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November 2012 TAX POLICY NEWS
a monthly newsletter about Texas tax policy

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HOTEL OCCUPANCY TAX

State Employees Are Not Exempt from Hotel Occupancy Tax

State employees traveling on official business are not exempt from state or local hotel occupancy tax, unless an exception applies. State employees should not issue a hotel occupancy tax exemption certificate to a hotel.

State law exempts certain state employees from state and local hotel occupancy tax: mostly judicial officials, heads of state agencies, members of state boards and commissions and members of the Texas legislature. Each agency issues such employees a hotel occupancy tax exemption photo identification (ID) or card which must be presented to the hotel, along with a completed Texas Hotel Occupancy Tax Exemption Certificate (Form 12-302) (PDF, 66KB) , during the check-in process. Refunds are not available.

Employees of Texas institutions of higher education travelling on official business may claim exemption from the 6 percent state hotel occupancy tax by presenting a completed Texas Hotel Occupancy Tax Exemption Certificate to the hotel at check-in. These employees must pay any local hotel occupancy tax imposed.

Texas state agencies are exempt from sales tax, but they are not exempt from hotel occupancy tax. State employees are entitled to reimbursement for hotel occupancy taxes paid when traveling on official business of the state. Most state agencies reimburse their employees through travel vouchers. The hotel tax is an incidental expense and does not apply to the maximum lodging reimbursement rate.

State agencies that have submitted a blanket refund request will receive a refund through the state’s accounting system each fiscal quarter for hotel tax that the agency reimbursed to employees. A state agency not on the state’s accounting system must make separate quarterly refund requests with the Comptroller’s office and with each local taxing authority that collected hotel tax. Submit a Texas Claim for Refund of State Hotel Occupancy Tax (Form 12-104) (PDF, 65KB) to claim a refund.

For more information, see Tax Code Sections 156.103(c), 351.006(d) and 352.007(d) and Rule 3.163.

SALES TAX

Holiday Shopping

When you shop online, remember Texas sales and use tax applies to orders for taxable items shipped or delivered to a location in Texas. If the seller didn’t collect tax from you, state law requires you to pay the tax directly to the state. If you hold a sales and use tax permit, report the tax on your next regular sales tax return. Otherwise, file a use tax return (PDF, 31KB).

SALES TAX

Saving Money during the Drought

Gov. Rick Perry renewed a proclamation extending the drought emergency for certain Texas counties due to the ongoing exceptional drought conditions across the state. Texas tax law allows sales tax exemptions for certain items used to enhance the availability of water.

SALES TAX

Federal Excise Tax on Medical Devices is Part of the Sales Price

A new federal excise tax on medical devices equal to 2.3 percent of the sales price on sales of certain devices begins Jan. 1, 2013. The tax is imposed on manufacturers, producers and importers, not on their customers.

A seller may pass along the expense of the new tax to customers by separately stating a line item charge on the invoice or receipt given to their customers for “Federal Excise Tax” or something similar. A seller cannot characterize such a pass-through or reimbursement as a tax or fee imposed on the purchaser.

The Texas Tax Code requires that any money represented as and collected by a seller as a “tax” or “fee” be remitted to the state in full. So, if a seller characterizes reimbursements for the federal excise tax as a tax or fee imposed on its customers (the purchaser), the Comptroller’s office will regard such charges as tax collected in error. “Error tax” must either be refunded to customers or remitted to the state. See STAR document 201008851L for additional guidance regarding line item charges and sales tax.

If Texas sales tax is due on a medical device when it is sold, an excise tax reimbursement charge included with the billing is part of the sales price and also taxable. If a medical device is exempt from sales tax, the associated medical device tax reimbursement charge is exempt from sales tax.

For more information on the taxability of medical devices in Texas, please see Rule 3.284, Drugs, Medicines, Medical Equipment, and Devices. The federal law that imposed the tax is the Health Care and Education Reconciliation Act of 2010 (Health Care Act), P.L. 111-152.

MEETINGS ATTENDED

Franchise Tax

A member of the Franchise Tax Section gave a presentation recently at the annual meeting of the Texas Chapter of the National Association of Tax Professionals in Corpus Christi.

Miscellaneous Fuels Tax

Representatives of the Oil, Gas and Fuels Section recently met with other Comptroller divisions concerning the International Fuels Tax Agreement (IFTA) Fuel Tax Processing/Retire New York Revenue Processing Center project.

Representatives also attended the 2012 Federation of Tax Administrators Motor Fuel Tax Section Annual Meeting and Uniformity meeting in Providence, RI.

IN THE WORKS

Sales Tax — Publications under Revision

We're updating and expanding our flea markets publication to include more information about:

  • other types of markets and shows;
  • sales and franchise tax responsibilities for temporary places of business; and
  • tax responsibilities for sellers and purchasers who occasionally sell taxable items.

We'll let you know when the publication is available online.

RULES

Proposed Rules

General Rules

The following rules were submitted for filing with the Secretary of State with a publication date of Nov. 23, 2012. The comment period ends 30 days after publication.

3.1 Repeal - Request for Extensions of Time in Which to File Report

3.1 Declaratory Rulings

3.10 Taxpayer Bill of Rights

State Sales and Use Tax

The following rule was submitted for filing with the Secretary of State with a publication date of Nov. 16, 2012. The comment period ends 30 days after publication.

3.325 Refunds and Payments under Protest

Natural Gas

The following rules were submitted for filing with the Secretary of State with a publication date of Nov. 30, 2012. The comment period ends 30 days after publication.

3.11 REPEAL Penalty and Interest

3.12 REPEAL Purchaser and/or Processor Reporting Requirements

3.14 REPEAL Exemption of Certain Interest Owners from Gas Occupation Taxes

3.16 REPEAL Reports, Payments, and Due Dates

3.25 Penalty and Interest

3.26 Purchaser and/or Processor Reporting Requirements

3.27 Exemption of Certain Interest Owners from Gas Occupation Taxes

3.28 Reports, Payments, and Due Dates

Adopted Rule

State Sales and Use Tax

The following rule adoption was filed with the Secretary of State on Nov.13, 2012. The publication date is Nov. 30, 2012, effective 20 days after filing.

3.365 Sales Tax Holiday - Clothing, Shoes and School Supplies

Effective Rule

State Sales and Use Tax

The following rule became effective Nov. 11, 2012.

3.346 Use Tax

RECENT TAX-RELATED WEBSITE UPDATES

Proper Check-Writing Procedures for Tax Payments

In an effort to credit your account with tax payments as quickly as possible, we’ve added a new Web page that provides proper check-writing procedures for tax payments. A link to this page can be found on our Texas Taxes page under “I Want to... Pay taxes by check.”

Franchise Tax Web Service Information for Software Developers and Transmitters

This page has been updated to include 2013 informaton for franchise tax software developers. New information includes:


RESOURCES

Popular Online Resources

Our Window on State Government website is a wonderful resource for information about Texas taxes. From applying for a sales tax permit to closing a business, and all things in between, you can find answers here. You can also sign up to be notified when we update pages of interest to you.

Some of the most popular sections include:

  • Texas Taxes – This section has links to all Texas taxes and fees. Clicking on a specific tax on the list will open its own page which will have links to everything needed to report and pay that tax, along with the statutes and rules that govern it.
  • Texas Taxes – Frequently Asked Questions – Answers to our most common questions, organized by tax
  • Tax Publications – Links to publications about specific taxes
  • Special Tax Mailings – A list of pertinent information sent to specific industries to keep them up to date about new legislation or other items of interest
  • State Tax Automated Research System (STAR) – A searchable tool for Texas tax law and tax policy, including position letters and hearings
ABOUT 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

For a wealth of tax information sorted by tax type or by subject matter, please visit the Texas Taxes section of our website.

Contributors to This Month’s Issue

Melissa Brogan, Robin Corrigan, Kirk Davenport, Don Dillard, Brad Gabbart, Tommy Hoyt, Carol McAnnally, Jo Anne Meyerson, Karen Ortosky, Jennifer Specchio and Viki Smith

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