Sales Tax Refund for Providers of Cable Television, Internet Access or Telecommunications Services
Frequently Asked Questions
I am a direct payment permit holder. Do I have to pay sales and use tax on items that are eligible for refund of state tax under this program, or can I just take a credit on my return?
You must report and remit state and local sales and use tax before you can apply for a refund. The law provides for a refund of taxes paid on qualifying items, not a credit. The statute requires payment of the tax and not merely an accrual.
The refund applies only to Texas state tax. Local tax will not be refunded.
Will interest be paid on the refunded tax?
Interest will not be paid on the refunds because the tax being refunded was not tax paid in error under Tax Code Chapter 111. Tax was due at the time of the transaction.
What is a subsidiary of a provider?
A subsidiary of a provider is a subsidiary, as defined in Texas Business Organizations Code, Section 1.002(85), for which a cable television provider, Internet access provider, or telecommunications provider is the parent, as that term is defined in Texas Business Organizations Code, Section 1.002(65).
The law provides for a refund of Texas state sales and use tax paid on qualifying purchases. What are qualifying purchases?
A qualifying purchase is tangible personal property:
- purchased, leased or rented by a provider or its subsidiary;
- directly used or consumed by the provider or subsidiary in or during these activities:
- the distribution of cable television service;
- the provision of Internet access service; or
- the transmission, conveyance, routing or reception of telecommunications services; and
- on which the provider or its subsidiary paid Texas state sales and use tax in the calendar year immediately preceding the calendar year in which the request for refund is submitted.
What amounts are included in a qualifying purchase?
The refund available to providers or their subsidiaries for qualifying purchases is based on the sales price, as defined in Texas Tax Code, Section 151.007 . The sales price is the total amount for which a taxable item is sold, leased, or rented, valued in money, which includes:
- The taxable item (tangible personal property or taxable service) sold, leased, or rented;
- The materials used, labor or service employed, interest, losses, or other expense;
- Transportation and installation of tangible personal property; or
- Transportation incident to the performance of a taxable service.
Services that are part of the purchase and any credit the seller gives to the provider or its subsidiaries are also included in the qualifying purchase price.
The qualifying purchase price does not include any of the following if separately stated:
- Cash discounts on the purchase;
- Amounts charged for tangible personal property that is returned by the provider or its subsidiaries;
- Refunds of charges from taxable services;
- Finance, carrying and service charges, or interest from credit; or
- The value of tangible personal property given to the seller in trade that is sold by the seller in the regular course of business.
Our company made a qualifying purchase in August 2013, but paid the Texas sales and use tax in September 2013. Can we apply for a refund of the tax? I noticed the effective date of the new law was Sept. 1, 2013.
The refund does not apply to purchases invoiced before Sept. 1, 2013, regardless of when the tax was paid.
The law is clear that any tax liability accruing before the effective date is under the authority of the former law. The former law did not provide for the $50 million refund. To be eligible for the refund, a qualifying purchase must be invoiced on or after Sept. 1, 2013, thus creating a tax liability after the effective date.
When would we apply for a refund if our company made a qualifying purchase in December 2015, but paid the tax in January 2016?
For a qualifying purchase invoiced at the end of one calendar year, with the tax paid in the following calendar year, the refund request should be submitted for the calendar year when the tax was paid.
In your situation, because the tax was paid in 2016, the purchase should be included in the refund claim covering 2016 purchases.