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 89th Legislative Session.

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

The Comptroller’s office 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. 8, and lasts through midnight Sunday, Aug. 10.

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 or a tax refund.

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.

Franchise tax mandatory electronic payers seeking an extension to Nov. 17 to file their report must file a second extension request and pay any additional tax due by Aug. 15.

If you paid all the tax due with your first extension, use 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. 17. 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. 17. 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.

For more information about filing and paying franchise tax, visit our franchise tax webpage.

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, 2025.

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 Motor Vehicle Crime Prevention Authority (MVCPA) Fee Report is due on Aug. 1, 2025.

Insurance companies that write any form of motor vehicle insurance in Texas must pay this fee. A $5 rate applies per each motor vehicle year, for insurance policies written from Jan. 1 through June 30. Report the fee on Form 25-106, Insurance Motor Vehicle Crime Prevention Authority Semiannual Fee Report-January through June (PDF). Form 25-106 may be filed online through Webfile or by paper report and must be filed even if no fee is due.

2025 franchise tax reports were due May 15, but many taxpayers have still not met their franchise tax filing requirements. A change in the requirements may have caused confusion for some taxpayers, many of whom need only file a Public Information Report (PIR) or Ownership Information Report (OIR) to resolve their issue.

In July 2023, the Legislature passed Senate Bill 3, increasing the no tax due threshold to $2.47 million and eliminating the no tax due reporting requirements for certain entities. In response, the Comptroller’s office changed the way some entities report for franchise tax purposes. See our No Tax Due Reporting For 2024 Reports and Later webpage for details.

Depending on your entity’s annualized total revenue, you may need to file a franchise tax report and a Public Information Report/Ownership Information Report; or you may only need to file a Public Information Report/Ownership Information Report. There is no $50 penalty for late filing a Public Information Report or Ownership Information Report.

Texas law requires the Comptroller’s office to forfeit an entity's right to transact business in Texas if the entity does not file all required franchise tax reports and pay any franchise tax and penalty due within 45 days of the date the notice of intent is mailed. The Comptroller's office provides this notice in accordance with Texas Tax Code Sections 171.251, 171.2515 and 171.256.

If the Comptroller’s office forfeits an entity's right to transact business in Texas, the forfeiture is reflected on the Comptroller’s public website; the entity is generally denied the right to sue or defend in a Texas court; and each officer, director, partner, member or owner will be liable for certain debts of the entity.

You still have time to act to ensure your entity’s right to transact business in Texas is not forfeited. Beginning in mid-August , the Comptroller’s office will start mailing Form 05-211, Texas Notice of Intent to Forfeit Right to Transact Business notices to entities who have not satisfied their franchise tax filing requirements.

If an entity has not satisfied franchise tax filing requirements, see our Making Your Franchise Tax Account Current - 2024 Report Year and Later webpage for steps on making your account current.

You can verify an entity’s franchise tax account status online.

The Comptroller’s office proposed the following rules for public comment through the Texas Register:

Sales and Use Tax

Rule 3.344 – Telecommunications Services

Publication date – June 27, 2025
Comment period end date – July 27, 2025

The Comptroller's office proposed amendments to Rule 3.344 concerning telecommunication services. The proposed amendments clarify provisions for determining local tax for mobile telecommunications services and hold harmless provisions if a service provider assigns an address to an incorrect taxing jurisdiction. A service provider will be held harmless if it exercised due diligence in determining the correct jurisdictions by methods including using all reasonable obtainable and usable data pertaining to jurisdictional boundaries. This data includes the Comptroller's online Sales Tax Rate Locator and Publication 96-339, Jurisdictions that Impose Local Sales Tax on Telecommunications Services.

Cigarette Tax

Rule 3.102 – Applications, Definitions, Permits, and Reports

Publication date – June 27, 2025
Comment period end date – July 27, 2025

The Comptroller’s office proposed an amendment to Rule 3.102 concerning applications, definitions, permits, and reports. The proposed amendment addresses age requirements for obtaining a cigarette permit and states that the Comptroller’s office will not issue a permit to an applicant that is under the age of 21.

Cigarette, E-Cigarette, and Tobacco Products Regulation

Rule 3.1207 – E-cigarette Retailer Permits

Publication date – June 27, 2025
Comment period end date – July 27, 2025

The Comptroller’s office proposed an amendment to Rule 3.1207 concerning E-cigarette retailer permits. The proposed amendment addresses age requirements for obtaining an E-cigarette permit and states that the Comptroller’s office will not issue a permit to an applicant that is under the age of 21.

Sexually Oriented Business Fee

Rule 3.722 – Sexually Oriented Business Fee

Publication date – July 4, 2025
Comment period end date – Aug. 3, 2025

The Comptroller’s office proposed amendments to Rule 3.722 concerning the sexually oriented business fee. The proposed amendments revise the definition of clothing to remove the provision that was deemed unconstitutional in Tex. Entm't Ass'n, Inc. v. Hegar, 10 F.4th 495 (5th Cir. 2021). The proposed amendments also increase the entry fee to implement House Bill 3345, 88th Legislature, 2023.

To see the latest items added to our State Tax Automated Research (STAR) system, 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.

STAR Accession No. 202503014L

Tax Policy Division issued a private letter ruling related to the taxability of services provided by injecting nitrogen into a pipeline.

The Comptroller's office determined that the taxpayer's services do not rise to the level of taxable repair, remodeling, restoration, or modification of pipelines. The services do not fall within the enumerated list of taxable services found in Texas Tax Code Section 151.0101 and are therefore not taxable. The taxpayer’s purchase of all materials, supplies, and equipment used or consumed while providing the nitrogen pumping service are subject to sales tax under Texas Tax Code Sections 151.010 and 151.009.

STAR Accession No. 202503018L

Tax Policy Division responded to a private letter ruling request related to the taxability of services provided by a taxpayer to employers who sponsor employer-based health plans that are subject to prescription drug data collection reporting obligations created by the Consolidated Appropriations Act of 2021.

The taxpayer provides three levels of service to clients. The Comptroller's office determined that each of the taxpayer's services involve the storage, manipulation, or storage of employers’ data and are therefore each taxable data processing services.

STAR Accession No. 202505005L

A taxpayer requested a private letter ruling related to sales tax exemptions for equipment, supplies, and other tangible personal property used to process, reuse, and recycle wastewater that will be used in fracturing work.

The taxpayer designs, builds, and operates water infrastructure and provides services to the oil and gas industry. The taxpayer disposes of and treats different types of water/liquids and also sells treated water to oil and gas operators.

The Comptroller's office determined that the taxpayer's equipment and supplies do not qualify for the exemption for property specifically used to process, reuse, or recycle wastewater for fracturing. However, the taxpayer’s equipment that causes a chemical or physical change to the treated water the taxpayer sells qualifies for the sales tax exemption for property used in manufacturing.

STAR Accession No. 202503024L

Tax Policy Division issued a private letter ruling related to the taxability of an annual subscription for services that includes website development, order management, and social media marketing for restaurants and bars. The taxpayer offers three different levels of bundled services – Premium, Premium Plus, and Enterprise.

The Comptroller's office determined that the taxpayer's Premium, Premium Plus, and Enterprise bundled services include taxable data processing and nontaxable services provided for a single charge. The single charge for each of the taxpayer’s bundles is presumed to be taxable.

STAR Accession No.202503025L

Tax Policy Division responded to a private letter ruling request related to the taxability of charges by a provider of nontaxable engineering services for taxable services and taxable materials purchased to provide its services.

The taxpayer subcontracts inspection and surveying services when necessary for its engineers to complete their services, as it does not have its own employees to perform these services. On some projects, the taxpayer may also directly purchase the necessary materials, pay any applicable sales tax at the time of purchase, and charge its client for the purchase. The taxpayer either charges an exact reimbursement to its client for materials and services that it directly purchases, or applies a markup on the charges.

The Comptroller's office determined that the taxpayer should separately state the charge for reimbursement of taxable services and materials as well as the taxes paid on those items. If the taxpayer charges a markup on the reimbursement for taxable items, the taxpayer must collect sales and use tax on the total reimbursement and not just the markup.

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