Franchise Tax Account Status

The Comptroller has historically issued Certificates of Account Status (“good standing”) in response to inquiries about the status of an entity’s franchise tax account. The ability to search the franchise tax status of an entity is also available on the Comptroller’s public website, Window on State Government.

In the past, being “in good standing,” or being able to obtain a Certificate of Account Status, meant that all franchise tax filing requirements had been met and no franchise tax was due. (more…)

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Future Roundtable Discussion on Cost of Goods Sold and the Printing Industry

The Tax Policy Division will hold a roundtable discussion regarding the cost of goods sold deduction and the printing industry. A date has not been set for the roundtable, but we are looking at the month of June.

If you would like to be involved in the development of our future policies in this area by attending the roundtable meeting, please email Teresa Bostick.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1304.html#issue2.

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State Tax Automated Research (STAR) System User Survey

Do you use our searchable STAR system to find information about Texas tax law and policies? We are currently evaluating STAR’s hardware and software components, and we’ve posted an online survey to learn more about how our customers use the system. We invite you to share your comments and observations through the survey. As always, we value your feedback.

If the link does not work, please copy and paste this address into your browser to take the survey.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1303.html#issue9.

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Spanish version of Fairs, Festivals, Markets and Shows

The Spanish version of Fairs, Festivals, Markets and Shows (Pub. 96-211) is now available online.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1303.html#issue6.

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Alcohol Reporting

The Comptroller’s office was asked to provide a speaker to discuss alcohol sales reporting requirements for wineries at the 2013 Annual Texas Wine and Grape Growers Association. Donald Dillard spoke to the association about reporting requirements stemming from the passage of House Bill 11 in 2011. Interested persons can learn more about alcohol reporting requirements on our website.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1303.html#issue4.

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Popular Online Resources

Our Window on State Government website is a wonderful resource for information about Texas taxes. From applying for a sales tax permit to closing a business, and all things in between, you can find answers here – just enter a keyword for the information you need in the Site Search box located on the top-right-hand corner of each website page.

You can also sign up to be notified when pages of interest to you are updated.

Some of the most popular sections include:

  • Texas Taxes – This section has links to all Texas taxes and fees. Clicking on a specific tax on the list will open its own page which will have links to everything needed to report and pay that tax, along with the statutes and rules that govern it.
  • Frequently Asked Questions – Answers to our most common questions, organized by tax
  • Tax Publications – Links to publications about specific taxes
  • Special Tax Mailings – A list of pertinent information sent to specific industries to keep them up to date about new legislation or other items of interest
  • State Tax Automated Research System (STAR) – A searchable tool for Texas tax law and tax policy, including policy letters and hearings

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1302.html#resources.

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New and Updated Agency Rules Concerning Taxability Letters and Taxpayer Rights

In January’s Tax Policy News, we announced that new Rule 3.1, relating to Private Letter Rulings and General Information Letters and amended Rule 3.10, relating to Taxpayer Bill of Rights, would be effective on Jan. 28, 2013.

We’ve created a new web page to summarize the information in Rule 3.1.

The Comptroller will issue a general information letter in response to a request for taxability information. Our response will refer the requestor to an existing resource, such as an administrative rule, a publication or a Frequently Asked Question (FAQ), to answer the question. You may want to search this list of resources to see if the answer to your question is already available, before writing to us.

A private letter ruling, on the other hand, is the Comptroller’s written determination on the application of relevant tax laws, rules and policies to a specific set of facts. When submitting a request for a private letter ruling, consult Rule 3.1 to make sure all requirements for requesting a private letter ruling are met, as the information on the web page is not intended to be a substitute for the rule.

We’ve also enhanced our Compact with Texans web page to explain when the agency will give taxpayers detrimental reliance relief in relation to the taxes, fees and other charges administered by the agency. This longstanding policy is now more clearly explained in Rule 3.10. Other aspects of the rule are updated as well, such as information about our customer service liaison, and ways to help taxpayers comply with the laws and provide input into Comptroller rules and procedures.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1302.html#issue3.

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Tax Deductions on 2012 Federal Income Tax Returns

Texans who itemize deductions on their federal income tax return can deduct state and local sales or use taxes paid on purchases made during the 2012 calendar year, including big-ticket items such as cars, recreational vehicles and boats.

To claim the federal deduction, eligible taxpayers can either:

Taxpayers who built a new home or improved their home in 2012 may deduct sales taxes paid on the materials incorporated into the real property improvement. Labor is not taxable for new construction or residential repair and remodeling.

To be eligible for the deduction, the homeowner must have:

  • purchased the materials directly from, and paid tax to, the building materials supplier; or
  • worked with a contractor under a separated contract.

Lump-sum (one price) contracts are not eligible for the deduction because a contractor performing a contract for a lump-sum price pays the sales tax on materials and does not collect tax from the customer. Since the customer did not pay tax to the contractor, the customer cannot deduct the tax on the federal income tax return.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1302.html#issue2.

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Homeowners Renting a Room to the Public

The many upcoming springtime festivals, rodeos, races and other entertainment events have some Texans leasing their homes to visitors in town for the events. Remember though, that persons leasing rooms or houses must collect hotel occupancy tax from their customers, in the same way a hotel or motel collects the tax from its patrons.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1302.html#issue1.

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Franchise Tax – Rule 3.588

The Tax Policy Division recently hosted a roundtable discussion on Rule 3.588 related to margin and the costs of goods sold. The roundtable discussion was based on a draft rule amendment that was sent to representatives of various businesses who had participated in a work group on the issue of qualifying labor costs for Cost of Goods Sold. The amendment has not been formally proposed in the Texas Register.

We’ll be holding more roundtables to allow interested people to have input in the rules we propose, and we’ll keep you informed of upcoming events through this newsletter.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1302.html#roundtable.

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Tax Publications

http://www.window.state.tx.us/taxinfo/taxpubs/index.html

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REMINDER – It’s a New Calendar Year for Certain Nonprofit Organizations

It’s a new calendar year for nonprofit organizations allowed to hold two one-day, tax-free sales during a calendar year. A qualified organization that has obtained sales tax exemption from our office must designate in its records before a sale which two, one-day sales will be exempt during a calendar year. This may require careful planning and coordination for organizations operating on a fiscal year basis.

For example, PTAsPTOs and other school groups often plan events based on school years rather than calendar years. When planning fundraising activities (PDF, 412KB) for a new school year, the school groups should verify the number of tax-free fundraisers conducted by the organization during the prior school year that occurred during the current calendar year.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1301.html#issue3.

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REMINDER – It’s Time to Renew Cigarette/Tobacco Non-Retailer Permits

Current cigarette and tobacco products non-retailer permits expire Feb. 28, 2013.

Renewal packets with preprinted applications were recently mailed to all cigarette, cigar and/or tobacco products manufacturers, importers, distributors, bonded agents and wholesalers for renewing their cigarette and tobacco products non-retailer permits for March 1, 2013, through Feb. 28, 2014.

Non-retailers should review the preprinted information, make any corrections and return all pages of the packet (and any other documentation) with the applicable permit fee to our office by the date printed on the application form.

Returning the renewal packet and application fee by the return date will allow enough time for us to process the renewal before the current permit expires.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1301.html#issue3.

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“Good Standing” Account Status – Changes Are Coming

Businesses have been reporting under the revised franchise tax since 2008. Due largely to the complications of combined reporting, companies can be “not in good standing” due to a reporting error, not a tax delinquency. A “not in good standing” status can be costly to a company conducting a business or financial transaction.

The Comptroller took another look at good standing in the light of concerns from businesses. The result of that review is that being “in good standing” for franchise tax will mean that the company’s right to transact business in Texas is intact.

Being in good standing has evolved over the years, as we made changes to accommodate processing times and filing requirement changes. There are also different types of good standing, and this office may not be able to issue a certificate under certain good standing conditions. In short, it’s become complicated.

The decision to simplify and update the franchise tax good standing status definition was based on several factors:

  • Fairness. The good standing calculation is done by the certificate of account status application in real time. If a report processes that is missing a schedule, for example, the website will show the company to be “not in good standing” immediately – even before the company has been notified of the problem.
  • Transparency. The term “good standing” is misleading in that it addresses only franchise tax, although a company in good standing could have liabilities in multiple other taxes.
  • Clarity. A good standing can be confused with a certificate of existence, which is issued by the Secretary of State and attests to the status of an entity’s registration in Texas.

What’s Next?

A project team is looking at the procedural and programming changes necessary to replace good standing with the status of the entity’s right to transact business in Texas. See Texas Tax Code 171.251 – 171.259. This new definition means that a business will receive a written notice of any issues with its franchise tax filing, and will have at least 45 days to cure those issues, before the business is not in good standing.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2013/tpn1301.html#issue1.

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Revised Sales Tax Publications

The sales tax publications below have recently been revised. Our publications are intended as a general guide and not as a comprehensive resource on the subjects covered. They are not a substitute for legal advice.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2012/tpn1212.html#issue4.

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Federal Excise Tax on Medical Devices is Part of the Sales Price

A new federal excise tax on medical devices equal to 2.3 percent of the sales price on sales of certain devices begins Jan. 1, 2013. The tax is imposed on manufacturers, producers and importers, not on their customers.

A seller may pass along the expense of the new tax to customers by separately stating a line item charge on the invoice or receipt given to their customers for “Federal Excise Tax” or something similar. A seller cannot characterize such a pass-through or reimbursement as a tax or fee imposed on the purchaser.

The Texas Tax Code requires that any money represented as and collected by a seller as a “tax” or “fee” be remitted to the state in full. So, if a seller characterizes reimbursements for the federal excise tax as a tax or fee imposed on its customers (the purchaser), the Comptroller’s office will regard such charges as tax collected in error. “Error tax” must either be refunded to customers or remitted to the state. See STAR document 201008851L for additional guidance regarding line item charges and sales tax.

If Texas sales tax is due on a medical device when it is sold, an excise tax reimbursement charge included with the billing is part of the sales price and also taxable. If a medical device is exempt from sales tax, the associated medical device tax reimbursement charge is exempt from sales tax.

For more information on the taxability of medical devices in Texas, please see Rule 3.284, Drugs, Medicines, Medical Equipment, and Devices. The federal law that imposed the tax is the Health Care and Education Reconciliation Act of 2010 (Health Care Act), P.L. 111-152.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2012/tpn1211.html#issue4.

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Saving Money during the Drought

Gov. Rick Perry renewed a proclamation extending the drought emergency for certain Texas counties due to the ongoing exceptional drought conditions across the state. Texas tax law allows sales tax exemptions for certain items used to enhance the availability of water.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2012/tpn1211.html#issue3.

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Holiday Shopping

When you shop online, remember Texas sales and use tax applies to orders for taxable items shipped or delivered to a location in Texas. If the seller didn’t collect tax from you, state law requires you to pay the tax directly to the state. If you hold a sales and use tax permit, report the tax on your next regular sales tax return. Otherwise, file a use tax return (PDF, 31KB).

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2012/tpn1211.html#issue2.

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State Employees Are Not Exempt from Hotel Occupancy Tax

State employees traveling on official business are not exempt from state or local hotel occupancy tax, unless an exception applies. State employees should not issue a hotel occupancy tax exemption certificate to a hotel.

State law exempts certain state employees from state and local hotel occupancy tax: mostly judicial officials, heads of state agencies, members of state boards and commissions and members of the Texas legislature. Each agency issues such employees a hotel occupancy tax exemption photo identification (ID) or card which must be presented to the hotel, along with a completed Texas Hotel Occupancy Tax Exemption Certificate (Form 12-302) (PDF, 66KB) , during the check-in process. Refunds are not available.

Employees of Texas institutions of higher education travelling on official business may claim exemption from the 6 percent state hotel occupancy tax by presenting a completed Texas Hotel Occupancy Tax Exemption Certificate to the hotel at check-in. These employees must pay any local hotel occupancy tax imposed.

Texas state agencies are exempt from sales tax, but they are not exempt from hotel occupancy tax. State employees are entitled to reimbursement for hotel occupancy taxes paid when traveling on official business of the state. Most state agencies reimburse their employees through travel vouchers. The hotel tax is an incidental expense and does not apply to the maximum lodging reimbursement rate.

State agencies that have submitted a blanket refund request will receive a refund through the state’s accounting system each fiscal quarter for hotel tax that the agency reimbursed to employees. A state agency not on the state’s accounting system must make separate quarterly refund requests with the Comptroller’s office and with each local taxing authority that collected hotel tax. Submit a Texas Claim for Refund of State Hotel Occupancy Tax (Form 12-104) (PDF, 65KB) to claim a refund.

For more information, see Tax Code Sections 156.103(c)351.006(d) and 352.007(d) andRule 3.163.

*Originally published in Tax Policy News; a monthly newsletter about Texas tax policy at http://www.window.state.tx.us/taxinfo/taxpnw/tpn2012/tpn1211.html.

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Policy Correction Regarding Ultrasound Equipment and Section 151.338 Exemption for Environment and Conservation Services

A recent inquiry concerning an exemption from tax, as provided in Texas Tax Code Section 151.338, for labor to repair, maintain, restore and remodel ultrasound equipment has led us to reconsider our position as previously discussed in STAR document 201009943L and STAR document 201112317L (December 2011 Tax Policy News).

The exemption provided in Texas Tax Code Section 151.338 states:

“The services involved in the repair, remodeling, maintenance, or restoration of tangible personal property are not taxable under this chapter if the repair, remodeling, maintenance, or restoration is required by statute, ordinance, order, rule, or regulation of any commission, agency, court, or political, governmental, or quasi-governmental entity in order to protect the environment or to conserve energy.” (more…)

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