The Texas Comptroller of Public Accounts publishes this newsletter to keep you informed about Texas taxes. Tax Policy News provides general information and is not legal or professional advice.
If you itemize deductions on your 2022 federal income tax return, you have the option of claiming a deduction for state and local sales taxes paid during 2022. See the IRS Sales Tax Deduction Calculator for more information on claiming the deduction.
Webfile makes it easy to submit tax reports, make payments, request extensions, file final reports , request tax clearance letters, and view a summary of your transactions. You can find your franchise tax Webfile number (which starts with "XT") on the franchise tax upcoming due date reminder letter we mailed in January.
You can also call 800-442-3453 at any time to get your XT number via our automated system. When you call, be sure to have your 11-digit taxpayer number and identifying information, such as total revenue from a previous report or the amount of the last tax payment you made (cannot be zero).
View the following video tutorials for help with franchise tax:
To qualify as independently procured insurance, you must obtain the insurance policy directly from a non-admitted insurer, and you must not use the services of an agent or broker in the procurement of coverage. If an agent is involved in the placement of the insurance, the policy may be surplus lines insurance with taxes due to the home state of the insured. If Texas is the home state of the insured and the agent does not hold a surplus lines license in Texas, the transaction may be considered unauthorized insurance.
As of January 2021, taxpayers no longer receive a paper tax report. Instead, the Comptroller’s office sends an email reminder about the filing deadline. Email reminders are sent in April.
For any questions regarding insurance tax reports, please contact us at firstname.lastname@example.org.
Prepare yourself for emergencies that can cause physical damage like hurricanes, flash floods, and wildfires during the 2023 Emergency Preparation Supplies Sales Tax Holiday. You can purchase certain emergency preparation supplies tax-free during the sales tax holiday. There is no limit on the number of qualifying items you can purchase, and you do not need to give the seller an exemption certificate to claim the exemption.
This year’s holiday begins at 12:01 a.m. on Saturday, April 22, and ends at midnight on Monday, April 24.
Taxpayers can refer to the Emergency Preparation Supplies Sales Tax Holiday publication for additional information.
Texas taxpayers can save money on tax-free purchases of certain ENERGY STAR® energy-efficient products and certain water-efficient and water-conserving products during the annual ENERGY STAR® Sales Tax Holiday and Water-Efficient Products Sales Tax Holiday. The 2023 holidays begin Saturday, May 27, and go through Memorial Day (Monday, May 29, ending at midnight). There is no limit on the number of qualifying items you can buy, and you do not need to give the seller an exemption certificate to buy items tax free.
The Comptroller’s office will mail invoices to insurers by the end of May for the Volunteer Fire Department Assistance Fund Assessment, and payment is due Aug. 1, 2023.
This assessment applies to property and casualty insurers writing homeowners insurance, fire insurance, farm and ranch owners’ insurance, private passenger auto physical damage insurance, commercial auto physical damage insurance and the non-liability portion of commercial multi-peril insurance.
The Comptroller’s office filed the following rules for adoption with the Secretary of State. You may view the effective rules on the Texas Administrative Code webpage.
Our State Tax Automated Research (STAR) system provides viewing and downloading of redacted letter rulings, hearings, rules, and Attorney General’s Opinions, among other documents. To see the latest items added to the STAR, use the New Documents link on the STAR home page in the blue menu bar.
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.
Tax Policy Division issued a policy memo to Audit Division summarizing the various federal statutes and regulations relating to Internal Use Software that the Comptroller recognizes as incorporated-by-reference into Texas law. These provisions are also described in the August 2022 amendments to Rules 3.340 and 3.599.
Prior to the August 2022 rule amendments, the Comptroller’s office only recognized federal regulations if taxpayers were required to apply those regulations to the 2011 federal income tax year. With the August 2022 amendments, the Comptroller’s office now recognizes federal regulations if taxpayers were allowed to apply those regulations to the 2011 federal income tax year.
Taxpayers have the option to elect between two prior versions of Treas. Reg. 1.41-4(c)(6) but cannot elect between different provisions within those versions. Whichever regulation the taxpayer selects must be applied in full. Provisions from the 2016 version of the regulations are not incorporated-by-reference into Texas law and should not be used. The memo also includes a table comparing the two versions of the Treasury Regulations side-by-side, with Tax Policy's notes of any differences.
A taxpayer requested a private letter ruling regarding whether the items it purchased that are used by its parent company in research activities are eligible for the research and development (R&D) tax exemption provided by Tax Code, Section 151.3182 (Certain Property Used in Research and Development Activities; Reporting of Estimates and Evaluation).
The taxpayer is a wholly owned subsidiary of its parent and does not have any employees or generate any revenue. The parent funds all of the taxpayer's activities by transferring cash to the taxpayer. Although the parent has a Texas Qualified Research Registration Number, the taxpayer does not.
The Comptroller’s office concluded that only an entity engaging in qualified research is eligible for the sales tax R&D exemption. In this taxpayer's case, the taxable transaction is the sale that occurs when the taxpayer purchases an item. The activities that would be necessary to support an exemption occur when the parent uses that item in its qualified research activities. The Comptroller’s office also determined that the sale-for-resale exemption did not apply as there was no clear consideration from the parent to the taxpayer in exchange for the items.
The Comptroller’s office responded to a private letter ruling request related to the taxability of various charges for the sale and maintenance of audiovisual and videoconferencing equipment and software.
The taxpayer sells a product that includes Voice over Internet Protocol (VoIP) service, videoconferencing software, device and infrastructure management, software monitoring, and analytics. The taxpayer sells the product under a lump-sum charge. The Comptroller’s office determined this charge to be taxable as the sale of telecommunications services.
The taxpayer also offers on-site support and maintenance services for its customers’ software and hardware infrastructure. The support and maintenance services were provided under a lump-sum charge.
The repair of tangible personal property is a taxable service. Tangible personal property includes computer programs and computer hardware. The Comptroller’s office determined the taxpayer’s lump-sum charge for the repair of customers’ software and hardware is taxable as the repair of tangible personal property.
The taxpayer also sometimes performs services related to customers’ communications infrastructure such as the migration of on-premises physical phones to cloud based software. The Comptroller’s office determined these charges were taxable as the repair and maintenance of computer programs.
The Comptroller’s office issued a private letter ruling related to the taxability of tickets to concerts presented by a nonprofit corporation. The nonprofit entered into an agreement with a third-party management company to produce and promote the concerts.
Amusement services, including concerts, are generally subject to sales and use tax. However, amusement services exclusively provided by a nonprofit corporation are exempt. An event may be considered to be exclusively provided by a nonprofit even if it contracts with a for-profit entity to provide the expertise to produce the event. The nonprofit must hold itself out as the provider of the amusement service and may not be part of a joint venture with the for-profit entity.
Under the agreement, the nonprofit does not share losses with the for-profit entity. The nonprofit receives a specified amount per ticket sold regardless of whether the event is profitable. The Comptroller’s office determined that the nonprofit was not engaged in a joint venture and that the concerts are exclusively provided by the nonprofit. Sales of tickets to the concert are not subject to sales and use tax.
A taxpayer requested a private letter ruling regarding the correct location to source the local sales and use tax it collects on sales of its good and services.
The taxpayer rents and repairs oil field equipment and repairs nonresidential real property such as oil well casing. The taxpayer receives all of its orders through its salespersons over their cellphones. These salespersons are located either at the taxpayer’s equipment yard or out in the field.
The Comptroller’s office determined that the taxpayer’s equipment yard is a place of business. The taxpayer should collect and remit local sales and use taxes on its rental and repair of oil field equipment based on the location of the equipment yard; and collect and remit local taxes on its nonresidential real property repair and remodeling services based on the location of the job site.
A taxpayer requested a private letter ruling regarding the taxability of sales of its peer-reviewed scientific journal and its learning materials provided in print and electronic form. Taxpayers also requested a ruling regarding charges for membership in its professional medical association.
Books, magazines, journals, and similar printed materials, either in a printed or an electronic format, are generally taxable as tangible personal property. However, periodicals and writings published and distributed by a religious, philanthropic, charitable, historical, scientific, or other similar organization not operated for profit are exempt from Texas sales and use tax. Based on the taxpayer’s status as a nonprofit professional health care organization under Internal Revenue Code, Section 501(c)(3), the Comptroller’s office determined that sales of the taxpayer’s scientific journal and its learning materials are exempt writings and not subject to Texas sales and use tax.
The taxpayer also offers membership in its professional medical association. Membership includes access to information for medical students and professionals including clinical practice guidelines, clinical guidance statements, best practice papers, and a clinical decision tool that can be used at the point of care. Membership also includes a subscription to the taxpayer’s scientific journal and contact with the taxpayer’s governmental advocacy groups.
Access to general or specialized information gathered and provided to the public or a specific segment of industry is generally a taxable information service. However, taxable information services do not include information derived from medical testing and experimentation and from scientific observation.
The Comptroller’s office found that the clinical practice guidelines, clinical guidance statements, best practice papers, and clinical decision tool included in membership in the taxpayer’s association fell under this exclusion and are not taxable. Other items included as part of the membership, such as a subscription to the scientific journal and access to advocacy groups, are also not taxable. Charges for membership in the taxpayer’s association are a nontaxable information service.
Tax Policy Division previously issued a memo to Audit Division related to the taxability of credit rating services (STAR Doc. No. 202301006L). This memo determined that services to assign credit ratings to legal entities are taxable as credit reporting services.
The memo has been updated to give taxpayers additional time to come into compliance with this policy. The updated memo states that taxpayers should start collecting and remitting sales and use tax on their taxable credit rating services beginning July 1, 2023. STAR Doc. No. 202301006L has been superseded.
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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.
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The Practitioners’ Corner is a one-stop resource for information about filing and paying taxes, links to tax research sources and searchable databases.