Off-Road, Heavy-Duty Diesel Equipment Surcharge
The Texas Emissions Reduction Plan (TERP)
To help improve the state's air quality and comply with federal pollution emission standards, the 78th Texas Legislature has amended the Texas Emissions Reduction Plan (TERP).
TERP provides funding for cleaner on- and off-road engines; programs for energy efficiency, cleaner fuels and related infrastructure; and research and development of new technologies related to improved air quality.
These programs are partially funded by a 2 percent surcharge on the sale, lease or rental price of heavy-duty, off-road diesel-powered equipment. The surcharge is in addition to regular state and local sales taxes and is collected by the dealer or lessor.
The surcharge applies to all qualifying equipment (see the list) that is subject to sales or use tax, including equipment purchased out of state for use in Texas or purchased by direct payment permit holders. The surcharge does not apply if the sale, lease, or rental of the equipment qualifies for exemption from sales or use tax. For example, a seller that accepts a properly completed resale or exemption certificate from the purchaser to exempt the equipment from sales tax should also exempt the sale or lease from the 2 percent surcharge.
Reporting the Surcharge
To report the surcharge, taxpayers use a separate form (01-142), which must be filed or postmarked on or before the 20th day of the month following the end of each reporting period.
Buyers who do not pay sales or use tax or the surcharge to the seller or lessor must pay and report directly to the Comptroller's office. Any use tax due should be included on the regular sales tax report, while the surcharge should be paid and reported using form 01-142. Returns must be filed or postmarked on or before the 20th day of the month following the month when the purchase was made and/or the equipment subject to the surcharge was brought into the state.
|Prior to September 1, 2001
|Sept. 1, 2001 to June 30, 2003
1 Percent Surcharge
|July 1, 2003 Forward
2 Percent Surcharge
The surcharge does not apply to a lease or rental of heavy-duty, diesel-powered construction equipment if the lessee took possession of the equipment before September 1, 2001.
The previous 1 percent rate continues to apply to leases in which the lessee took possession of the equipment on or after September 1, 2001 and before July 1, 2003. The new higher rate does not apply to these leases for the term of the original lease.
New leases, rentals, renewals or extensions of leases of diesel-powered, heavy-duty equipment are subject to the 2 percent rate if the lessee takes possession of the equipment on or after July 1, 2003.
Equipment Subject to Surcharge
The 2 percent surcharge is due on all diesel-powered equipment of 50 or more horsepower, new and used, including mobile or stationary equipment used in construction, mining and other activities, with the exception of oil and gas exploration and production and agricultural production activities. No surcharge is due if the purchase, lease or rental is exempt from state sales and use tax.
The following is a partial list of equipment subject to the surcharge:
- bore/drill rigs
- cement and mortar mixers
- concrete pavers
- concrete/industrial saws
- crawler tractors/dozers
- crushing/processing equipment
- mining equipment
- off-highway tractors
- off-highway trucks
- paving equipment
- plate compactors
- rough terrain forklifts
- rubber tire loaders
- rubber tire tractors/dozers
- signal boards/light plants
- skid steer loaders
- surface equipment
- tampers and rammers
Equipment Not Subject to Surcharge
The surcharge does not apply to:
- repair or replacement parts or accessories related to the equipment unless sold or leased with equipment;
- equipment used in oil and gas exploration and production at an oil or gas well site;
- implements of husbandry (including equipment exclusively used on a farm or ranch to build or maintain roads or water facilities and equipment used in timber operations);
- processing machinery and equipment eligible for manufacturing exemptions; and
- machinery and equipment exempt from sales and use tax for any other reason, such as being used to construct or operate a qualifying water or waste water system (Tax Code Sec. 151.355) or used solely for brush control designed to enhance the availability of water.