Tax Counsel News

Following recent organizational changes within the Comptroller’s office, the Tax Policy Division has been restructured as the Tax Counsel’s Office. As part of this change, Tax Policy News has been rebranded Tax Counsel News.

The newsletter continues to provide general information about Texas taxes and updates relevant to taxpayers and tax professionals.

Previous articles that are no longer available in the online newsletter may still be accessed through the State Tax Automated Research (STAR) System.

Thank you for continuing to read and subscribe to our newsletter. We look forward to keeping you informed through Tax Counsel News.

Franchise tax reports are due Nov. 16, 2026, for taxpayers who filed valid extensions for the 2026 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, 2026. 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 will 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. 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 on 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. Many taxpayers have CPAs or consultants who handle their filings and may not have signed up for Webfile. To view notices in Message Center once it becomes available, users must sign up for Webfile and add their taxpayer account using their unique Webfile number. Visit our Getting Started with Webfile webpage for instructions on creating a Webfile profile and locating your Webfile number.

The Message Center is a secure, one-way digital mailbox available in eSystems. It provides online access to certain notices in PDF format, allowing taxpayers to review important information without waiting for mail delivery. Message Center is expected to be available by the end of 2026.

2026 franchise tax reports were due May 15, but some taxpayers have still not met their franchise tax filing and/or payment requirements.

Depending on your entity’s annualized total revenue, you may need to file a franchise tax report and a Public Information Report (PIR) or Ownership Information Report (OIR); or you may only need to file a PIR or OIR. There is no $50 penalty for late filing a PIR or OIR. See our Changes to No Tax Due Reporting For 2024 Reports and Later webpage for details.

On Sept. 29, the Comptroller’s office began 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 Jan. 29, 2027, 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.

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.

Third-Party Medical Provider Submission and Management Services, STAR Accession No. 202607009L

Tax Counsel’s Office issued a private letter ruling addressing whether submission and management service performed by a third-party on behalf of a medical service provider to resolve a disputed insurance claim amount is taxable as an insurance service.

Insurance services are included in the list of specifically enumerated taxable services in Texas. See Tax Code Section 151.0101(a)(9) Taxable Services. An insurance service means insurance loss or damage appraisal, insurance inspection, insurance investigation, insurance actuarial analysis or research, insurance claims adjustment or claims processing, or insurance loss prevention service. See Section 151.0039(a), Insurance Service. Insurance claims adjustment or claims processing means “[a]ny activities to supervise, handle, investigate, pay, settle, or adjust claims or losses.” See Rule 3.355(a)(8), Insurance Services.

Prior Comptroller guidance does not limit “insurance claims adjustment” to services provided by persons described by the definition of “adjuster” in Texas Insurance Code Section 4101.001, Definitions. Furthermore, Attorney General Opinion JM-1016 (1989) claims adjustment or claim processing services are taxable whether or not performed before or after a medical service settlement. See Star Accession No. 8902A0923A03 (Feb. 13, 1989).

Tax Counsel therefore determined third-party submission and management services are taxable insurance services because the services constitute the supervising, handling, investigating, and settling of payment of an insurance claim under the definition of insurance claims adjustment or claims processing in Rule 3.355(a)(8). See Tax Code Sections 151.0039 and 151.0101(a)(9) and Rule 3.355(b).

Normal Selling Price of Promotional Beverages, STAR Accession No. 202609002L

Tax Counsel’s Office issued a private letter ruling related to the “normal selling price” for a complimentary beverage provided during a promotional period.

Mixed beverage taxes are imposed on the receipts of a permittee received from the sale, preparation, or service of mixed beverages or from the sale, preparation, or service of ice or nonalcoholic beverages that are sold, prepared, or served for the purpose of being mixed with an alcoholic beverage and consumed on the premises of the permittee. See Tax Code Sections 183.021, Tax Imposed on Gross Receipts of Permittee from Mixed Beverages, and 183.041, Tax Imposed on Sales of Mixed Beverages and Related Items.

Alcoholic beverages served without any consideration paid to the permittee (i.e., complementary alcoholic beverages) are excluded from mixed beverage taxes. See Rule 3.1001(a)(4) and (f), Mixed Beverage Gross Receipts Tax. See also Tax Code Sections 183.021 and 183.041. Use tax, as provided in Section 151.101, Use Tax Imposed, is due on the complimentary alcoholic beverage based on its normal selling price. See Rule 3.1001 (f)(1) and (l)(2).

The “normal selling price” is the “sales price” of the alcoholic beverage, that is defined in part as the total amount for which a taxable item is sold or valued in money. See Tax Code Section 183.001(a)(3), Definitions, and Section 151.007(a), Sales Price or Receipts. Therefore, the “normal selling price” of a complimentary alcoholic beverage is the amount for which it is valued in money at the time of the service. This includes alcoholic beverages sold during promotional periods. Detailed documentation must be kept to support “normal selling price.” See also Rule 3.1001 (a)(11), (k), and (l)(2).

Pest Control Services, STAR Accession No. 202609003L

Tax Counsel’s Office issued a private letter ruling related to the taxability of charges for residential wildlife removal, exclusion, remediation, and pest control services provided by a licensed pest control company.

The taxpayer offers four kinds of structural pest control services exclusively to residential customers: wildlife removal using live traps and flushing techniques; installation of structural barriers, such as flashing and vent screens to prevent wildlife reentry; attic remediation after wildlife removal; and, pesticide based structural pest control treatments. The taxpayer invoices these services as separate line items.

The taxpayer’s wildlife removal and flushing services include setting live traps, monitoring traps, flushing wildlife from structures, and removing captured animals. Tax Counsel determined that these activities do not constitute taxable structural pest control services as defined in Occupations Code Section 1951.003(a) because they do not involve the use of insecticides, pesticides, rodenticides, fumigants, or allied chemicals and substances.

Regarding the taxpayer’s structural exclusion work, Tax Counsel determined that the taxpayer is acting as a contractor performing residential real property repair and remodeling. The taxability of a contractor’s charge to its customers is determined by whether the contractor uses a lump-sum or separated contract. Because the taxpayer uses lump-sum contracts, the charges for these services are not taxable. Instead, the taxpayer owes tax on all materials incorporated into the residence.

Tax Counsel determined that the taxpayer’s attic remediation and pesticide based pest control services are taxable as cleaning, janitorial, or custodial services and structural pest control services, respectively.

Funds From the Municipal Hotel Occupancy Tax, STAR Accession No. 202607002L

Tax Counsel’s Office issued a private letter ruling addressing whether funds received by a taxable entity under a contract with a city and subsequently distributed to third parties are included in the entity’s total revenue. The city contracted with the taxpayer to administer certain cultural and preservation funding programs funded by municipal hotel occupancy taxes. The taxpayer facilitated a grant application process, executed grant agreements with awardees, and distributed grant funds received from the city to the designated recipients. The city approved the annual budgets for both the grants and the taxpayer’s administrative fees. The taxpayer invoiced the city monthly, provided weekly expenditure information, and returned any unused funds.

Tax Counsel determined that the requirement for the taxpayer to pass the grant funds through to the awardees was more than a contractual obligation. Because the taxpayer met the requirements of Tax Code Section 351.101(c), the law established a fiduciary duty over the funds. As a result, the grant funds received by the taxpayer qualify as flow-through funds under Section 171.1014(f) and are excluded from total revenue.

Synthetic Nicotine Analog, STAR Accession No. 202609004L

Tax Counsel’s Office issued a private letter ruling related to the taxability and regulation of a brand of ersatz cigarettes, referred to as “ercigs.” These ercigs are comprised of a non-tobacco, organic, plant-based filler and a nicotine substitute containing 6-Methylnicotine, a synthetic nicotine analog.

Tax Counsel determined that the ercigs are taxable tobacco products subject to applicable regulatory requirements under Tax Code Chapter 155 and Health and Safety Code Chapter 161 because the ercigs’ combination of non-tobacco plant matter and synthetic nicotine analog takes the place and function of tobacco plant matter in products taxed under Section 155.001(15). Therefore, ercigs are taxable tobacco products made of a tobacco substitute under the definition of “tobacco substitute” provided by the Supreme Court of Texas in Kelly Hancock v. RJR Vapor Co., LLC, 734 S.W.3d 856(Tex. 2026).

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