|January 2012||TAX POLICY NEWS|
|a monthly newsletter about Texas tax policy|
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In this issue...
Cigarette Tax; Cigars and Tobacco Products Tax
Recently Adopted Rules
Time to Renew Cigarette/Tobacco Non-Retailer Permits
It’s time to renew cigarette and tobacco products non-retailer permits for the upcoming period of March 1, 2012, through Feb. 28, 2013. “Non-retailers” include cigarette, cigar and/or tobacco products manufacturers, importers, distributors, bonded agents and wholesalers.
Current period non-retailer permits will expire Feb. 29, 2012. Renewal packets with preprinted applications were recently mailed to all non-retailers. Non-retailers should review the preprinted information and make any corrections. Return all pages of the renewal packet and any other documentation with the applicable permit fee to the Comptroller's office by the date printed on the application form.
Returning the renewal packet with the application fee by the return date will allow enough time for us to process the renewal before the current permit expires.INSURANCE TAX
Insurance Tax Electronic Reporting and Payment
The Comptroller’s electronic reporting and payment system (Webfile) provides cost savings and convenience when filing your insurance reports. Electronic reporting and paying options are available 24 hours a day, seven days a week, so we encourage you to use these services to save time, money and paper.
The WebFile system allows taxpayers to submit payment by credit card, electronic check or, if enrolled, via TEXNET. The TEXNET system is the state’s electronic funds transfer system. If you owe more than $100,000 in tax, you must use the TEXNET system.
Reporting Premium Taxes
The electronic reporting system is available to all taxpayers submitting premium tax data. Taxpayers who paid $50,000 or more in premium taxes for the previous tax year are required to electronically file their reports.
Taxpayers required to file electronically do not receive paper forms from the Comptroller’s office, whether they actually filed electronically or not.
Voluntary electronic filers who report twice using the WebFile system no longer receive paper forms. Instead, we send an email to the address registered with the WebFile system to remind taxpayers of upcoming tax filing deadlines, so keep that address current.
Reporting Maintenance Taxes and the Automobile and Burglary Theft Prevention Authority Assessment (ABTPA)
Although there is no mandatory electronic reporting requirement for these tax types, we encourage taxpayers to use WebFile.
How to Log in to WebFile
To log in to WebFile, you will need your11-digit taxpayer number and the WebFile or RT number. Your RT numbers are unique for each type of tax; you will have one number each for premium tax, maintenance tax and the ABTPA assessment. You will create a User ID and password and can use that information to file multiple reports.
Paying Premium Taxes, Maintenance Taxes and the ABTPA Assessment
Taxpayers who paid $10,000 or more in the preceding state fiscal year must transmit payments electronically by Electronic Funds Transfer (EFT) via WebFile or pay by credit card. Taxpayers who paid $100,000 or more in the preceding fiscal year are required to pay via the TEXNET system. You must enroll in the TEXNET system prior to use, so contact us early to ensure you don’t miss your deadline.
Taxpayers who are subject to mandatory electronic payment of insurance premium tax, maintenance taxes and/or the ABTPA assessment who fail to pay electronically are subject to a 5 percent penalty.SALES TAX
Correction! 2012 Sales Tax Holiday Scheduled for Aug. 17 - Aug. 19
Our August 2011 issue of Tax Policy News reported that the 2012 Sales Tax Holiday would take place in July, due to legislative changes affecting the start date.
Since that time, we received clarification of the legislative intent of those changes, and confirmed the Sales Tax Holiday should remain in August, nearer to the beginning date of the school year for the majority of Texas school districts.
The 2012 Sales Tax Holiday is scheduled for Aug. 17 through Aug. 19.SALES TAX
There's No (Tax) Free Lunch for Employees of Exempt Organizations
Under Rule 3.322(g)(5), “An employee of an exempt organization cannot claim an exemption from tax when the employee purchases taxable items of a personal nature even though the employee receives an allowance or reimbursement from the organization.”
Under Rule 3.322(g)(6), “A person who travels on official business for an exempt organization must pay sales tax on taxable purchases whether reimbursed on a per diem basis or reimbursed for actual expenses incurred.”
Texas state and local governments and universities are among the numerous types of exempt organizations covered by Rule 3.322(g)(5)and(6). Only the exempt organization or its authorized agent may purchase items tax-free by issuing an exemption certificate in lieu of paying tax. Employees may not purchase meals tax-free with an exemption certificate, even when on official business. More information is available in our publication Exempt Organizations: Sales and Purchases (PDF, 405KB) .SALES TAX
Tax-Free Sales: It's a New Calendar Year
Generally, nonprofit organizations are required to collect sales tax on sales of taxable items and services. There are exceptions.
For example, a nonprofit religious, educational or charitable organization, or an organization exempted under Internal Revenue Code, Section 501(c)(3), (4), (8), (10) or (19) that applies for and receives sales tax exemption on its purchases, based on criteria established in Texas Tax Code Section 151.310(a)(1) and (a)(2) and each bona fide chapter of those qualified organizations, is allowed to hold two one-day, tax-free sales each calendar year. This exemption is found under Texas Tax Code Section 151.310(c).
A qualified organization that has obtained sales tax exemption, as set out in the previous paragraph, must designate in its records prior to the sale which two one-day sales will be exempt that calendar year. This may require careful planning and coordination for organizations that operate on a fiscal year basis. For example, PTAs, PTOs and other school groups commonly plan events based on school years rather than calendar years. When planning fundraising activities for a new school year, the school groups should verify the number of tax-free fundraisers conducted by the organization during the prior school year that occurred during the current calendar year.
If a qualified exempt organization collects sales tax on a sale, the tax must either be remitted to the state or refunded to the purchaser. The organization cannot collect the tax and keep it under the tax-free sale provision.
“One day” means 24 consecutive hours. If a designated tax-free sale or auction exceeds a consecutive 24-hour period, the organization may not hold another tax-free sale or auction that calendar year. If two or more groups hold a one-day tax-free sale together, the event counts as one tax-free sale for each participating organization. Each of those organizations is then limited to one additional tax-free sale during the remainder of the calendar year.
During a designated tax-free fundraising event, the qualifying exempt organization may sell taxable items free of tax as long as the sales price does not exceed $5,000. But, an item donated to the organization and not sold back to the person who donated it may be sold tax-free regardless of the sales price. This means the sale of a donated item during a designated tax-free fundraising event may be exempt even if the sales price of the donated item is greater than $5,000, as long as it is not sold back to the person who donated the item. Additionally, an item is made by an exempt organization and sold at one of the organization’s one-day tax-free sales or auction is exempt regardless of the sales price.
A qualifying exempt organization may take orders over an extended period of time before delivery is made. This event can still count as a one-day tax-free fundraiser as long as the items are either delivered to purchasers on a single day or received by the selling organization from a third party vendor on a single day. A sale occurs when title or possession of the item transfers to the purchaser. In the case of items that are preordered and generally prepaid (e.g., yearbooks), the organization can transfer title to the items as soon as it receives the order. Therefore, the date the items are delivered by the vendor to the seller can be designated as the “one day” for the purposes of the tax-free sale.
Additionally, items sold on the spot on a day that is held out to be one of the organization’s tax-free days does not cause the pre-ordered sales to lose the exemption.
The tax-free fundraising provisions described apply only when a qualified exempt organization is the seller of the items. There is no exemption from the collection of sales tax when a qualified exempt organization raises funds by acting as a sales representative or commissioned sales agent for a for-profit retailer. The for-profit retailer, not the exempt organization, is considered the seller and consequently the tax-free sale provision does not apply.
The exempt organization must collect sales tax on the taxable sales and forward the tax collected to the for-profit retailer, who reports and remits the tax. An alternative would be for the for-profit retailer to include a statement in the catalogs and order sheets that the selling price includes Texas sales or use tax on taxable items. This type of fundraising activity does not count against the two one-day tax-free sale days available to qualifying exempt organizations.OTHER NEWS
Interest Rates for 2012
Delinquent taxes accrue interest beginning on the 61st day after the due date until paid. This year, the interest rate is 4.25 percent (.0425) or 0.01161 percent per day.
Refund claims filed with the Comptroller’s office accrue credit interest at either Treasury Pool rate or Prime +1, whichever is less. The Treasury Pool interest rate this year is 0.692 percent (.00692) per day.
For more information about how the interest rate is applied (as well as the interest rates for this year and previous years), please see the Interest on Credits and Refunds and On Tax Due section of our website.RECENTLY ADOPTED RULES
Cigarette and Tobacco Products Regulation
The following rule adoption was filed with the Secretary of State on Jan, 17, 2012, with a publication date of Feb. 3, 2012, effective 20 days after filing.
Section 3.1204 Administrative Remedies for Violations of Health and Safety Code, Chapter 161, Subchapter H or KABOUT THE NEWSLETTER
The Comptroller’s office publishes this newsletter to keep you informed about state taxes. Tax questions can be complicated, so please use these summaries as guidelines only.
For a Copy of a Proposed Rule
For a copy of a proposed rule or information about a proposed rule, write to Bryant Lomax, Tax Policy Division, 1700 North Congress Avenue, Austin, Texas, 78701-1436, or submit a request via Texas Tax Help.
For Publications, Rules or Other Tax Information
Contributors to This Month’s Issue
Robin Corrigan, Lisa Davis, Tommy Hoyt, Carol McAnnally, Stefanie Medack, Karen Ortosky, Lindey Osborne, Jo Anne Meyerson, Jacob Salisbery, Viki Smith and Karen Snyder