Has the Texas Comptroller Stopped Issuing Tax Policy Letters?

Due to a significant loss of Tax Policy Experts, the Texas Comptroller’s Office has not issued a Tax Policy Letter (TPL) since late 2012. Folks, that is over 4 years!

You might say, ‘Who cares and what the heck is a Tax Policy Letter anyway?’. Well, let me tell you. (more…)

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Sales Tax and the Upstream Petroleum Industry

The upstream sector of the Petroleum industry involves companies that search for potential underground crude oil and natural gas fields, drill exploratory wells, and subsequently drill and operate the wells that recover and bring the crude oil and/or raw natural gas to the surface. Sales taxes can be a significant cost for the companies exploring, drilling and operating successful oil and gas wells. (more…)

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Sales Tax and Midstream Oil and Gas Companies

Companies involved in the midstream movement of oil and gas from the well sites to the processing or downstream refineries generally utilize pipelines, tanker trucks, barges, rail or oil tankers.

In Texas oil and gas is primarily moved by pipeline. Texas has over 425,000 miles of pipelines within its borders that represent about 1/6 of the total pipeline structure in the United States. The Pipeline safety department of the Texas Railroad Commission is charged with the responsibility of enforcing compliance with federal and state laws and regulation by the more than 1,485 pipeline operators in Texas of intrastate gathering, transmission, distribution and master-metered systems. (more…)

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Requesting an Independent Audit Review Conference (IARC) to Stop an Incorrect Texas Comptroller State Tax Audit from being Billed

Imagine this uncomfortable scenario. Your business is under audit by the Texas Comptroller’s Office. It is the last day of the Field Audit and you are meeting with the auditor at the Exit Conference. The auditor then hands you a tax bill for an amount that you disagree with. What do you do now? What rights do you have? (more…)

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Texas Oil & Gas -Southwest Royalties, Inc. vs. Susan Combs Most Likely Heading to Supreme Court

The issue concerning whether tangible personal property placed inside a well (i.e., “downhole”) qualifies for the manufacturing exemption has been pending in the Texas court system for several years. The trial judge ruled in favor of the Comptroller on April 30, 2012, and the Third Court of Appeals heard oral arguments on September 25, 2013. After considering the issue for almost 11 months, the Third Court of Appeals issued an opinion on August 13, 2014, affirming the trial court’s judgment for the Comptroller. (more…)

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Why am I Being Audited?

You just received notification that your business has been selected for a Texas Comptroller state tax examination. Unless you have been through the audit process before, you probably have lots of questions and concerns. Of course one of the first questions most business owners ask is, “Why my business?” Although it’s common to think you did something wrong, this usually isn’t the case. However, if you have been selected for audit, Texas Tax Group has a team of 15 former Texas Comptroller State Tax Auditors who can help you save time and money. (more…)

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“Estimated” Sales Tax Audit

This client owns a bar that does not serve food. The bar had not been remodeled in years, and the only real tax exposure for the state was in the mixed beverage area. However, there are some overly zealous audit supervisors who insist their auditors spin off sales tax audits “in order to protect the state’s interest.” The client did not initially provide any records related to the sales tax audit, so the auditor “estimated” the sales tax audit. (more…)

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Mixed Beverage Gross Receipts Tax

Mixed Beverage Gross Receipts Tax Rate Lowered; New Mixed Beverage Sales Tax Imposed

House Bill 3572, effective Jan. 1, 2014, lowers the mixed beverage gross receipts tax rate from 14 percent to 6.7 percent. The bill also imposes an 8.25 percent mixed beverage sales tax.

Mixed beverage gross receipts tax is imposed on the mixed beverage permittee and will be administered the same as before but at a lower rate. In addition, a mixed beverage permittee will collect an 8.25 percent tax on each mixed beverage sold, prepared or served. The new sales tax is also due on ice and each nonalcoholic beverage sold, prepared or served to be mixed with an alcoholic beverage and consumed on the permitted premises. (more…)

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Sales Tax Reporting Requirements for Contractors

The Comptroller’s office was asked to provide a speaker to discuss the applicability of sales tax for plumbing contractors at the Buda headquarters of the Plumbing-Heating-Cooling Contractors Association of Texas. Jim Mathieson spoke to the association about reporting requirements under Rules 3.2913.3573.292 and 3.322.

*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#issue9.

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Direct Pay Permit Holders and “Tax-Included” Sales

Tax responsibilities can be confusing when a sale occurs between a seller and a direct pay permit holder, and the seller indicates that tax will be included as part of the sales price.

The Comptroller is considering amendments to appropriate rules to explicitly state that a seller who uses “tax-included” language in contracts and on invoices is responsible for remitting the tax to the Comptroller, without regard to who the purchaser is, consistent with longstanding law.

Additionally, if tax-included language is part of a contract when the purchaser holds a direct pay permit, the seller must remit the tax and cannot claim a refund if the direct pay permit holder also accrues and remits tax on the same transaction.

*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#issue8.

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Court Case Summary: Plush Toy Prizes Used to Stock Coin-Operated Amusement Crane Machines May Qualify for Resale Exemption

Roark Amusement & Vending, L.P. v. Combs, et al., Cause No. D-1-GN-06-004725

Roark Amusement & Vending, L.P. (Roark) owns and leases coin-operated amusement crane machines that customers operate to try to grab a toy prize. Roark filed a refund claim for Texas sales and use tax paid under protest on its purchases of plush toys used in its coin-operated amusement crane machines, arguing that the plush toy purchases qualified for the sale for resale exemption. (more…)

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Local Sales Tax Rate Increases – Calculating and Reporting Tax for Sellers Operating on a Cash Basis of Accounting

Businesses operating on the cash basis of accounting record all transactions in their books when money actually changes hands, meaning when payment is actually received by the company or when money is paid out by the company.

If your business operates or reports using the cash basis of accounting, and there is a change in the local tax rate between the time you execute a sales contract and payment is received, you should collect tax based on the rate in effect when the sales contract was executed, unless your contract allows for a change in the contract price based on a tax rate increase. Sales contracts must be dated and state a definite price and terms. (more…)

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Future Roundtable Discussion on Internet Hosting and Nexus

The Tax Policy Division will hold a roundtable discussion regarding House Bill 1841 (passed during the 82nd Legislature) and how the change in the law should impact our policies on Internet hosting and nexus. A date has not been set for the roundtable, but it will likely take place after the 83rd Legislature adjourns in 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 Bryant Lomax.

*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#issue5.

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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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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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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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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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