August 2024

Sales Tax Application to Separately Stated Credit Card Processing Fees: The Comptroller's Office (Comptroller) has recently issued a Memorandum addressing the application of Texas sales tax to separately stated credit card processing fees billed by a retailer and the sales price of the taxable items sold. By way of background, the Comptroller in this Memorandum states that retailers who accept credit card payments for sales of taxable items may choose to pass on a credit card processing fee to their customers or cover the processing fee at the retailer's own expense, and these processing fees represent charges to the retailer by the person settling the credit card transaction. The Comptroller further noted that retailers frequently claim that separately stated credit card processing fees passed on to the customer are not part of the sales price for one of two reasons, those being: (1) the processing fees are excluded from the sales price under Texas law as finance, carrying and service charges or interest from extending credit to the purchaser, or (2) the processing fees are excluded from the definition of “data processing service” and thus are not included in the sales price. In analyzing the issue, the Comptroller concluded that separately stated credit card processing fees are taxable as part of the total sales price of a taxable item, and that such separately stated charges are not finance, carrying and service charges, or interest from credit extended for sales of taxable items, because the retailer is not extending credit to the customer for the purchase of a taxable item. Further, Comptroller determined that a retailer selling a taxable item is not acting in the capacity of a credit card payment processor or financial institution settling an electronic payment transaction; and, therefore, when a retailer chooses to pass on a credit card processing fee to its customer, it is passing on a cost or expense incurred in connection with the sale of a taxable item, which amounts are included under Texas law in the sales price of taxable items. Accordingly, the Comptroller determined that a retailer's charges for reimbursement of credit card processing fees, even when separately stated, are taxable as part of the total price of the taxable items sold. This Memorandum supersedes some previous decisions by the Comptroller relating to service charges for credit card sales. More information can be found here.

July 2024

Beginning SOL Date for Franchise Tax Assessments/Refund Claims: The Comptroller's office recently published guidance as to the beginning date for the statute of limitations for purposes of assessing franchise tax, and for purposes of filing refund claims as to such tax, under situations both where the taxpayer is not required to make tax payments by electronic funds transfer (EFT) and where the taxpayer is required to make tax payments by EFT. In general, the Texas Tax Code provides that no tax may be assessed, and no refund may be requested, after four years from the date a tax becomes due and payable. In determining the beginning date for a period of limitation, the date a tax is due and payable is the day after the last day on which a payment is required. As a result, because annual franchise tax reports and payments of the franchise tax are due on or before May 15 of each year, the beginning date of the statute of limitations is May 16 for a taxpayer that is not granted an extension of time to file its franchise tax report.

In issuing guidance, the Comptroller addresses the limitations period in situations where the taxpayer has been granted a valid extension under one of two methods to determine the amount of tax the entity must remit to receive that valid extension. According to this guidance, as to a taxpayer that is a non-EFT taxpayer (i.e., a taxpayer not required to make payments via EFT) which chooses to obtain an extension by filing an extension request by May 15 and paying 100 percent of the tax due in the prior reporting year, the remaining tax is due on or before November 15, such that the beginning date for the statute of limitations under that method for such taxable year is November 16. Further, the Comptroller provides that if a non-EFT taxpayer obtains an extension by (i) filing an extension request by May 15, (ii) remitting with the extension request at least 90 percent of the tax due for such reporting year, and (iii) subsequently filing its franchise tax report on or before the November 15 deadline, then the statute of limitations would likewise begin on November 16. However, if any of the preceding three requirements are not satisfied, the taxpayer requesting an extension based on the "90 percent of tax due" method would not have met the requirements for a valid extension, in which case the statute of limitations for such taxable period would begin on May 16.

With respect to a taxpayer required to make payments by EFT, if such taxpayer files an extension request by May 15 and pays 100 percent of the tax due in the prior reporting year, then the taxpayer would obtain a valid first extension, and the report and any remaining tax would be due on August 15, with the beginning date for the statute of limitations being August 16. With respect to a taxpayer required to make payments by EFT, and which obtains an extension by filing an extension request by May 15 and remitting with the extension request at least 90 percent of the tax due for such reporting year, and which either (A) subsequently files its franchise tax report on or before the August 15 deadline or (B) requests a second extension request on or before the August 15 deadline (with which the taxpayer must remit the difference between the amount remitted when filing the first extension request and the amount of tax eventually reported as due on the report) and subsequently files the report on or before November 15, then the statute of limitations would likewise begin on August 16. However, if any of the preceding requirements are not satisfied, the taxpayer would not have met the requirements for a valid extension, in which case the statute of limitations for such taxable period would begin on May 16.

The Comptroller also addresses in this guidance other circumstances pertaining to EFT taxpayers. More information can be found here.

May 2024

Disaster Relief Information: On April 30, 2024, Governor Abbott issued a disaster proclamation declaring a state of disaster in certain counties in Texas, such proclamation being amended on May 2, 2024. The Governor's proclamation certified that severe storms and flooding that began on April 26, 2024, and included heavy rainfall, flash flooding, and other disaster events, caused widespread and severe property damage, injury, or loss of life or property. A significant number of Texas counties are included within this proclamation. Taxpayers affected by the disaster may be eligible for an extension of time to file and pay taxes due. According to information on the Comptroller's website, extensions are available upon request only. Information required for the request is set forth on the website. A contact number is also included if assistance is needed with respect to the extension request. More information can be found here.

April 2024

Water-Efficient Products Sales Tax Holiday: The Texas Comptroller's Office recently published information regarding the Water-Efficient Products Sales Tax Holiday, which begins May 25, 2024 through May 27, 2024, and coincides with the ENERGY STAR Sales Tax Holiday, which provides an exemption from sales tax for purchases of certain energy-efficient products. During the holiday period, any product that displays a WaterSense label or logo can be purchased free from tax, regardless of whether such products will be used for personal or business purposes. In addition, and according to the Comptroller's Office, during the sales tax holiday certain water-conserving products can also be bought tax free; however, unlike the WaterSense labeled or logoed items, the water-conserving products are only exempt when purchased for use at the purchaser's residential property. The water-conserving products, according to the Comptroller's publication, include items that are used or planted for conserving or retaining ground water; recharging water tables; or decreasing ambient air temperature, and so limiting water evaporation. That publication then gives examples of various water-conserving products, such as a soaker or drip-irrigation hose, a moisture control for sprinkler or irrigation system, and mulch, among others. The Comptroller's publication also addresses purchases by contractors, landscapers and other service providers. More information can be found here.

March 2024

Contractor's Use of Exemption Certificate: On December 1, 2023, the Texas Comptroller's Office published Ruling No. PLR20220920115231 (the "Ruling") addressing the question of whether a certain taxpayer can issue an exemption certificate to its contractor so that the contractor may purchase, free from sales tax, tangible personal property incorporated into the realty, qualifying consumable items, and taxable services purchased for the improvement of property leased to the taxpayer. The taxpayer in the Ruling leased certain unimproved land from a tax-exempt Port Authority and was required to construct certain improvements on the property. Pursuant to the terms of the lease, the permitted use of the property was for the development and operation of a depot, which will be used for the evaluation, servicing, storage, and necessary repairs of containers and associated equipment as required by various shipping lines and other customers. The Ruling references the general impact of the sales tax on each sale of taxable items in Texas, but also states that purchases used in performance of a contract to improve realty for an exempt entity are exempt from the tax. The Ruling also mentions that this exemption can apply even when the contract is between a nonexempt entity (like the taxpayer) and a contractor if the contract is an "exempt contract." Pursuant to the Texas Administrative Code, an "exempt contract" is a contract with a nonexempt entity to improve real property for the primary use and benefit of an organization exempt under Texas law. Based upon the facts and circumstances in the Ruling, the Comptroller determined that the contract for the project at issue is an exempt contract because the primary use and benefit of the lease is for the Port Authority; and, as a result, the taxpayer may issue an exemption certificate to its contractor that is constructing the improvements on the property, claiming the exemption for the improvement to realty under an exempt contract. The Ruling also states that the contractor may in turn issue exemption certificates to its suppliers for tangible personal property incorporated into the realty, qualifying consumable items, and for taxable services performed at the jobsite, that are expressly required by the construction contract and are integral to the performance of the contract and used to construct the project as referenced in the Ruling. More information can be found here.

February 2024

Increase to the No Franchise Tax Due Threshold: The Comptroller's Office published a reminder for reports originally due on or after January 1, 2024, that recently enacted legislation increases the no tax due revenue threshold to $2.47 million and prohibits the Comptroller's Office from requiring taxable entities whose annualized taxable revenue is at or below the revenue threshold to file a No Tax Due Report. The Comptroller also noted in this reminder that the enacted legislation also repealed the requirement that a new veteran-owned business file a No Tax Due Report during its initial five-year exemption period. Further, the Comptroller noted in this reminder that because taxable entities whose annualized total revenue is at or below the no-tax revenue threshold, and qualifying new veteran-owned businesses are no longer required to file the No Tax Due Report, the Comptroller is discontinuing the No Tax Due Report for the 2024 report year and beyond. This reminder then reviews how various types of entities will report (or not report) beginning with the 2024 report. More information can be found here.

January 2024

Penalty and Interest Chart Through September 2024: The Property Tax Assistance Division of the Comptroller's Office (Comptroller) recently issued a chart setting forth the penalty and interest to be used in calculating the amount due on delinquent property tax bills. The chart applies to delinquent tax payments in the months of October 2023 through September 2024. Instructions for using the chart are included within. More information can be found here.

November 2023

Taxability of Electronic Games and Associated Content: As recently published by the Comptroller's Office (Comptroller) in September 2023, guidance has been issued as to the taxability of electronic games and associated content so as to include virtual currencies purchased for use with a game. As noted in the summary of such guidelines, electronic games are games operated on or through the use of devices such as a personal computer, game console, or mobile phone, where gameplay is accomplished through a connection to the internet. In recent years, according to this guidance, electronic games have evolved into more of an interactive virtual gaming experience by offering associated content including items such as additional content, character upgrades, and even their own virtual currencies. The guidance noted that consumers can purchase games and associated content directly through a game's website or from third-party retailers. Further, the guidance stated that when purchases are made via third-party retailers, they are often in the form of redeemable, physical cards. These cards, according to the guidance, include a code that grants access to the game and associated content; and they may also include a preloaded amount of virtual currency that the purchaser may redeem to access content within a game. The guidance notes that the purchase of electronic games and associated content, including virtual currencies, is taxable as an amusement service regardless of whether the access is purchased directly through a game's website or a redeemable card. More information can be found here.

October 2023

Adopted Rule Not Invalidated by Lack of Summary: As recently published by the Comptroller's Office (Comptroller) in the August 2023 Tax Policy News under the Other Legislative Developments segment, the Comptroller noted that House Bill 139 requires a state agency to provide notice of a proposed rule to be adopted. According to the information published by the Comptroller, the notice only applies to rules that are proposed to be adopted by a state agency under statutory authority that specifically authorizes the agency to adopt the rule and that became law during the proceeding four-year period. The Comptroller noted that House Bill 139 adds that the failure by a state agency to publish on the agency's internet website a summary of a proposed rule written in plain language in both English and Spanish does not invalidate the rule adopted by a state agency or an action taken by the agency under that rule. More information can be found here.

September 2023

Private Letter Ruling Involving R&D Sales Tax Exemption: As referenced in a Tax Policy News issued by the Comptroller's Office (Comptroller), the Comptroller previously issued a Private Letter Ruling involving the application of the sales and use tax exemption for research and development (R&D) purchases. In this Ruling, the taxpayer is a wholly owned subsidiary of a parent entity. The taxpayer was established to purchase vacant land and construct facilities in Texas for the parent entity. The parent's Texas operations and its Texas employees are located at the taxpayer's facility. The taxpayer however does not have any employees, nor does it generate, or plan to generate, any revenue. The parent entity funds all of the taxpayer's activities by transferring cash to the taxpayer. The taxpayer purchased items that are used by the parent entity in the parent entity's research and development activities. The parent entity applied for and received a Texas Qualifying Research Registration Number that allows for the parent entity to claim an exemption from the sales and use tax when purchasing qualified tangible personal property to be used in qualified research. The taxpayer has not applied for a Texas Qualified Research Registration Number. Upon review by the Comptroller's Tax Policy personnel, and in response to the Ruling request, the Comptroller ruled that the taxpayer may not use the Qualified Research Registration Number assigned to the parent entity nor would the research activities of the parent entity qualify for the R&D sales tax exemption to make taxpayer's purchases tax-free. As stated in the Ruling, only an entity engaging in qualifying research is eligible for the sales tax R&D exemption. The Ruling then sets forth the reasoning for such determination. More information can be found here.

August 2023

Legislative Update: The Comptroller's Office has recently announced that readers should be on the lookout for the August 2023 edition of Tax Policy News, which will include a special legislative update resulting from the 88th Legislative Session which is now ended. The August edition of such publication was not released by the Comptroller's Office at the time of this newsletter, but when released can be found here.

July 2023

Fraud Alerts: The Comptroller's Office has published an Alert addressing the reporting and investigation of suspected fraud, theft, waste, abuse and scams impacting taxpayers and that Office. The Comptroller noted that suspected fraud concerning his Office can be reported by using the contact information in that Alert. Further, the Alert sets forth various other resources for reporting suspected fraud, as well as provides a listing of Alerts previously issued by the Comptroller's Office regarding various fraud circumstances. More information can be found here.

June 2023

Saving for Higher Education: On May 24, 2023, the Comptroller's Office published a Release in which the Comptroller encouraged families to save for their children's higher education expenses using the Texas 529 college plans. In that regard, the Comptroller stated in this Release that Texas offers three tax-advantaged 529 plans, those being the Texas College Savings Plan, the LoneStar 529 Plan, and the Texas Tuition Promise Fund. More information regarding each of those savings opportunities is set forth in this Release, which can be found here.

May 2023

Energy STAR /Water-Efficient Products Sales Tax Holiday: The Comptroller's Office recently published information regarding the sales tax holiday for certain Energy STAR energy-efficient products and certain water-efficient and water-conserving products. According to the Comptroller's announcement, the upcoming 2023 holidays begin Saturday, May 27, and go through Memorial Day on Monday, May 29, 2023, ending at midnight. Also according to that announcement, there is no limit on the number of qualifying items that can be purchased, and there is no need to give the seller an exemption certificate to buy items free of tax. For additional information, taxpayers can refer to the Energy STAR sales tax holiday and the water-efficient products sales tax holiday publications, which can be found here and here.

April 2023

Emergency Preparation Supplies Sales Tax Holiday: The Comptroller's Office has recently published an announcement that the 2023 Emergency Preparation Supplies Sales Tax Holiday will begin on April 22, 2023, and end at midnight on April 24, 2023. As referenced in this announcement, emergencies can cause physical damage like hurricanes, flash floods, and wildfires. Taxpayers, according to this announcement, can purchase certain emergency preparation supplies tax free during the sales tax holiday, and there is no limit on the number of qualifying items that can be purchased, nor does the taxpayer need to give an exemption certificate to claim the exemption. This announcement lists the type of emergencies preparation supplies that qualify for the tax exemption, as well as lists the supplies that do not qualify for the tax exemption. More information can be found here.

March 2023

Approved 2023 Franchise Tax Preparation Software Providers: The Comptroller's Office has recently published an update regarding approved Franchise Tax preparation software providers for 2023. That update provides a listing of approved software providers for electronic submissions of Franchise Tax Reports through 2023, as well as listing of approved software providers for original printable reports for Franchise Tax through 2023. This update states that software developers, distributors and users are responsible for how data is gathered and processed through the software programs, and questions about a provider's product should be directed to the provider. The listing of approved software providers for electronic submission was updated as of February 8, 2023, and the listing of approved software providers for Franchise Tax printable forms was updated as of March 2, 2023. More information can be found here.

February 2023

New/Additional Tax Rate Changes Effective January 1, 2023: The Comptroller's Office recently published an update regarding new and additional tax rate changes with respect to city, special purpose districts, and combined area jurisdictions. More information can be found here.

January 2023

Extension of the Fair Market Value Deduction for Motor Vehicles: The Comptroller's Office has published an announcement in the Tax Policy News for October 22, advising that people in the business of selling, renting, or leasing motor vehicles will have an additional 12 months to purchase a replacement vehicle for vehicles retired in 2022. In that regard, the Comptroller stated that a person in that business may deduct the fair market value on a retired vehicle that is titled in Texas from the total consideration paid for a replacement vehicle. The deduction, according to the Comptroller, reduces the motor vehicle tax liability due on the replacement vehicle. Previously, the deduction from the retired vehicle had to be used within 18 months after it was removed from service and offered for sale. Recognizing the current difficulty in finding replacement vehicles, the Comptroller stated that a such a business will now have an additional 12 months to purchase a replacement vehicle for vehicles retired in 2022. For example, and as noted in the announcement, if a dealer retired a vehicle June 30, 2022, the dealer has until December 30, 2024, to deduct the fair market value deduction from the total consideration purchase price paid for a replacement vehicle. The announcement also notes that a person in such business must maintain records necessary to document when the vehicle was retired, the vehicle's fair market value, and the time the deduction was used. More information can be found here.

October 2022

Updated Information Regarding Property Taxes in Disaster Areas and During Droughts: On September 23, 2023, the Texas Comptroller's Office posted updated information regarding property tax assistance that may be available in disaster areas and during droughts. The Comptroller noted that Texas law allows a qualified property that is at least 15 percent damaged by a disaster in a governor-declared disaster area to receive temporary exemption of a portion of the appraised value of the property; however, the property owner must apply for the temporary exemption no later than 105 days after the governor declares a disaster area. The Comptroller noted that qualified property includes tangible personal property used for income production; improvements to real property; and certain manufactured homes. The Comptroller then set forth various information that will help determine whether property tax assistance is available in various circumstances, such as the potential for waiver of certain penalties and the availability of installment payment arrangements. With respect to small businesses, this information notes that an installment payment arrangement may be available for real and personal property damaged in a disaster or emergency that is owned or leased by a business entity that has gross receipts under a specified threshold which is adjusted annually by the Comptroller's Office. That threshold for the 2022 year is $6,707,468. More information can be found here.

September 2022

Proposed Manual for the Appraisal of Timberland: The Comptroller's Office filed a proposed rule with the Texas Secretary of State on August 12, 2022, that was published in the Texas Register on August 26, 2022, regarding the proposed adoption of the Manual for the Appraisal of Timberland dated March 2022. As set forth in the publication notice, this manual provides both the eligibility requirements for timberland to qualify for productivity appraisal and the methodology for appraising qualified timberland and restricted-use timberland. Copies of this manual can be obtained from the Comptroller's Office at the address set forth in the publication notice. As referenced in that notice, the earliest possible date of adoption is September 25, 2022, and the comment period also ends on that date. More information can be found here.

August 2022

Back-to-School Sales Tax Holiday Tips for Sellers: The Comptroller's Office has published a segment in its July Tax Policy News addressing some tips for sellers during the back-to-school sales tax holidays, which begins August 5 and lasts through August 7, 2022. That segment states that if you are a seller of items that could qualify for the sales tax holiday, these tips published by the Comptroller will assist in handling special situations such as rain checks, advertising, and tax reporting. The Comptroller then discusses the types of items that qualify for the sales tax holiday, which predominantly are clothing, footwear, and other items, as well as school supplies; compared to non-qualifying items, which generally include textbooks, computers, software, clothing and footwear used for athletic activities, jewelry, and handbags, among many other non-qualifying items. The Comptroller goes on to provide tips with respect to selling backpacks and school supplies; school supplies bought using a business account; online purchases and telephone orders; layaways and rain checks; advertising non-qualified items; and reporting the applicable tax. More information can be found here.

June 2022

Proposed Property Tax Manual Update for the Appraisal of Agricultural Land: The Comptroller's Office has recently filed with the Texas Secretary of State a proposed rule that was published in the Texas Register on June 3, 2022; the proposed rule adopts an updated version of the Manual for the Appraisal of Agricultural Land. According to the filing with the Register, the comment period begins when the rule is published and ends July 3, 2022. Based on the filing, it appears that the updated manual will be dated February 2022, replacing the version dated June 2020. Further, this updated manual will be accessible on the Property Tax Assistance Division website; and copies can be requested by contacting the Comptroller's Office at the number set forth in the Register. More information can be found here.

May 2022

Due Dates for Taxes, Fees and Information Reports: The Comptroller's Office has published the 2022 reporting due dates for taxes, fees and reports, as well as published the 2022 reporting due dates for information only reports. The publication also references various payment deadlines as applicable. More information can be found here.

April 2022

Sales Tax Holidays Discussed: In its March 2022 Tax Policy News (News), the Comptroller's Office discussed a few holidays on which purchases of certain items will be exempt from the Texas sales tax. One such holiday is the 2022 Emergency Preparation Supplies Sales Tax Holiday which begins on Saturday, April 23, and ends on Monday, April 25, 2022, and during which certain emergency preparation supplies qualify for tax exemption if purchased for a sales price within the limits set forth in the News. Other such holidays include the ENERGY STAR Holiday and the Texas Water-Efficient Products Holiday, which begins Saturday, May 28 and runs through Memorial Day, Monday, May 30, 2022. Each of these tax holidays contain various restrictions and limitations; more information regarding these holidays can be found here.

March 2022

Approved 2022 Franchise Tax Preparation Software Providers: On February 24, 2022, the Comptroller’s Office updated and published information regarding approved franchise tax preparation software providers for and through the 2022 reporting year. Those providers are set forth in the updated publication, together with related software information. More information can be found here.

February 2022

2022 Due Dates for Taxes, Fees and Information Reports: The Comptroller's Office has recently published a chart showing the due date for numerous taxes, fees and information reports during the 2022 calendar year. This updated information also addresses the timing for making payments using a paper check, electronic data interchange, TEXNET, and electronic check and credit card payments. More information can be found here.

January 2022

Penalty Waiver Information Updated: The Comptroller's Office has recently published an updated version of the online information entitled Waiver Request for Late Reports and Payments Frequently Asked Questions. In this publication, the Comptroller addresses when penalties are assessed, when interest is assessed, why a penalty is imposed when the taxpayer had a franchise tax extension, what recourse does a taxpayer have if a request for penalty waiver is denied, among other topics. Additionally, for purposes of avoiding a penalty, this publication notes that a successful Electronic Data Interchange report that includes a payment must be received by 2:30 p.m. Central on the bank business day before the due date so funds are in the Comptroller's Office by the due date. More information can be found here.

October 2021

Local Sales Tax Provisions Effective October 1, 2021: The Comptroller's Office has published information regarding Rule 3.334, Local Sales and Use Taxes, which became effective May 31, 2020. This Rule implements provisions related to the Wayfair decision, marketplace providers and single local use tax rate for remote sellers, and provides guidance on determining the place of business of a seller. As referenced in this guidance, the Rule requires both remote sellers and marketplace providers to collect local tax based on the destination location. This Rule provides a hierarchy for determining where a local sale is "consummated," which includes an evaluation of whether an order is received at a place of business of the seller in Texas, and whether an order is fulfilled from a place of business of the seller in Texas. According to this guidance, this evaluation may result in local tax being due in the local jurisdiction where the order is received, in the local jurisdiction where the order is fulfilled, or the local jurisdiction where the order is delivered. This Rule also provides guidance regarding the location where an order is received. Two of these provisions are effective as of October 1, 2021: (i) an order received by a salesperson while traveling will be treated as being received at the location from which the salesperson operates if the location independently meets the definition of a place of business; and (ii) an order not received by a salesperson, such as an order received by a shopping website or shopping application, is received at a location that is not a place of business of the seller. Also, according to this announcement, and pursuant to an agreed temporary injunction, the second of these provisions is not being enforced while the validity of such provision is being challenged in court; however, the temporary injunction does not change the effective date of the Rule.

September 2021

Disaster Relief Information: The Comptroller's Office recently announced that, in response to Governor Abbott's disaster declaration regarding Tropical Storm Nicholas, taxpayers in declared counties that are affected by the severe weather and flooding may request a thirty-day extension for sales and use tax reports otherwise due on September 20, 2021. The affected counties are set forth in the announcement, and taxpayers affected by that severe weather may be eligible for an extension of time to file and pay the taxes due; however, the extensions are available upon request only. The announcement then provides the type of information that needs to be provided with the extension request and provides a contact number at the Comptroller's Office if assistance is needed. More information can be found here.

August 2021

2022 Water-Efficient Products Sales Tax Holiday: The Comptroller's Office announced that the Texas Water-Efficient Products Sales Tax Holiday for 2022 will begin Saturday, May 28, 2022, through Monday, May 30, 2022. During that holiday time period, certain water-efficient and water-conserving products can be purchased online or by telephone, mail, custom order, or other means (including in-store purchases) that qualify for sales tax exemption when either the item is both delivered to, and paid for, by the customer during the exemption period; or the customer orders and pays for the item, and the retailer accepts the order during the exemption period for immediate shipment, even if the delivery is made after the exemption period ends. During that period, purchases of product displaying a WaterSense label or logo can be purchased tax-free, and such items can be bought for either personal or business purposes. Additionally, water-conserving products can be purchased tax-free during this holiday period, such as items used or planted for conserving or retaining ground water; recharging water tables; or decreasing ambient air temperature, and so limiting water evaporation. Examples of items that qualify for this exemption include a soaker or drip-irrigation hose; moisture control for sprinkler or irrigation system; mulch, among many other examples as set forth in the announcement. Additionally, the announcement provided examples of items that do not qualify for the exemption, such as construction/building materials; air conditioners; ceiling fans, among other items (assuming no other exemption is applicable). The announcement stated that if a sales tax is paid on these exempt items during the sales tax holiday, a sales tax refund can be requested in the manner set forth in the announcement. More information can be found here.

July 2021

Enhanced Sales Tax Reporting Feature: The Comptroller's Office recently announced that a new feature will help provide sellers with more information about their tax responsibilities at the time of a sale. According to the Comptroller's announcement, and beginning June 30, 2021, sellers are now able to download files which can be incorporated into their tax reporting and point-of-sale software. These files include a comprehensive dataset of Texas addresses and associated state and local sales and use tax responsibilities, as well as a local jurisdiction tax rate file. The Comptroller's Office stated that these files will be updated quarterly to account for new tax jurisdictions and tax rate changes within jurisdictions, and that such tax responsibility and rates will be valid for that quarter. More information can be found here.

June 2021

Sales Tax Exemption For Firearm Safety Equipment: On June 14, 2021, Governor Abbott signed into law Senate Bill No. 313 providing a sales tax exemption for certain "firearm safety equipment." According to this new legislation, which is effective September 1, 2021, that phrase means a "gun lock box, a gun safe, a barrel lock, a trigger lock, a firearm safety training manual or electronic publication, or another item designed to ensure the safe handling or storage of a firearm." Under this new law, the sale, storage, use or other consumption of firearm safety equipment is exempt from the sales tax.

May 2021

Deadline Extension for Disaster Areas: The Texas Comptroller of Public Accounts issued a Release dated May 20, 2021, advising that most businesses in State declared disaster areas impacted by recent severe weather will be granted an extension to file certain tax reports. Tax reports due on the date of that Release and on May 25 can now be filed by June 1 without penalty, according to the Release. Some of those tax reports include sales and use tax, mixed beverage gross receipts tax and gasoline tax; however, a complete list of the due dates for Texas taxes can be found on the Comptroller's website. This extension, according to the Release, is for taxpayers in Calhoun, Jasper, Jefferson, Kleberg, Newton and Tyler counties, which Governor Abbott declared a state of disaster on May 19, 2021. Those counties were hard hit by significant flooding, tornadoes, hail and damaging winds, according to the Release. More information may be found here.

March 2021

Updates Reported – Because of the statewide severe winter weather, the Texas Comptroller of Public Accounts in late February announced the extension of the due date for the 2021 Texas Franchise Tax Reports from May 15 to June 15, 2021. The Texas Comptroller stated that this extension aligns the agency with the Internal Revenue Service, which on February 22, extended the April 15 tax filing and payment deadline to June 15 for all Texas residents and businesses. The Comptroller stated that the due date extension applies to all franchise taxpayers, that the extension is automatic, and that taxpayers do not need to file any additional forms. More information can be found here.

February 2021

Updates Reported – The Texas Comptroller has recently announced that certain proposed rules were filed with the Texas Register on January 20, 2021, for publication on February 5, 2021. The announcement stated that the 30-day comment period begins when the rule proposals are published and ends March 7, 2021. Among the rule proposals are modifications to the continuation of the residential homestead exemption while the replacement structure is being constructed, and modifications to the property tax exemption for certain leased motor vehicles. The Comptroller's announcement states that comments on the proposed rules may be submitted to the Director of the Property Tax Assistance Division at the physical or email addresses set forth in that announcement. More information can be found here.

January 2021

Updates Reported – The Texas Comptroller has announced on its website that most franchise tax filers will receive an email in lieu of a mailed reminder to file or seek an extension of the franchise tax return before the May 17, 2021 due date. The website also notes that if a taxpayer does not have an email address on file (or if the taxpayer is a first-year filer) the Comptroller's Office will mail a reminder notice to that taxpayer. However, the website also notes that electronic filing is highly encouraged for faster account updates and is mandatory for no-tax-due returns. More information can be found here.

December 2020

Updates Reported – On November 20, 2020, the Texas Comptroller filed with the Texas Secretary of State proposed amendments to Texas Administrative Code Rule Section 3.586 addressing nexus for purposes of the Texas franchise tax. That Rule was previously amended to adopt economic nexus for purposes of the franchise tax, providing that a foreign taxable entity has nexus in Texas and is subject to the Texas franchise tax, even if it has no physical presence in Texas, if during a federal income tax accounting period ending in 2019 or later the entity had gross receipts from business done in Texas of $500,000 or more consistent with that Rule. Under the proposed amendment, the term "gross receipts" is defined to mean "all revenue reportable by taxable entity on its federal return, without deduction for the cost of property sold, materials used, labor performed, other costs incurred."

Further, and to clarify timing with respect to when a foreign taxable entity has nexus for purposes of the Texas franchise tax, this Rule is being further amended so as to provide that: (1) prior to January 1, 2019, a foreign taxable entity begins doing business in Texas on the day the entity has physical presence as described in that Rule; and (2) on or after January 1, 2019, a foreign taxable entity begins doing business in Texas on the earliest of (a) the date the entity has physical presence as described in that Rule, (b) the date the entity obtains a Texas use tax permit if obtained on or after January 1, 2019 or January 1, 2019 if the entity obtained a use tax permit prior to that date (subject to the entity overcoming the presumption of nexus because of said permit), or (c) the first day of the federal tax income accounting period ending in 2019 or later in which the entity had gross receipts from business done in Texas of $500,000 or more. More information can be found here.

November 2020

Updates Reported – The Texas Comptroller, in the Tax Policy News publication issued October 27, 2020, addresses a number of concerns relative to the impact of COVID-19. In that publication, the Comptroller's office states that it understands the tremendous strain the pandemic and its related closures have placed on businesses throughout Texas. The Comptroller also states that payment deadlines for the motor vehicle tax due on purchases will continue to be extended until the Governor's state disaster declaration expires. Any tax penalty will be automatically waived, according to that publication, if the tax payment is received within 60 days of the expiration of the state disaster declaration. For businesses struggling to pay the full amount of sales taxes they collect from customers, the publication states that a short-term payment agreement may be available through the Comptroller's office. More information can be found here.

October 2020

Updates Reported – The Texas Comptroller has recently issued disaster relief information to assist taxpayers impacted by Tropical Storm Beta and Hurricanes Hanna and Laura. With respect to Tropical Storm Beta, the published information indicates that taxpayers in identified counties are eligible for an automatic penalty waiver for state taxes due September 21, 2020 if the taxes are paid within 30 days of the original due date; and an automatic 30-day extension of time to file and pay any state taxes due on September 25 and September 30, 2020. Taxpayers are not required to request a waiver or an extension of time to file and pay taxes that have been automatically waived or extended, according to that publication. As to Hurricanes Hanna and Laura, taxpayers affected by the severe weather may be eligible for an extension of time to file and pay taxes, and such extensions are available upon request only and will be granted by the Comptroller's Office in 30-day increments; however, if a taxpayer is unable to file and pay within 30 days, a request may be made for additional extensions up to 90 days total. More information can be found here.

September 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Updates Reported (September 30): On September 1, 2020, the Texas Comptroller issued Publication 96-259 which addresses taxable services for sales and use tax purposes. Those taxable services, as set forth in Subsection (a) of Texas Code Section 151.0101, include 17 different broad categories of services, such as amusement services, data processing services, debt collection services, internet services, telecommunication services, and security services, among others. Under Subsection (b) of that Section, the Comptroller "shall have exclusive jurisdiction to interpret" those taxable services. In that regard, Publication 96-259 addresses each of those taxable services so as to provide taxpayers with examples and references to additional relevant information. More information can be found here.

August 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Information Reported (August 20): In the August 2020 Tax Policy News, the Texas Comptroller reminded taxpayers that the deadline for filing a franchise tax second extension request for mandatory electronic payers was August 17, 2020. The reminder also stated that entities that properly secured a second extension (after filing a first extension by July 15) will have until January 15, 2021 to file their report (the due date is extended from November 15, 2020 as a relief from the COVID-19 pandemic). To have properly secured a second extension entities must have electronically submitted payment using the appropriate electronic payment method set forth in that edition of Tax Policy News. More information can be found here.

July 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Updates Reported (July 27): Texas has changed sales tax sourcing rules for internet orders effective October 21, 2021. Under the current version of 34 Tex. Admin. Code § 3.334(h)(3)(C), when an order is placed over the internet and the seller fulfills that order at a location that is a place of business in Texas, the sale is considered to be consummated at that place of business where the order is fulfilled and the local sales tax is sourced to that fulfillment location. However, under the Texas Comptroller’s newly-enacted regulation at 34 Tex. Admin. Code § 3.334(b)(5), "[o]rders not received by sales personnel, including orders received by a shopping website or shopping software application … are received at locations that are not places of business of the seller." (underscore added) As a result, under the newly adopted regulations, when an order is placed over an internet website, that order is sourced to the purchaser’s address. This rule does not go into effect until October 21, 2021 in order to give "interested parties an opportunity to seek a legislative change." More information can be found here.

May 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Further Updates Reported (May 8): On April 27, 2020, the Texas Comptroller updated its website regarding certain relief offered to Texas taxpayers. For example, this update again noted that in order to aid Texas franchise taxpayers, the Comptroller is automatically extending the due dates to file and pay 2020 Texas franchise tax reports to July 15, 2020. Additionally, an extension of up to 90 days past the original due date is provided in order to pay the motor vehicle tax due on purchases. Further, with respect to businesses struggling to pay the full amount of sales taxes they collect from customers, the Comptroller is offering short-term payment agreements and, in most instances, waivers of penalties and interest.

April 2020

Coronavirus Tax Payment and Return Filing Responsibilities - Further Updates Reported (April 16): On April 2, 2020, the Texas Comptroller issued a release extending the due date for 2020 franchise tax reports to July 15. The release stated that this due date extension applies to all franchise taxpayers, and that the extension is automatic without the need to file additional forms. The Texas franchise tax, as noted in the release, is a tax imposed on each taxable entity formed or organized in Texas or doing business in the state. The release also noted that franchise taxpayers who need an extension beyond July 15 have the following options:

• Non-electronic funds transfer taxpayers who cannot file by July 15 may file an extension request on or before that date and must pay 90 percent of the tax due for the current year or 100 percent of the tax reported as due for the prior year with the extension request, and that those taxpayers who request an extension will have until January 15, 2021 to file a report and pay the remainder of the tax due.
   
• Taxpayers who are mandatory electronic funds transfer payers may request an extension of time to file by August 15 and must pay 90 percent of the tax due for the current year or 100 percent of the tax reported as due for the prior year with the extension request and that a second extension of time to file may be requested with the initial extension request to obtain an extension of the report due date to January 15. The release also noted that any payments made after August 15 will be subject to penalty and interest.

More information can be found here.

Coronavirus Tax Payment and Return Filing Responsibilities - Further Updates Reported (April 3): As updated through March 31, the Texas Comptroller's Office addressed situations involving taxpayers that have existing payment plan agreements with that Office. Pursuant to this update, the Comptroller stated that postponement of deadlines to remit payments under existing payment plans will be considered on a case-by-case basis. However, that update also stated that postponement of payment deadlines will only apply to existing payment plan agreements for periods prior to the February 2020 tax report. The update also stated that potential postponements will not extend or delay a taxpayer's due dates for remitting or reporting tax collected on behalf of state and local governments, and that it will also not apply to resolution agreements that specify a deadline to make a single lump sum payment of the entire liability. The update further stated that the total amount due under the payment plan will not be reduced and that after expiration of the postponement period, all payment deadlines will resume on the next periodic payment deadline as provided in the payment plan agreement and that postponed payments will be added to the end of the term of the agreement. Separately, the Comptroller's Office announced that business owners affected by COVID-19 can request, in writing to the chief appraiser, an extension of the deadline to May 15 to file most property tax renditions with their county appraisal districts, assuming the district has not already implemented extensions.

March 2020

Coronavirus Tax Payment and Return Filing Responsibilities - No Due Date Changes Are Being Made (March 25): The Comptroller of the State of Texas has recently issued a few messages reminding businesses to use the agency's online tools for tax filing and payment. In these messages, the Comptroller recognizes the hardships businesses are facing during these uncertain times. However, the Comptroller has stated that taxes based on sales made in February and collected by businesses on behalf of state and local governments in February must be remitted by the March due dates for state and local sales taxes, hotel taxes, mixed beverage gross receipts and sales taxes, motor vehicle rental tax, seller-financed motor vehicle sales tax and motor fuel taxes. The Comptroller stated that this is a complex and rapidly evolving situation where many businesses are facing devastating economic conditions such as bars, restaurants, retail outlets and other businesses, and that the looming health emergency may strain the state's ability to provide adequate care and emergency services. The Comptroller further stated that Texans must pull together to ensure the state meets the inevitable needs; and, as part of pulling together, the Comptroller asks businesses to remit the taxes they collect from Texans by the established due date. The Comptroller further stated that each tax due date will be examined as it approaches, and the Comptroller's Office will keep lawmakers and stakeholders informed as the agency evaluates rapidly changing conditions. In closing, and recognizing that businesses are struggling to pay the full amount of sales taxes that they collect in February, the Comptroller's Office just announced that the agency is offering assistance in the form of short-term payment agreements and, in most instances, waivers of penalties and interest. More information can be found here.

Coronavirus Tax Payment and Return Filing Responsibilities - No Broad Changes Reported (March 19): Pursuant to a recent message from the Comptroller of the State of Texas, taxpayers are strongly urged to use online tools, tutorials, and other resources for tax services and to establish 24/7 account access on the State's Webfile. The Comptroller noted that the Webfile account can be accessed at any time and taxpayers can submit sales tax reports, make payments, and conduct other tax return-related activities through that Webfile. The Comptroller also noted that enforcement offices have reduced staffing and modified the configuration of waiting areas and urged taxpayers to use online services.

February 2020

Franchise Tax: In response to South Dakota v. Wayfair, Inc., the Texas Comptroller of Public Accounts amended regulation 34 Tex. Admin. Code Section 3.586 requiring out-of-state entities to file Texas franchise tax reports beginning January 1, 2020 and providing an economic nexus standard for out-of-state entities that do not have a physical presence in Texas.

Sales and Use Tax: The Texas Comptroller of Public Accounts has amended regulation 34 Tex. Admin. Code Section 3.286 to implement newly-enacted statutes that created tax obligations for marketplace providers and marketplace sellers.

October 2019

Sales and Use Tax: The Texas Comptroller of Public Accounts has issued guidance for remote sellers including, but not limited to, guidance related to collection obligations and marketplace sales. As anticipated, the Texas Comptroller has indicated that Texas plans to amend its franchise tax rules to create an economic nexus threshold for franchise tax purposes. Texas Tax Responsibilities and Resources for Sellers After Wayfair, Texas Comptroller of Public Accounts, 10/01/2019. For more information, click here.

September 2019

Franchise Tax: On August 30, 2019, the Texas Comptroller amended its rule codified at 34 TAC Section 3.584 resulting in some taxpayers no longer qualifying for the lower .375 percent franchise tax rate applicable to retailers and wholesalers and subjecting them to the higher .75 percent franchise tax rate. Specifically, the Comptroller added definitions of "produce" and "product" necessary for determining whether a taxpayer is a retailer or wholesaler. Generally, Section 3.584 allows retailers and wholesalers to claim the 0.375 percent franchise tax rate unless they or their affiliates produce a product that they sell. Under the new definition of "produce," an entity produces a product that it sells if the entity or affiliate: (1) asserts a software copyright with respect to the product or a component of the product; (2) asserts a patent right under Title 35 of the United States Code or comparable foreign law with respect to the product, a component of the product, or the packaging of the product; or (3) produces a component of the product, or acquires the product and makes a modification to the product, unless the entity can demonstrate that the component or modification does not increase the sales price of the product by more than ten percent. The new rule is effective beginning September 4, 2019. Refer to the following Rule for more details.

Property Tax: According to a recent Texas Court of Appeal decision, a business that constructed, installed and leased a solar system to a homeowner is not eligible for the solar and wind-powered energy devices exemption because the business did not own the residence on which it installed the system. Sunnova AP5 Conduit LLC v. Hunt County Appraisal District, Tex. Ct. App. (5th Dist.), No. 05-18-00995, 08/19/2019. Refer to the Notice for more details.

August 2019

Franchise Tax: In Vafaiyan v. The State of Texas, the Texas Court of Appeals held that a director of a Texas corporation was personally liable for penalties imposed by the Texas Commission on Environmental Quality because the corporation's status and corporate privileges were forfeited when it failed to pay Texas franchise tax. Vafaiyan v. The State of Texas, Tex. Ct. App. (13th Dist.), No. 13-18-00352-CV, 08/15/2019.

Sales and Use Tax: Guidance recently issued by the Texas Comptroller of Public Accounts indicates that music downloaded via the Internet by a coin-operated jukebox constitutes tangible personal property and, therefore, sales tax is owned on the downloads. Texas Private Letter Ruling No. 201907012L, 07/17/2019.

July 2019

Sales Tax/Remote Sellers: In light of the South Dakota v. Wayfair decision rendered in June 2018 by the U.S. Supreme Court, Texas will begin enforcing effective October 1, 2019 the collection and remittance obligations of sellers whose only activities in the state are the remote solicitation of sales. For purposes of providing a safe harbor for certain remote sellers, the Texas Comptroller will not require remote sellers with total Texas revenue of less than $500,000 in the preceding 12 calendar months to obtain a permit or collect and remit sales and use tax.

Additionally, the 2019 Legislature enacted HB 2153 (codified at Texas Tax Code § 151.0595), which provides a single local tax rate for remote sellers. A remote seller may choose to collect this single local tax rate by notifying the Account Maintenance Division via email or mail instead of calculating and remitting local tax based on the total local tax rate in effect at the destination. According to the Comptroller's Office, the applicable email address is Sales.applications@cpa.texas.gov, and the applicable mailing address is: Comptroller of Public Accounts, P.O. Box 149354, Austin, TX 78714-9354. For the period of October 1, 2019 through December 31, 2019, the single local tax rate will be 1.75 percent. Going forward, the Comptroller will compute the single local tax rate and publish it in the Texas Register prior to the beginning of each calendar year.

June 2019

Property Tax: Just recently, the Texas Property Tax Reform and Transparency Act of 2019 was enacted. This Act requires more voter approval before tax rates can be increased; provides certain caps for revenue increases from the property tax; requires taxing districts to post tax information on county websites; and provides tax protesters with the right to request a copy of data, schedules and other information, among many other provisions. Most of these provisions take effect January 1, 2020. A Legislative Explanatory Q&A regarding the Act can be found here.