Tax Policy News

Under Tax Code Section 182.022 (b), the tax rates for the Miscellaneous Gross Receipts Tax (MGRT) depend on the population of incorporated cities or towns according to the "last federal census next preceding the filing of the report." The U.S. Census Bureau has not yet released city and town population data from the 2020 decennial U.S. Census. Until that data is released, MGRT taxpayers should continue to use data from the 2010 decennial U.S. Census to determine the applicable tax rates.

Once the 2020 decennial U.S. Census data is released, the Comptroller’s office will provide additional information on our Miscellaneous Gross Receipts Tax webpage.

Coin-operated amusement machine owners and operators must file renewal applications for their 2022 General Business License, Registration Certificate, Import License or Repair License by Nov. 30, 2021. 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 Occupations Code Section 2153.154 and Section 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.

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.

Bookkeepers and accountants may provide a variety of services, from helping a business keep track of their day-to-day operations to advising them on their financial "big picture." Some of these services are taxable while some are not.

Bookkeeping and Accounting Services

When a bookkeeper merely inputs, sorts or manipulates data with the use of a computer, this is taxable as a data processing service. If, however, the bookkeeper is required to calculate or create the data, this is not considered taxable data processing.

Accounting and bookkeeping services are not taxable when knowledge of accounting principles or tax laws are applied to produce financial reports such as income statements, balance sheets, or profit or loss statements; or to prepare federal income tax, state franchise tax or sales tax returns.

Taxable Services

Examples of taxable services include

• compiling records of business transactions
• computing and preparing payroll checks
• filing payroll tax returns
• filing reports electronically to federal, state or other regulatory agencies
• maintaining records of employee work time
• preparing W-2 forms
• producing reports from client’s data
• recording a company’s inventory control data

Keep in mind, 20 percent of a charge for a taxable data processing service is exempt from state and local sales tax. Sales tax is due on the remaining 80 percent of the total sales price.

Nontaxable Services

Examples of nontaxable services include

• auditing services (including inventory counting services)
• consulting services
• forecasting
• interpreting a client’s data
• preparing financial statements
• preparing federal income tax returns
• preparing state sales, franchise, and income tax returns

Collecting Tax

Tax must be collected on taxable services. If a business combines both taxable and nontaxable services, the business can separate its service charges if nontaxable services are distinct and identifiable.

If taxable and nontaxable services are not separated and the taxable service represents more than 5 percent of the overall contract price, then the entire charge is taxable.

More Information

• Texas Tax Code Section 151.0035 – Data Processing Service
• Rule 3.330 – Data Processing Services
• Publication 94-127 – Data Processing Services are Taxable

Who doesn’t love winning contests, receiving free items and finding discounted deals?

Those who run contests that award prizes, provide discounts on retail purchases of taxable items, or give away items as samples or business advertisements need to know the sales tax implications and responsibilities associated with such transactions.

Contests and Giveaways

Many contests and sweepstakes offer prizes for winners. Unless these prizes are donated, they must be purchased by those running the contests or sweepstakes.

The sale of tangible personal property (TPP) to persons who make use of the property as prizes is taxable. If the items are purchased from an out-of-state vendor who does not collect Texas tax, the purchaser is responsible for remitting use tax to the Comptroller’s office.

For example – To increase business, a restaurant decides to host a contest. Customers who eat at the restaurant during a specified month are entered for a chance to win daily prizes in that month. At the end of the month, there is a drawing for a grand prize, which any customers previously entered can win. The restaurant is responsible for paying sales tax to the seller(s) of all prizes purchased for use in their contest.

The same can be said for items that are given away as gifts or samples. If a person purchases TPP to use in a giveaway, as a sample product, or for advertising purposes, they owe sales tax to their vendor on the purchase of those items.

For example – To promote the opening of an additional store location, a local business is giving away recyclable shopping bags (TPP) printed with its business logo to customers who come to the location’s grand opening. The business is responsible for paying sales tax to its vendor on the purchase of the bags.

Reporting and Remitting Use Tax

Permitted Sellers
Persons and businesses that are permitted for Texas sales and use tax that have not paid tax on taxable goods and services purchased, must report any taxable purchases on their sales and use tax return.

Non-Permitted Sellers
Any person or business not permitted for Texas sales and use tax that has not paid sales tax on taxable goods and services purchased, brought or shipped into the state for use, storage or consumption must report use tax on Form 01-156, Texas Use Tax Return (PDF), and remit payment to the Comptroller’s office.

The use tax return, with payment, should be filed on or before the 20th day following the period (month or year) during which items subject to use tax are purchased in Texas (for which no sales tax was collected by the seller), or brought into Texas for use. If the 20th day falls on a Saturday, Sunday or legal holiday, the next business day is the due date for the return and payment.

Discounts

A discount is an offer to reduce an item or service’s sales price. When a retailer provides a discount, it is commonly in the form of a specific dollar amount or a percentage. For sales tax purposes, the actual selling price of a taxable item is the measure of the tax due, which excludes the cash discount; discounts are never part of the sales price or the tax base.

For example – A retailer gives customers a $10 discount off their total purchase price. A customer’s total purchase is valued at $100; therefore, the taxable amount of that transaction is $90 after the discount is taken. If the tax rate is 8.25 percent, the retailer will multiply $90 by the tax rate (8.25 percent) to calculate the $7.43 sales tax due and collect the total amount of $97.43 from the customer.

More Information

• Rule 3.301 – Promotional Plans, Coupons, Retailer Reimbursement
• Rule 3.346 – Use Tax

Many Texans enjoy drinking wine, whether they consider themselves connoisseurs or just casual consumers. While there are many ways to indulge in a favorite glass or bottle of "vino," some prefer to order and purchase wine directly from wine producers outside of Texas.

An out-of-state winery can sell and ship wine directly to Texas customers if it has an Out-of-State Winery Direct Shipper’s Permit from the Texas Alcoholic Beverage Commission (TABC) and a Texas Sales and Use Tax Permit. The winery must collect, report and remit taxes to the Comptroller’s office on wine sold and delivered to Texas customers. The safe harbor provision for remote sellers does not apply to out-of-state wineries that are required to have a Texas tax permit in compliance with TABC requirements.

Sales and Use Tax

An out-of-state winery must collect the 6.25 percent state sales tax for wine sold and delivered to Texas customers. It must also collect

• up to 2 percent local sales tax based on where the order is shipped, delivered or at which the purchaser takes possession of the item; or
• the 1.75 percent single local use tax rate.

Out-of-state wineries choosing to collect the single local use tax rate must submit Form 01-799, Remote Seller's Intent to Elect or Revoke Use of Single Local Use Tax Rate (PDF) to the Comptroller’s office by email or mail.

Please note, if an out-of-state winery has physical presence in Texas (e.g., employee, representative, warehouse, owner), it is not eligible to collect the single local use tax rate.

More Information

• Rule 3.286 – Seller’s and Purchaser’s Responsibilities
• Publication 94-179 – Out-of-State Wineries
• Remote Sellers
• Sales Tax Rate Locator
• Wine Shipping to Texas

The Comptroller’s office proposed the following rule for public comment through the Texas Register:

State and Local Sales and Use Tax

To see the latest items added to our State Tax Automated Research (STAR) system, click New Documents in the blue menu bar 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.

The Comptroller’s office offers video tutorials on filing and paying sales tax through Webfile. View them on our Video Tutorials webpage.

Our office also offers virtual Sales and Use Tax Seminars conducted via Webex Events. New taxpayers are especially encouraged to attend these overviews of tax responsibilities for buyers, sellers, and service providers. For more information, visit the Taxpayer Seminars 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.

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