Sales Tax Refunds - Frequently Asked Questions
1. What does “toll the statute of limitations” mean?
Generally, a person has four years from the date the tax was originally due and payable to the State to claim a refund for the invoices or transactions in question. When the statute of limitations is tolled for these transactions, the “clock stops running”. Even if you need to provide additional information to substantiate your refund claim, you've submitted a timely claim if you submitted it within that time period. However, be aware that the Comptroller may send you a notice that asks for all information that supports your refund claim, including documents such as invoices and cancelled checks, and that this information must be provided within 180 days of the notice.
2. Why can't I just take a credit on my sales tax return?
A person actually holding a sales tax permit generally can take a credit on a sales tax return. But persons who do not actually hold a sales tax permit, even though they may be responsible for collecting and remitting sales tax, cannot claim a refund on a tax return. Examples include:
- persons who were identified as being responsible for sales tax during an audit examination or investigation, but who have not obtained a permit;
- persons who have applied for a permit electronically but have not submitted the signature page; and
- persons who are required to post a bond to obtain a sales tax permit but have not done so.
3. What is the purpose of the Credit Acceptance Memo form?
The seller of a taxable item who collected sales tax in error must refund the tax to the purchaser before he can claim a refund from the Comptroller. The seller can either refund the tax or give the purchaser credit for the tax paid in error. The credit memo acceptance form states that the seller gave the purchaser a credit on his account (instead of refunding the tax directly). The purchaser acknowledges the credit by signing the form. With this documentation, the Comptroller can then process the refund request for the seller.
4. Why do I have to complete an Assignment of Right to Refund?
You have to complete an assignment form because you are seeking a refund of tax you paid, but you are not the person who paid the tax to the Comptroller. The person from whom you purchased the taxable item collected the tax from you and remitted it to the Comptroller. The assignment form is basically a "permission slip" from the seller that allows you to pursue the refund directly from the Comptroller. This form is needed when the person or entity that paid the tax was not permitted at the date when the transaction occurred.
5. What does “assignor” and “assignee” mean on the Assignment of Right to Refund form?
The assignor is the entity that collected the sales tax and remitted it to the Comptroller’s office. The assignee is the customer who paid the sales tax on the purchased item. Note that a separate Assignment of Right to Refund form is needed for each vendor for which you are claiming a refund.
- Assignor is the entity that reported the tax to The Texas Comptroller’s Office
- Assignee is the customer that paid Sales tax on the purchased item
- One form is needed for each vendor
6. I have a sales and use tax permit because I make handmade jewelry that I sell from my home. I paid Texas sales tax on a piece of equipment that I use in my business that I now realize is actually exempt from tax. Do I have to go back to the seller of the equipment to ask for a refund?
No. Because you have a sales and use tax permit, you can take a credit on your next return. See the Permitted Purchasers page for more information.
7. What should be included within a predominant use study when a person is seeking a refund claim related to the purchase of natural gas or electricity?
- a complete predominant use study (See Rule 3.295(f)(1))
- Twelve consecutive months of utility usage must be a part of the study
- The study must establish that the electricity measured by the meter is predominantly (more than 50%) used in a tax-exempt manner.
- Must be certified by a registered engineer or a person with an engineering degree from an accredited engineering college.
- The owner of the business must certify that all items using natural gas or electricity (depending on which utility is covered by the study) are listed and that the hours of use for each item are correct.
- The certification of both the engineer and the owner must appear on the face of the study.
8. The identification of the local taxing jurisdictions to which tax was paid in error is required information for a refund claim. How can taxpayers identify local jurisdictions to which tax was remitted for their claim?
The Comptroller provides a “tax rate locator” that allows a person to enter a physical address. The search will return the taxing jurisdiction information applicable to that address.
9. How can I verify an agricultural or timber registration number?
Use our Ag and Timber Number search.
10. How can I find taxpayer number information?
Use our sales tax permit search.
11. How can I verify that an organization is exempt on the records of the Comptroller?
Use our tax-exempt entity search.