I read a somewhat recent Texas Comptroller ‘Private Letter Ruling’ (PLR) dated March 9, 2018. The ID number or ‘fiche’ number as it is referred to is: 201803005L and can be found on the agency website – see link https://star.comptroller.texas.gov/advanced . It is written to a grocery store owner that also sold flowers explaining what ‘local tax’ was due depending on certain circumstances. And I then realized I needed to write an article about the local jurisdiction Texas tax rules. Keep in mind that this article will not cover every scenario, but it will describe the basics of selling tangible personal property when you have more than one ‘place of business’ or you drop ship the item.
Also let me say (i.e., complain about) one thing about these Private Letter Rulings (PLR) before I continue. The complaint is that there are not nearly enough of them being issued. The Texas Comptroller basically shut down their Tax Policy Section in 2012 for purposes of publishing sales tax opinions (they were called Tax Policy Letters since the 1980s) but occasionally will write what been since been called Private Letter Rulings – PLR (see Tax Rule 3.1 – Private Letter Rulings).
The problem is that, if I am correct, the agency might issue 10 or 15+ PLRs per month which is a fraction of the 100+ monthly Tax Policy Letters commonly issued up until about 2012. That means there has been a significant reduction in the amount taxability information published by the Texas Comptroller to sales/use tax guidance. In addition, the agency has also dramatically reduced the number of phone bank operators who take taxability inquiries by phone. It should be noted that these operators can oftentimes give conflicting advice on the same issue (and you are not protected from acting on bad advice, unless you have a written correspondence addressing your specific issue).
Ok. Sorry for digressing but it bugs me (IMO) that the agency is falling short when it comes to discussing unique sales tax issues. If you want to read more on this subject read my article: http://texastaxgroup.com/has-the-texas-comptroller-stopped-issuing-tax-policy-letters .
Ok. Back to this article about this particular PLR. Also keep in mind that the local jurisdiction tax rules that apply in this PLR can apply to any Texas retailer selling taxable tangible personal property or services except for commercial / non-residential contractors.
This PLR just happened to be written in response to a grocery store located in Texas asking about the ‘local tax’ that should be charged on sales of flowers. It should be noted that the local ‘jurisdiction’ taxes are those taxes due other than the main Texas State Tax rate of 6.25% which is due on all Texas sales. These additional ‘local taxes’, if due, can include one of more jurisdictions such as a City, Special Purpose District, Mass Transit Authority, etc.) but in total can never exceed 2%. Therefore, the maximum total Texas tax (State plus local taxes) cannot exceed 8.25%.
Ok. Back to the story. Let’s say the grocery / flower store is located at 1001 E. Main St., Round Rock, Texas 78664. If the flower store had just this single store and everybody came in person to that store to buy flowers, then the local tax would be 8.25% (6.25% Texas State tax plus 2% local tax for the City of Round Rock). The local sales tax is based on where the customer ‘picked up’ the flowers which was inside the City of Round Rock, Texas.
Now let’s say this grocery / flower shop had a 2nd location inside the City of Austin at 1001 Congress Ave., Austin, Texas. In this 2nd scenario the walk in customers would pay 8.25% (6.25% State + 1% City of Austin + 1% Austin Mass Transit Authority).
But let’s make up a 3rd scenario and say the customer called in an order to the Round Rock location but then drove over to the Austin location to pick up the flowers. Which local tax would be due? The total tax would be the same (8.25%). But according to Tax Rule 3.334 the local tax would Austin City (1%) and Austin Mass Transit Authority (1%).
The reason that the City of Round Rock local tax is not due is because that Under Rule 3.334(h)(1), local sales taxes are due based on the location where a sale is consummated (i.e., item is received).
Rule 3.334(h)(3)(C) states that when an order is placed over the telephone or through the Internet, (the buyer called the Round store to order the flowers), and the seller fulfills the order at a location that is also a place a business in Texas (the buyer picked up the flowers in Austin), the sale is then considered to be consummated / completed in Austin.
Conclusion: Keep in mind that flowers are just like any other tangible personal property (TPP). These local jurisdiction rules will apply whether you are talking the sale of any other TPP (such as car parts, electronics, furniture, etc.).
And believe me there are lots more scenarios that apply to the sale of TPP and taxable services. Instead of me writing several more blog articles I would suggest you read an excellent publication finally put out by the Texas Comptroller in June of 2016. It is a 12 page document titled: “TAX TOPICS – LOCAL SALES AND USE TAX” (Publication #94-105 – revised June 2016).
Please contact Texas Tax Group with any question regarding this article or any other Texas Tax issue.