Tax Policy News

In an effort to improve user experience and reduce less relevant search results on the STAR system, we will be making changes to the types of information available on the system. Earlier this year, we revised the names of the categories of documents and reorganized some of the material within those categories. Now we plan to begin removing content that is available elsewhere.

Starting in November 2025, we will no longer include Tax Policy News articles on the STAR system, and we will remove all prior articles. In compliance with records retention standards, full issues of Tax Policy News from the last four years are available on the Comptroller’s website. We will also be removing superseded administrative rules. Current versions of the rules will still be available. The Texas Secretary of State’s office website provides all previous and current versions of the rules, along with the preambles.

This is just the first step to clean up the system and improve your research. We will have more updates coming throughout the year, and you can find those announcements here in Tax Policy News and on the STAR system website.

Franchise tax reports are due Nov. 17, 2025, for taxpayers who filed valid extensions for the 2025 annual tax report.

Coin-operated amusement machine owners and operators must file renewal applications for their 2026 general business license, registration certificate, import license or repair license by Nov. 30, 2025. A $60 occupation tax permit for each coin-operated amusement machine exhibited or displayed in Texas is also due by Nov. 30. An occupation tax permit must be affixed to each machine in use.

Under Occupations Code Section 2153.154, License Fee and Section 2153.405, Refund or Credit Prohibited, the Comptroller’s office may not refund the license fee once a license is issued, nor refund the occupation tax to an owner who ceases to exhibit or display a coin-operated machine before the end of the calendar year for which the tax is imposed.

The Comptroller's office mailed renewal application packets in early October. Coin-operated amusement machine owners and operators who have not received renewal packets by Oct. 31 should contact our office at 512-463-3731.

Sales tax filers should validate their business location address(es) to ensure local tax is accurately reported. Collecting and paying the correct local tax rate is the taxpayer’s responsibility, and inaccurate local tax collection can cost you money. If you have moved and your business location address is no longer correct, let us know by selecting “Move or Add a Business Location” on Comptroller.Texas.Gov under “Manage Account,” and complete the online form.

It is extremely important for all taxpayers to ensure the mailing address we have on file is accurate and up-to-date. Without an accurate mailing address, a taxpayer’s mail goes undelivered, and you will miss important information from the Comptroller’s office. Without a correct mailing address, an account could also slip into a delinquent status and the taxpayer would not be aware. Check your address under Franchise Tax Account Status and/or Sales Taxpayer Search Comptroller.Texas.Gov. You can update your address under “Manage Account.”

For convenient access to taxpayer notices and billings, the Comptroller’s office is developing a platform called “Message Center” within our confidential Webfile system. As a taxpayer, if you have CPAs and consultants who handle your tax filings, you may not have yet signed up for Webfile yourself. You must sign up for Webfile and add your taxpayer account using your unique Webfile number to view your account and any important notices that will be in Message Center. Visit our Getting Started With Webfile webpage for information on signing up for Webfile and locating your Webfile number.

2025 franchise tax reports were due May 15, but many taxpayers have still not met their franchise tax filing and/or payment 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 Changes to 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 PIR or OIR; or you may only need to file a PIR or OIR. There is no $50 penalty for late filing a PIR or OIR.

On Oct. 29, the Comptroller’s office will begin mailing Form 05-212, Texas Notice of Forfeiture of Right to Transact Business, to entities who have not satisfied their franchise tax filing and/or payment requirements. As a direct result of the forfeiture of the right to transact business, an entity's officers, directors, partners, members, or owners will be liable for certain debts of the entity (including taxes, penalties, and interest) incurred after the due date of the report and/or payment. Also, the entity will generally be denied the right to sue or defend in a Texas court in accordance with the law. If your entity's right to transact business is not revived before Feb. 28, 2026, the entity's registration with the Secretary of State will be forfeited.

You still have time to act to ensure your entity’s registration with the Secretary of State is not forfeited. See our Tax Notices and Resolving Problems With Your Account 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:

Franchise Tax

Rule 3.587 – Margin: Total Revenue

Publication date – Aug. 15, 2025
Comment period end date – Sept. 14, 2025

The Comptroller’s office proposed amendments to Rule 3.587 concerning margin: total revenue. The proposed amendments incorporate exclusions from total revenue passed by the 82nd Legislature, First Called Session, 2011, through the 88th Legislature, 2023. The proposed rule provides guidance on the required adjustment to the cost of goods sold or the compensation deduction for the portion of the actual cost of uncompensated care excluded from total revenue. Additional guidance is provided regarding flow-through funds in connection with real property improvements. Lastly, the proposed amendments provide for prospective application of the calculation of total revenue under the federal tax law in effect for that federal tax year, unless the statute/rule expressly cites the Internal Revenue Code, which refers to the 2007 Internal Revenue Code.

Motor Fuels Tax

Rule 3.434 – Liquefied Gas Tax Decal

Publication date – Aug. 29, 2025
Comment period end date – Sept. 28, 2025

The Comptroller’s office proposed the repeal of Rule 3.434 concerning liquefied gas tax decals. The tax on liquefied gas was repealed effective Sept. 1, 2015, by House Bill 1905, 84th Legislature, 2015. The last taxable period for liquefied gas is now outside the four-year statute of limitations for assessments and refund claims.

Rule 3.436 – Liquefied Gas Dealer Licenses

Publication date – Aug. 29, 2025
Comment period end date – Sept. 28, 2025

The Comptroller’s office proposed the repeal of Rule 3.436 concerning liquefied gas dealer licenses. The tax on liquefied gas was repealed effective Sept. 1, 2015, by House Bill 1905, 84th Legislature, 2015. The last taxable period for liquefied gas is now outside the four-year statute of limitations for assessments and refund claims.

The Comptroller’s office filed the following rules for adoption with the Secretary of State:

Cigarette Tax

Rule 3.102 – Applications, Definitions, Permits, and Reports

Publication date – Aug. 22, 2025
Effective date – Aug. 24, 2025

The Comptroller’s office adopted an amendment to Rule 3.102 concerning applications, definitions, permits, and reports. The amendment was adopted without changes to the proposed text. The 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 – Aug. 22, 2025
Effective date – Aug. 24, 2025

The Comptroller’s office adopted an amendment to Rule 3.1207 concerning e-cigarette retailer permits. The amendment was adopted without changes to the proposed text. The 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.

Fireworks Tax

Rule 3.1281 – Fireworks Tax

Publication date – Oct. 3, 2025
Effective date – Oct. 8, 2025

Senate Bill 761, 84th Legislature, 2015, effective Sept. 1, 2015, repealed Tax Code, Chapter 161, Fireworks Tax. Reports and tax due are now outside the four-year statute of limitations for assessments and refund claims. The Comptroller’s office therefore repealed Rule 3.1281. Although the fireworks tax is repealed, Texas sales and use tax is due on all fireworks sales in Texas.

Sexually Oriented Business Fee

Rule 3.722 – Sexually Oriented Business Fee

Publication date – Aug. 22, 2025
Effective date – Aug. 28, 2025

The Comptroller’s office adopted amendments to Rule 3.722 concerning the sexually oriented business fee. The amendments were adopted without changes to the proposed text. The 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 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. 202506007L

Tax Policy Division responded to a private letter ruling request on the treatment of the sale of bitcoin (BTC) for franchise tax purposes.

The taxpayer acquires BTC and resells it to customers in exchange for cash at ATM machines. Customers can also load cash to their BTC wallet to then purchase BTC. In addition to the ATM machines, the taxpayer allows customers to go to participating vendors to add cash to the customer’s BTC wallet. Once the cash is added it is automatically converted to BTC within two hours or the customer can choose to convert it instantly.

The Comptroller’s office analyzed whether BTC is tangible personal property, a security, or an intangible, and determined that BTC is an intangible. Costs for acquiring BTC are ineligible for the cost of goods sold deduction because BTC is intangible property. For COGS purposes, intangible property is explicitly excluded from the definition of tangible personal property. Section 171.1012(a)(3)(B)(i). As the sale of an intangible, the sale of BTC is sourced to the location of the payor under Rule 3.591(e)(21)(B) (Margin: Apportionment).

STAR Accession No. 202506001M

Tax Policy issued a memo to the Audit Division on the taxability of sand, dirt, gravel, rock, and other sold materials after the decision in Hegar v. Texas Westmoreland Coal Co. The sale of these materials was treated as a nontaxable sale of unprocessed materials.

Westmoreland filed a tax refund claim for sales tax paid on leases of the excavators used to mine lignite. Previously, the agency did not allow an exemption for equipment, such as excavators, used to extract raw materials from the earth’s surface as the equipment was used to process real property and not tangible personal property. The appeals court agreed with Westmoreland’s position that the processing of tangible personal property can include the severance of minerals or other physical materials from the earth.

Initially, the memo provided that after the Westmoreland decision, sand, dirt, gravel, rock, and other solid materials will be considered processed materials when extracted from the earth in a way that causes a chemical or physical change to those materials. In addition, activities such as washing, drying, and separating materials will be considered processing when these activities cause a change to the material. The sale of processed sand, dirt, and other solid materials would be subject to sales tax.

However, the Comptroller’s office is delaying implementation of the memo indefinitely to further review the policies it provides. The policies in place before the issuance of the memo will continue to be applied.

STAR Accession No. 202506015L

Tax Policy issued a private letter ruling related to whether a taxpayer that provided staffing services to hotels and resorts was providing exempt temporary employment services or taxable real property services.

A person who assigns personnel to a host employer to support or supplement the host employer’s workforce in situations such as during an employee absence, a temporary skill shortage, a seasonal workload, or for a special project is providing temporary employment services. These services are exempt for sales and use tax under certain conditions including when the host employer provides all necessary supplies and equipment to perform the job and when the host employer retains exclusive rights to supervise and direct the work of the temporary employee.

The taxpayer’s agreement with its clients does not specify an end date for the services performed and continues in perpetuity. The Comptroller’s office determined that the clients do not maintain an adequate workforce and that the taxpayer was therefore not supplementing the client’s workforce on a temporary basis due to employee absence, a seasonal workload, or for a special project. The activities performed by the taxpayer’s staff meet the definition of taxable real property services. The taxpayer is therefore required to collect and remit sales tax on the charge for its services.

STAR Accession No. 202506016L

Tax Policy responded to a private letter ruling request related to whether a charge for equipment used to triage wireless phones and devices was a rental of equipment or the provision of a service.

The taxpayer provides services to wireless telecommunications providers to evaluate and determine the condition of exchanged or trade-in wireless devices. The taxpayer receives devices from telecommunication providers and determines if a device is new, damaged beyond repair, defective, or eligible for recycling.

The taxpayer does not own the equipment used to provide its services. The taxpayer entered into an agreement with a supplier that grants the taxpayer the right to use the necessary equipment, technicians, and software at the taxpayer’s location.

The supplier provides on-site technicians that activate and deactivate the equipment at the beginning and end of each shift, provide preventative maintenance and repairs as needed, and monitor the equipment for malfunctions. The taxpayer’s employees load the wireless devices into the equipment for testing.

The Comptroller’s office determined that the supplier’s technicians do not actively operate the equipment to test the devices. The taxpayer’s employees continually use, control, and operate the equipment to perform the testing services for their customers. The taxpayer therefore has possession of and is exercising operational control over the equipment and the agreement is a taxable rental of the equipment.

STAR Accession No.202506019L

Tax Policy responded to a private letter ruling request regarding the taxability of services for the removal of Class 1-3 non-hazardous waste, as classified by the Texas Commission on Environmental Quality (TCEQ).

Texas Department of Transportation contacts the taxpayer when there is a spill of materials, such as gasoline, used motor oil, diesel, antifreeze, jet fuel, and other contaminants on Texas highways. The taxpayer responds to the location with company personnel, vehicles, and cleaning materials and equipment to clean and dispose of the contaminants.

The taxpayer is responsible for the cleanup of all waste or contaminants and for transportation to and disposal of the material at an approved disposal site. The taxpayer disposes of waste in a landfill which accepts Class 1 materials. After completing the waste removal services, the taxpayer submits an invoice to the party responsible for the spill. Additionally, the taxpayer charges for the use of “rolloff boxes” used as part of its hazardous material cleanup operations.

Taxable real property services include the removal or collection of garbage, rubbish, or other solid waste. The collection of hazardous waste and industrial hazardous waste are excluded from the services subject to tax.

Class 1 waste, as disposed of by the taxpayer, is classified as non-hazardous waste by the TCEQ. The Comptroller’s office therefore determined that the taxpayer’s service is the removal of solid waste and is a taxable real property service. The taxpayer’s charges for rolloff boxes are also taxable as part of the taxpayer’s waste removal service.

STAR Accession No. 202507018L

A taxpayer requested a private letter ruling regarding the taxability of telehealth services and related items provided with those services. The taxpayer provides employers access to telehealth services, primarily for gastrointestinal related health issues. The employers provide this access as an employee benefit for individuals enrolled in an employer-sponsored benefit plan or other health plan.

The telehealth services provide enrolled employees access to physicians, nurses, dietitians, and other staff such as a healthcare coach. The telehealth services also include online health questionnaires, online medication profiles, and related educational content such as videos, recorded webinars, courses, and articles written by the taxpayer’s employees.

As part of the services, an employee covered by a benefit plan may request at-home testing such as microbiome analysis. The taxpayer provides a test kit to a covered employee at the direction of a medical professional. The kits are processed by an independent, third-party laboratory.

The Comptroller’s office determined that the taxpayer’s telehealth services that provide access to medical professionals do not fall under the list of services subject to Texas sales and use tax and are therefore not taxable.

It was also determined that any data processing activities that the taxpayer performs are ancillary to the nontaxable telehealth services. The taxpayer’s services are therefore not taxable as data processing services. Similarly, the educational content included in the services does not resemble other taxable information services and does not cause the taxpayer’s service to be taxable.

The taxpayer is not selling the test kits to the covered employees. The taxpayer uses the kits in the performance of its nontaxable telehealth service and must pay sales tax on its purchase of the kits.

STAR Accession No. 202508025L

Tax Policy issued a private letter ruling related to charges for use of a mobile application that allows truck drivers to purchase discounted fuel from fuel stops.

The taxpayer’s app lists the fuel stops’ locations, prices for fuel, and the locations’ amenities. When a truck driver arrives at a fuel stop, the driver provides a code generated by the application to the fuel stop clerk to purchase fuel at the discounted price. The application also compiles and produces reports of transactions made through the app for the fuel stops. The taxpayer charges fuel stops a percentage-based fee on the total sale of fuel to the truck drivers.

The Comptroller’s office determined that the activities performed by the application involve data compilation, data manipulation, and information storage which fall under the definition of data processing. The taxpayer’s charges to the fuel stops are therefore subject to tax as data processing services.

The Taxes webpage has links to:

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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.

Visit our Tax Training Resources webpage to:

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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.

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