Tax Policy News

The Comptroller’s office understands the tremendous strain the pandemic and its related closures have placed on businesses throughout our state. We’re grateful that virtually all of our taxpayers are doing their best to remain in compliance with Texas tax requirements, and we want to ease this burden whenever possible.

We will continue to extend the payment deadline for the motor vehicle tax due on purchases until the Governor’s state disaster declaration expires. Any tax penalty will be automatically waived if the tax payment is received within 60 days of the expiration of the state disaster declaration.

For businesses struggling to pay the full amount of sales taxes they collect from customers, a short-term payment agreement may be available.

We continue to stand with and assist our Texas businesses during these difficult times.

For more information on these accommodations in addition to other COVID-19 related information, please see

• Agency Response and Changes to Business Operations
• Resources for Taxpayers and Small Business Assistance
• Local Government Stimulus Assistance

Coin-operated amusement machine owners and operators must file renewal applications for their 2021 General Business License, Registration Certificate, Import License or Repair License by Nov. 30, 2020. A $60 occupation tax permit for each coin-operated amusement machine that is exhibited or displayed in this state is also due by Nov. 30. An occupation tax permit decal must be affixed to each machine in use.

Under the Occupations Code Sec. 2153.154 and Sec. 2153.405, the Comptroller may not refund the license fee once a license is issued. The Comptroller may also not refund the occupation tax to an owner who ceases to exhibit or display a coin-operated machine before the end of the calendar year for which the tax is imposed.

Although taxpayers need to renew their licenses on or before Nov. 30, 2020, for 2021, they may minimize the upfront costs to their businesses by choosing not to purchase the occupation tax permits (decals) that allow them to exhibit or display the coin-operated machines. Before the coin-operated machines can be exhibited or displayed, decals must be purchased at the appropriate rate found in Rule 3.602, Licenses and Certificates, Renewals and Due Dates, Occupation Tax Permits and Exemptions, section (e)(2).

The Comptroller's office mailed renewal application packets in early October. Coin-operated amusement machine owners and operators who have not received renewal packets by Oct. 31 should contact our office at 512-463-3731.

Recent upgrades to the Webfile system make it easier to obtain a Certificate of Account Status online. Taxpayers who don’t owe a report, payment or late fee can file their annual and final reports and then request a Certificate of Account Status the same day. The certificate will be available for immediate download. Using this self-service option is more convenient and avoids the delays of mailing and processing.

If you do not owe any outstanding reports or payments, you may still conveniently obtain your certificate using Webfile.

Our latest webinar, "Sales Tax Exemptions for Healthcare Items," was held in June and highlighted the sales tax exemptions available for a variety of healthcare items such as medicines, medical equipment and devices. A recording of this webinar is now available.

We also offer video tutorials on filing and paying sales tax through Webfile. View them on our Video Tutorials webpage.

Visit our Tax Training Resources webpage to

• find out more about our training resources
• register for upcoming webinars
• view the Podcast and Webinar Archive sections for previous recordings

Certain types of sales and services related to funerals and cemeteries require the service providers to collect sales tax from their customers. These can include

• caretaker and maintenance services
• new construction and installation services
• nonresidential repair and remodeling services
• other related services and sales

Caretaker and Maintenance Services

Generally, persons providing grass-cutting and weed-eating services must collect sales tax, as lawncare performed on residential or nonresidential realty is a taxable real property service. Providing caretaker and maintenance services, such as gravesite grass-cutting and weed-eating services, is not taxable. The caretakers do not need sales tax permits and do not collect any sales tax from customers because gravesites and cemeteries are not considered lawns or yards.

New Construction and Installation Services

Tax is due only on the cost of materials when permanently installing new headstones, curbing or other materials into real property. Additionally, the types of contracts installers issue to customers determine the tax responsibility.

When the installers use lump-sum contracts, they owe vendors the tax on the materials. When the installers use separated contracts, customers owe the installers the tax on the installers’ sale price.

When the installers use separated contracts, the installers may issue their vendors resale certificates (PDF), as the installers are buying the incorporated materials for resale. No tax is due on labor charges to improve real property.

Additionally, if a headstone or monument is installed before someone’s death, without engraved death dates, no tax is due on charges for engraving the dates later. This is considered new construction finish-out.

Nonresidential Repair and Remodeling Services

Service providers must collect tax on the total charge for labor and materials when providing the following services:

• leveling headstones after original installation
• repairing existing gravesite curbing
• providing similar nonresidential real property repair, remodeling, or restoration services

The service providers may issue their vendors resale certificates (PDF) instead of paying tax when buying any incorporated materials.

Funeral, Cremation, and Burial Service Providers

Morticians

Morticians providing funeral, cremation or burial services are providing nontaxable services. Morticians providing these nontaxable services are consumers of the items they purchase to provide their services, even if prices of the items are stated separately in the contracts. Therefore, morticians owe tax on items used to provide their nontaxable services. These items can include

• caskets
• flowers
• vaults
• printed prayer cards and orders of service
• monuments
• rented chairs, tents and artificial turf

Morticians are sellers of such items, however, when they do not provide them in conjunction with their nontaxable funeral, cremation or burial services. For example, when morticians sell the items to customers under "pre-need" contracts for the items only, listing each item separately, they must collect the tax due for each item.

Motorcade Escort Services

No tax is due on a charge for providing uniformed motorcade escort services, when the services are performed only for traffic control functions in connection with escorting funeral processions.

Opening and Closing Gravesites

No tax is due for opening and closing gravesites.

The service providers owe tax on purchases or rentals of equipment used to open and close the gravesites. For information about reimbursements, see the November 2019 edition of Tax Policy News.

Moving Graves and Headstones

Service providers do not collect sales tax for moving graves and headstones, as these are nontaxable services.

Service Provider Responsibilities When Making Taxable Sales

When making taxable sales (i.e., selling materials or providing taxable services), service providers may issue properly completed resale certificates to buy tax-free inventory and services they will resell, and must

• hold sales tax permits
• collect the sales tax due from customers
• report and pay the collected taxes

If needed, service providers can

• apply online; or
• mail in Texas Application for Sales and Use Tax Permit forms

More Information

• Rule 3.291 – Contractors
• Rule 3.300 – Manufacturing; Custom Manufacturing; Fabricating; Processing
• Rule 3.304 – Morticians and Monument Builders
• Rule 3.334 – Local Sales and Use Taxes
• Rule 3.357 – Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property Maintenance
• Publication 94-112, Landscaping and Lawn Care Services
• Sales Tax Rate Locator

Generally, food, candy and soft drinks sold through vending machines are taxable. Vending machine operators must have a Texas Sales and Use Tax Permit and collect and remit sales tax based on the types of items they sell through their vending machines.

Sales Tax on Food and Beverages

A vending machine operator must remit sales tax on

• 100 percent of their total gross receipts of soft drink and candy sales; and
• 50 percent of their total gross receipts of food product sales (such as snack items, milk, tea, and coffee).

Some vending machines contain a combination of soft drinks and/or candy (100 percent of total gross receipts are taxable) and food products (50 percent of total gross receipts are taxable). If a vending machine operator cannot specifically identify what is being sold (soft drinks/candy or food products), then 100 percent of the gross receipts are subject to tax.

If taxable items are sold through a vending machine, the vending machine operator must place a sign on the vending machine stating the vending price includes tax. The operator may then "back out" the amount of tax before reporting their taxable sales.

To back out sales tax when it is included in the sales price, first determine the taxable sales price: Divide the total price by the sum of 1 and the total sales tax rate for the location of the vending machine. Then, subtract the taxable sales price from the total price to determine the amount of sales tax to report and pay to the Comptroller’s office.

For example, items are sold through a vending machine in Austin for a total price of $100, tax included. The state tax rate is 6.25 percent and the local tax rate in Austin is 2 percent, for a tax rate of 8.25 percent (0.0825).

$100 ÷ (1 + 0.0825) = $92.38 taxable sales price

$100 - $92.38 = $7.62 tax to be reported and paid on sales tax return

Exempt Vending Machine Sales

There are certain circumstances, described below, in which vending machine sales are not taxable.

Water

Water, spring water, sparkling water and mineral water are exempt from sales tax. Vending machine operators are not required to remit sales tax on the receipts from sales of water. Flavored water (carbonated or non-carbonated), however, is a soft drink and tax must be remitted on the total gross receipts.

Bulk Sales

Bulk vending machine sales of food, gum, candy, and toys sold for 50 cents or less are exempt from sales tax. A bulk vending machine is defined as a device that contains unsorted items and randomly dispenses equal amounts of goods without selection of a particular item by the customer.

Certain Nonprofit Organizations

Sales made through vending machines operated by certain nonprofit organizations are not taxable. Sales are exempt if the machine is owned by the nonprofit organization and is stocked and maintained by individuals with special needs as part of an independent life skills and education program operated by the nonprofit organization.

Collecting Tax

Vending machine operators must collect and remit the appropriate state and local sales tax based on the location of the vending machine. Local tax rates can be verified by using the Sales Tax Rate Locator and entering a location’s physical address. The Sales Tax Rate Locator provides what tax rate to collect and the local taxing jurisdictions for the specified location.

Vending Machine Repair

Repairs performed on a vending machine are taxable as the repair of tangible personal property. Sales tax is due on the entire charge for the repair, including any separately stated charges for materials, parts, labor, consumable supplies, or equipment. In addition, a service call and other related charges are taxable when billed in conjunction with the taxable repair of the vending machine.

More Information

• Texas Tax Code Section 151.3051 – Sales Through Certain Vending Machines
• Rule 3.293 – Food; Food Products; Meals; Food Service
• Rule 3.292 – Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property

As required by the 84th Legislature's House Bill 1, the Comptroller's office is reminding readers that all mothers have the right to breastfeed their babies without interference or restriction of that right.

The Comptroller’s office filed the following rule for adoption with the Secretary of State:

Natural Gas

To see the latest items added to our State Tax Automated Research (STAR) system, use the New Documents link on the STAR home page.

The Monthly Updates Search Form defaults to the current month and "All Taxes." Use the pull-down menu to choose a different month or a particular tax. Selecting "All Taxes" brings up the documents organized by tax type.

The Taxes webpage has links to:

• All Texas taxes and fees.
• Resources for taxpayers.
• Filing and paying taxes.
• Tax laws and rules.

Our Account Update Tools make it easy for you to:

• Change your address.
• Add a location.
• Close a location.
• Change return/email notifications.

We host free taxpayer seminars across the state about the tax responsibilities of buyers, sellers and service providers.

Our Video Library has online tutorials on tax-related topics as well as information about our office.

The Practitioners’ Corner is a one-stop resource for information about filing and paying taxes, links to tax research sources and searchable databases.

• Tax Due Dates
• Holiday Schedule