Sales Tax Exemption for Qualified Research
Frequently Asked Questions
What legislation created this new law?
House Bill 800, 83rd Legislature, Regular Session, 2013, created the sales tax exemption in Tax Code Section 151.3182 and the franchise tax credit in Tax Code Chapter 171, Subchapter M. The effective date of the legislation is Jan. 1, 2014.
How do I register to take the franchise tax credit?
Registration is not required to take the franchise tax credit. Eligible parties electing to take the franchise tax credit will take it directly on the franchise tax report form.
What is meant by “directly” used?
For the purpose of this sales tax exemption, “directly” means having an immediate effect on an item or in an activity, without an intervening, ancillary or prior effect.
What happens if a registrant’s Registration Number is cancelled by the Comptroller?
The Comptroller will send notice of cancellation to the address in our records. Be sure to keep all contact information current.
When a registration is cancelled, the former registrant cannot claim the qualified research exemption during the period for which the Registration Number is cancelled. The intentional or knowing attempt of a former registrant to purchase an item under a cancelled Registration Number is considered a failure and refusal to pay tax and is a criminal offense.
Can the qualified research sales tax exemption be granted retroactively? I just now became aware of the program and have paid sales tax on eligible purchases.
Yes. A registrant can request that its Registration Number be made retroactive to Jan. 1, 2014, or after. The Comptroller will grant the request if the date meets the following criteria:
- The date cannot be more than four years before the date the registration is received; and
- The date cannot be during a period when the registrant claimed the franchise tax research credit as a taxable entity or a member of a combined group.
If the exemption is granted retroactively, a registrant can request a refund of the tax directly from the retailer or from the Comptroller’s office with an Assignment of Right to Refund provided by the retailer.
Who can sign the Texas Qualified Research Sales and Use Tax Exemption Certificate (Form 01-931)?
The registrant or the registrant’s authorized agent must sign a properly completed Texas Qualified Research Sales and Use Tax Exemption Certificate and include the Registration Number.
Is the qualified research sales tax exemption permanent?
No. The sales tax exemption is not permanent and may be cancelled by the registrant or by the Comptroller. All persons registered for the sales tax exemption are required to file an Annual Information Report (AIR). The Qualified Research and Development Annual Report also allows a registrant to renew its Registration Number, enabling the registrant to claim the sales tax exemption on qualifying purchases for the next period. The Comptroller will cancel the Registration Number if the registrant does not file the AIR by March 31.
If a direct payment permit holder also qualifies for the qualified research sales tax exemption, is the permit holder required to apply for a Registration Number?
Yes. A direct payment permit holder must obtain a Registration Number to claim the research and development sales tax exemption. A direct payment permit holder with a Registration Number must file the Annual Information Report (AIR) for each year the number is effective.