services for customers.
As long as a pest control business provides structural pest control services, it is required to have a sales tax permit. Structural pest control services are taxable real property services.
Structural pest control services include activities performed for the purpose of identifying, preventing, controlling, or eliminating, by use of chemical or mechanical means, infestation of any of the following:
The term "structural pest control services" includes related activities, such as inspection or evaluation concerning the nature or extent of an infestation; reports; or performance of services to control pest or insect infestation.
Although structural pest control services are taxable, there are some services that are considered nontaxable:
Structural pest control services are also nontaxable if purchased by a developer, builder, contractor or other person acting as a builder as part of a contract to build a new residential structure or other structure improvement immediately adjacent to the new residence and used in the residential occupancy of the structure. This exclusion from tax also applies to pest control services purchased in connection with the construction of model or speculative homes that will be sold as residences.
A person who provides structural pest control services for a developer, builder, contractor or other person acting as a builder to improve real property is responsible for collecting tax on the service until certification is obtained from the developer, builder, contractor or other person acting as a builder to improve real property.
The certification must state the service is part of a contract to build a new residential structure. If it is later determined that the services do not qualify as nontaxable, the person who issued the improper certification will be held liable for the tax due.
Sales and use tax are due on most materials, supplies and equipment used to perform a taxable pest control service. However, with an active sales tax permit, a purchaser may give a resale certificate (PDF) to their supplier instead of paying tax when buying the chemicals used to perform the service. These two rules apply even when the service is provided to a tax-exempt organization or political subdivision.
Using bee removal as an example, the following helps explain the tax treatment for Pest Control Services:
A sales tax permit would not be required unless providing structural pest control services.
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