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Tax Policy News

A monthly newsletter about Texas tax policy


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FRANCHISE TAX

“Good Standing” Account Status – Changes Are Coming

Businesses have been reporting under the revised franchise tax since 2008. Due largely to the complications of combined reporting, companies can be “not in good standing” due to a reporting error, not a tax delinquency. A “not in good standing” status can be costly to a company conducting a business or financial transaction.

The Comptroller took another look at good standing in the light of concerns from businesses. The result of that review is that being “in good standing” for franchise tax will mean that the company’s right to transact business in Texas is intact.

Being in good standing has evolved over the years, as we made changes to accommodate processing times and filing requirement changes. There are also different types of good standing, and this office may not be able to issue a certificate under certain good standing conditions. In short, it’s become complicated.

The decision to simplify and update the franchise tax good standing status definition was based on several factors:

  • Fairness. The good standing calculation is done by the certificate of account status application in real time. If a report processes that is missing a schedule, for example, the website will show the company to be “not in good standing” immediately – even before the company has been notified of the problem.
  • Transparency. The term “good standing” is misleading in that it addresses only franchise tax, although a company in good standing could have liabilities in multiple other taxes.
  • Clarity. A good standing can be confused with a certificate of existence, which is issued by the Secretary of State and attests to the status of an entity’s registration in Texas.

What’s Next?

A project team is looking at the procedural and programming changes necessary to replace good standing with the status of the entity’s right to transact business in Texas. See Texas Tax Code 171.251 - 171.259. This new definition means that a business will receive a written notice of any issues with its franchise tax filing, and will have at least 45 days to cure those issues, before the business is not in good standing.

We'll keep you posted on our progress in this newsletter.


CIGARETTE TAX; CIGARS AND TOBACCO PRODUCTS TAX

REMINDER – It's Time to Renew Cigarette/Tobacco Non-Retailer Permits

Current cigarette and tobacco products non-retailer permits expire Feb. 28, 2013.

Renewal packets with preprinted applications were recently mailed to all cigarette, cigar and/or tobacco products manufacturers, importers, distributors, bonded agents and wholesalers for renewing their cigarette and tobacco products non-retailer permits for March 1, 2013, through Feb. 28, 2014.

Non-retailers should review the preprinted information, make any corrections and return all pages of the packet (and any other documentation) with the applicable permit fee to our office by the date printed on the application form.

Returning the renewal packet and application fee by the return date will allow enough time for us to process the renewal before the current permit expires.


SALES TAX

REMINDER – It's a New Calendar Year for Certain Nonprofit Organizations

It's a new calendar year for nonprofit organizations allowed to hold two one-day, tax-free sales during a calendar year. A qualified organization that has obtained sales tax exemption from our office must designate in its records before a sale which two, one-day sales will be exempt during a calendar year. This may require careful planning and coordination for organizations operating on a fiscal year basis.

For example, PTAs, PTOs and other school groups often plan events based on school years rather than calendar years. When planning fundraising activities (PDF, 412KB) 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.


MEETINGS ATTENDED

Sales Tax

A member of the sales tax team taught a Continuing Education presentation on “Sales Tax Exemptions Relating to the Water Well Industry” at the Texas Ground Water Association Annual Convention and Trade Show in San Marcos.

Sales Tax

A member of the sales tax team made a presentation on sales tax issues and exemptions in the residential and commercial construction industry to the Plumbing-Heating-Cooling Contractors Association.


RULES

Proposed Rules

State Sales and Use Tax

Rule 3.324, Oil, Gas, and Related Well Service, was submitted for filing with the Secretary of State with a publication date of Dec. 28, 2012. The comment period ends 30 days after publication.

General Rules

Rule 3.9, Electronic Filing of Returns and Reports; Electronic Transfer of Certain Payments by Certain Taxpayers, was submitted for filing with the Secretary of State with a publication date of Jan.25, 2013. The comment period ends 30 days after publication.

This rule is being revised to improve clarity, to delete a reference to the Telecommunications Infrastructure Fund, which was repealed effective September 1, 2008 and to make conforming changes required by revisions to Chapters 15 and 16 of this title.

A new subsection is being added to explain the time limitation for taxpayers to submit payment information to the Comptroller using the State of Texas Financial Network (TexNet), the electronic data interchange (EDI) system, or another approved means of electronic funds transfer and to provide an updated reference to the Comptroller’s TexNet filing rules.

Adopted Rules

General Rules

The rules listed below were filed with the Secretary of State on Jan. 08, 2013. The publication date is Jan. 25, 2013, effective 20 days after filing.

  • Rule 3.1, Request for Extensions of Time in Which to File Report, was repealed.
  • Rule 3.1, Declaratory Rulings, adopts specific guidelines for the public to request, and the Comptroller to issue, private letter rulings and general information letters. This rule will help the Comptroller balance limited resources with the important responsibility of providing information to promote voluntary compliance.
  • Rule 3.10 Taxpayer Bill of Rights, still states the purposes in having a Taxpayer Bill of Rights, which is updated to identify the Compact with Texans that all state agencies must develop. New subsection (b) explains the Comptroller’s commitment to providing timely and accurate information in a professional manner and explains the resources available to help taxpayers find answers to their questions.

Effective Rules

State Sales and Use Tax

Rule 3.325, Refunds and Payments Under Protest, became effective Jan. 7, 2013.


OTHER NEWS

Interest Rates for 2013

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 0.465 percent (.00465) per day.

For more information about how the interest rate is applied (as well as the interest rates for this year and previous years), see the Interest on Credits and Refunds and On Tax Due section of our website.

Free Seminars on Sales and Use Tax

Our office offers free sales and use tax seminars across the state throughout the year featuring overviews of tax responsibilities for buyers, sellers and service providers.

Check out the list of seminars for January and February to see if there is one in your area.


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 policy letters and hearings

ABOUT THE NEWSLETTER

The Comptroller’s office publishes this online newsletter to keep you informed about Texas taxes. Tax Policy News provides general information on the subjects covered and is not a substitute for legal advice.

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.

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