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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

January 2022

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...

Notification

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

Reminders

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.

Cigarette/Tobacco Non-Retailer Permit Renewals

Current cigarette and tobacco products non-retailer permits expire Feb. 28, 2022.

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, 2022, through Feb. 28, 2023.

If you did not receive your packet, call us at 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.

A $50 late filing fee will be assessed on non-retailer renewals postmarked after Feb. 28, 2022.

Insurance Tax Reports Due March 1, 2022

The 2021 annual insurance premium and maintenance tax reports and payments for licensed insurance companies and miscellaneous organizations (such as HMOs) are due on or before March 1, 2022.

Annual insurance premium tax reports and payments for Texas licensed surplus lines agents and agencies, and for entities required to report unauthorized insurance premium taxes, are also due on or before March 1, 2022.

As of January 2021, Taxpayers no longer receive a paper tax report. Instead, the taxpayer receives an email reminder about the filing deadline. Email reminders were sent in January 2022.

For any questions regarding insurance tax reports, please contact us at insurance.tax@cpa.texas.gov.

Motor Vehicle Crime Prevention Authority Fee

Property and casualty insurance companies authorized by the Texas Department of Insurance to write automobile insurance as described in Insurance Code, Art. 5.01(e) must report and pay the Motor Vehicle Crime Prevention Authority Fee on or before March 1, 2022, for automobile policies effective from July 1, 2021, through Dec. 31, 2021. Companies licensed to write automobile coverage must file the form even if no fee is due. Refer to Form 25-107, Insurance Motor Vehicle Crime Prevention Authority Semiannual Fee Report - July through December (PDF).

Sales and Use Tax

Holiday Shopping – Returns and Exchanges

After a December filled with holiday celebrations and gift giving, it’s inevitable that January finds many gift recipients returning or exchanging gifts. So how exactly should retailers handle sales tax for these transactions?

Returns

When a seller provides a refund or store credit for an item returned to them, the refund or credit should include all the sales tax originally paid.

Exchanges

A seller should not charge additional sales tax on an item exchanged for another item at the same price.

If the returned and new items are different prices, additional sales tax or a refund is due on the price difference.

Mark Your Calendar for the 2022 Sales Tax Holidays

Timing and planning are critical for retailers. With that in mind, it’s time to mark your 2022 calendar for Texas’s four annual sales tax holidays. During the sales tax holidays, certain taxable items are exempt from tax for a limited period of time. Here are the 2022 sales tax holidays and their dates:

Emergency Preparation Supplies
Saturday, April 23, through Monday, April 25, 2022.

Energy Star Products
Saturday, May 28, through Monday, May 30, 2022 (Memorial Day).

Water-Efficient Products
Saturday, May 28, through Monday, May 30, 2022 (Memorial Day).

Clothing, Footwear, Backpacks and School Supplies
Friday, Aug. 5, through Sunday, Aug. 7, 2022.

While each holiday exempts different items from sales tax, there are common aspects and steps to take to be prepared.

It’s the Law

The laws passed by the Texas Legislature for each of these holidays use the words "is exempted." Therefore, retailers must comply with these laws and honor the exemptions whether the Texas sale is made in person, online, or by mail, email or telephone.

Know the Details of Each Holiday

Know the items that are exempt during each holiday. Understand how changing the sales price of an item can make the item either eligible or ineligible for the exemption. For example, rebates, discounts, coupons, delivery charges and other elements of the transaction can change the taxability of an item if a maximum sales price is set in the law. Learn how to handle exchanges and returns after the sale. We provide Administrative Rules and Publications that explain the details of each holiday.

Plan Ahead

Retailers should program sales tax software to adjust for these temporary sales tax exemptions. It would be helpful to alert and train in-store and online staff so they will be prepared to assist associates and customers during each sales tax holiday. One option is to make our Rules, Publications and other relevant Comptroller resources available to staff and customers for reference.

Keep Accurate Records

When it is time to report sales for the reporting period, do not include tax-free sales with "Taxable Sales." Report tax-free sales under "Total Texas Sales" on the sales tax return.

In most cases, a customer does not need to provide a resale or exemption certificate (PDF) for the tax-free purchase, but there are exceptions. For example, retailers must get an exemption certificate from a customer that uses a business account to buy school supplies during the clothing, footwear, backpacks and school supplies sales tax holiday.

Report or Refund Tax Collected in Error

Retailers must report and remit any sales tax collected, even if they collected the tax in error.

If sales tax is collected in error on an exempt item and a customer asks for a refund, retailers have two options: 1) refund the tax to the customer and then either request a refund from our office or take a credit on the next sales tax return; or 2) give the customer Form 00-985, Assignment of Right to Refund (PDF) for them to request the refund directly from the Comptroller’s office. Visit our Sales Tax Refunds webpage for details.

Stay Updated

Our electronic GovDelivery service is one of the ways the Comptroller’s office communicates with taxpayers, and it provides alerts about all upcoming sales tax holidays. Sign up for GovDelivery to stay informed. Be sure to visit our website for updates, as well.

More Information

Publications and Webpages

Latest Updates

The Comptroller’s office updated the following resources:

Rules

Effective Rules

The following rule became effective January 2022:

Sales Tax

Rule 3.302, Accounting Methods, Credit Sales, Bad Debt Refunds, Repossession Refunds, Interest on Sales Tax, and Trade-Ins
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.

Taxes

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