Tax Policy News

Be on the lookout in August for a special edition of Tax Policy News that focuses on new Legislative Updates that came out of the 88th Legislative Session.

Address changes for franchise tax, sales tax and ag/timber accounts can be made through Comptroller eSystems. This is the fastest and most efficient way to update your address information. With eSystems, you can change your address immediately and avoid any delays or inconveniences.

Since 1999, Texas shoppers have saved money during one weekend every August on the annual sales tax holiday.

The Comptroller encourages you to support Texas businesses while saving money on tax-free purchases of most clothing, footwear, school supplies and backpacks (sold for less than $100) during the annual tax-free weekend. You can purchase qualifying items tax free from a Texas store or from an online or catalog seller doing business in Texas. In most cases, you do not need to give the seller an exemption certificate to buy qualifying items tax free.

This year’s sales tax holiday begins Friday, Aug. 11, and lasts through midnight Sunday, Aug. 13.

The sales tax exemption applies only to qualifying items you buy during the sales tax holiday. Items you buy before or after the sales tax holiday do not qualify for exemption, and there is no tax refund available.

See the following for additional information:

• Publication 98-490, Sales Tax Holiday.
• Publicación 98-490s, Fin de Semana Libre de Impuestos Sobre las Ventas.
• Texas Tax Code Section 151.326 – Clothing and Footwear for Limited Period.
• Texas Tax Code Section 151.327 – School Supplies and School Backpacks Before Start of School.

Texas cities – have you annexed or de-annexed any areas recently? If so, the Comptroller’s office needs this information. We cannot start or stop collection of applicable local sales and use taxes in the affected areas until we hear from you.

Please send the following information to Comptroller of Public Accounts, P.O. Box 13528, Austin, TX 78711-3528 or attach a PDF copy of the information to an email addressed to taxalloc.revacct@cpa.texas.gov:

• Annexation/de-annexation ordinance(s);
• Plat map(s) of the affected area(s); and
• Whether the area is developed or undeveloped land.

Once we receive this information, we will update our records, notify any affected taxpayers and advise affected utility companies to start collecting your tax.

If you have any questions or are unsure if we have been notified about your city’s annexation or de-annexation activity, please give us a call at 800-531-5441 ext. 3-4530.

The General Land Office certified that the Coastal Protection Fund has reached the maximum balance allowed by law. Therefore, by law, the Coastal Protection Fee is suspended (PDF) effective June 1, 2023. Crude oil transferred through a marine terminal on or after June 1, 2023, is not subject to this fee.

The May 2023 report is the last report that must be filed until the fee is reinstated. Reports are not required while the fee is suspended. The Coastal Protection Fee may be reinstated if the fund falls below the minimum allowed by law.

The deadline for filing a second extension request for franchise tax mandatory electronic payers is Aug. 15. The extended due date is Nov. 15.

If you paid all the tax due with your first extension, use franchise tax Webfile or submit Form 05-164, Texas Franchise Tax Extension Request (PDF) to request a second extension. If the amount you paid with your first extension does not cover 100 percent of the amount of tax due, you must pay the difference with your second extension request. Entities must electronically submit payment using the appropriate electronic payment method described below:

Webfile – Select the file extension option in Webfile and pay the difference, if any, between the amount paid with your first extension and 100 percent of the amount of tax that will be reported as due on the report filed on or before Nov. 15. You do not need to submit a paper Extension Request form if you select the file extension option in Webfile.

TEXNET – Select the extension payment option and pay the difference between the amount paid with your first extension and 100 percent of the amount of tax that will be reported as due on the report filed on or before Nov. 15. You do not need to request an extension in Webfile or submit a paper Extension Request form if you select the extension payment option in TEXNET.

Due to recent legislation, the Motor Vehicle Crime Prevention Authority (MVCPA) Fee Report that is due on Aug. 1, 2023, will be a split period.

A $4 rate will apply from Jan. 1 through May 28 and a $5 rate will apply from May 29 through June 30. The report required for the split filing period will be Form 25-106-A, Insurance Motor Vehicle Crime Prevention Authority Semiannual Fee Report-January through June (PDF). Form 25-106-A may be filed online through Webfile or by paper report. This report will only be used for reports due Aug. 1, 2023.

The Comptroller’s office mailed invoices to insurers at 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 owner’s 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.

Sales and Use Tax

Rule 3.297 – Carriers, Commercial Vessels, Locomotives and Rolling Stock, and Motor Vehicles

Publication date – June 30, 2023
Effective date – July 4, 2023

Summary: The Comptroller’s office adopted amendments to implement House Bill (HB) 4032, 86th Legislature, 2019. HB 4032 changed the definition of a boat subject to Boat and Boat Motor Sales and Use Tax under Tax Code, Chapter 160 to include all vessels 115 feet or shorter in length, measured from the tip of the bow in a straight line to the stern. The amendments update the length of a boat from the previous 65 feet to the current 115 feet or shorter in length.

The amendments also clarify that sales and use tax is not due on component parts for or the labor to repair a boat subject to tax under Tax Code, Chapter 160 that meets the definition of a commercial vessel.

Boat and Boat Motor Sales and Use Tax

3.741 – Imposition and Collection of Tax

Publication date – June 30, 2023
Effective date – July 4, 2023

Summary: The Comptroller’s office amended Rule 3.741 to implement House Bill (HB) 2926, 78th Legislature, 2003 and House Bill (HB) 4032, 86th Legislature, 2019. The amendments adopt a definition for the term “distributor” which was codified by HB 2926.

To implement HB 4032, the amendments to Rule 3.741 update the definition of a boat to include all vessels 115 feet or shorter in length, include an exemption for boats and boat motors sold for use in another state, add a temporary use permit for boats purchased outside of this state, and limit the maximum amount of sales tax due on a boat to $18,750.

STAR Doc. No. 202305008L

Certain municipalities are eligible to develop municipal hotel and convention center projects. A municipality developing a project is entitled to receive the state sales and use tax and state hotel tax generated and paid by the hotel and each restaurant, bar, and retail establishment located in or connected to the hotel or the convention center facility in the project. The Comptroller’s office issued a private letter ruling related to whether restaurants, bars, and retail establishments will be considered connected to the hotel or convention center in a specified project.

The restaurants, bars, and retail establishments to be developed as part of the project will be located on lots that share a boundary with the lot where the hotel and convention center will be located. The Comptroller’s office determined that the restaurants, bars, and retail establishments located in the proposed project will be connected to the hotel or convention center facility. The municipality will be entitled to receive the state sales tax and state hotel tax from those establishments once the hotel and convention center are open for initial occupancy.

STAR Doc. No. 202306004L

Tax Policy issued a memo to the Audit division on the impact of Hegar v. Health Care Services Corp. to stop-loss insurance. Based on the decision in Health Care Services Corp., insurers can allocate premiums received for stop-loss policies purchased by employers to finance self-funded employee health care benefits when calculating gross premiums subject to premium and maintenance tax if the insurer follows a reasonable allocation methodology that is supported by sufficient evidence.

Additionally, stop-loss policies purchased by employers to finance self-funded employee health care benefits can qualify for the single nonprofit trust exemptions from premium and maintenance tax, assuming all other requirements of those exemptions are met.

The Taxes webpage has links to:

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

Our Account Update Tools make it easy for you to:

• Change your address.
• Add a location.
• Close a location.
• Change return/email notifications.

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.

The Practitioners’ Corner is a one-stop resource for information about filing and paying taxes, links to tax research sources and searchable databases.

• Tax Due Dates
• Holiday Schedule