The Texas Comptroller of Public Accounts publishes this newsletter to keep you informed about Texas taxes. Tax Policy News provides general information and is not legal or professional advice.
Public Hearing on Nov. 8, 2023 – Rule 3.334, Local Sales and Use Tax
The Comptroller will hold a hearing to take public comments, on Nov. 8, 2023 in Room 2.034 of the Barbara Jordan Building, 1601 Congress Ave., Austin, Texas 78701. Interested persons may sign up to testify beginning at 8:30 a.m. and testimony will be heard on a first come first serve basis. All persons will have 10 minutes to present their testimony and shall also provide their testimony in writing prior to their oral testimony.
Coin-operated amusement machine owners and operators must file renewal applications for their 2024 general business license, registration certificate, import license or repair license by Nov. 30, 2023. A $60 occupation tax permit for each coin-operated amusement machine exhibited or displayed in Texas 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’s office may not refund the license fee once a license is issued, nor 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.
Effective for reports originally due on or after Jan. 1, 2024, Senate Bill (SB) 3, 88th Legislature, Second Called Session, increases the no tax due revenue threshold to $2.47 million and prohibits the Comptroller’s office from requiring taxable entities whose annualized total revenue is at or below the revenue threshold to file a No Tax Due Report. The bill also repealed the requirement that a new veteran-owned business file a No Tax Due Report during its initial 5-year exemption period. Read on to learn how we are implementing these changes.
Because taxable entities whose annualized total revenue is at or below the no tax due revenue threshold and qualifying new veteran-owned businesses are no longer required to file a No Tax Due Report, we are discontinuing the No Tax Due Report for the 2024 report year and beyond. The form will not be available for any new reporting periods. Currently there are five types of entities that can file a No Tax Due Report:
The following is how each entity will report (or not report) beginning with the 2024 report:
The long form, EZ Computation form, PIR, OIR and instructions for each tax year are available at Texas Franchise Tax Forms.
A combined group must include all taxable entities in the combined group report even if any member, on a separate entity basis, has annualized total revenue at or below the no tax due revenue threshold. If a combined group’s annualized total revenue is at or below the no tax due revenue threshold, the combined group is no longer required to file a franchise tax report, an Affiliate Schedule (Form 05-166), and a Common Owner Information Report (Form 05-177) for that report year. Each individual member of the combined group that is organized in Texas or has nexus in Texas must file a PIR or OIR.
The Comptroller’s office proposed the following rules for public comment through the Texas Register:
The Comptroller’s office filed the following rules for adoption with the Secretary of State. You may view the effective rules on the Texas Administrative Code webpage.
Our State Tax Automated Research (STAR) system provides viewing and downloading of redacted letter rulings, hearings, rules, and Attorney General’s Opinions, among other documents. To see the latest items added to the STAR, use the New Documents link on the STAR home page in the blue menu bar.
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.
Tax Policy issued a memo to the Audit Division to address electronic games and associated content. This memo updated STAR Accession No. 201405957L (May 28, 2014) to include virtual currencies purchased for use within a game.
Electronic games are games operated on or through the use of devices such as a personal computer, game console, or mobile telephone, where gameplay is accomplished through a connection to the internet. In recent years, electronic games have evolved into more of an interactive virtual gaming experience by offering associated content including items such as additional content, character upgrades, and even their own virtual currencies.
Consumers can purchase games and associated content directly through a game’s website or from third-party retailers. When purchases are made via third-party retailers, they are often in the form of redeemable, physical cards. These cards include a code that grants access to the game and associated content. They may also include a preloaded amount of virtual currency that the purchaser may redeem to access content within a game.
The purchase of electronic games and associated content, including virtual currencies, is taxable as an amusement service regardless of whether access is purchased directly through a game’s website or a redeemable card.
STAR Accession No. 201405957L has been superseded.
A taxpayer requested a private letter ruling on whether the redemption of a merchandise certificate won through a charity auction is subject to sales and use tax. A department store donated the certificate to a nonprofit. The certificate entitled the taxpayer to exchange it for $3,000 in merchandise at the store.
The Comptroller’s office determined the certificate was a gift certificate that entitled the taxpayer to a future purchase of taxable items. The certificate was consideration and redemption of the certificate for merchandise was a taxable sale. The sales price was the full price of the merchandise for which the certificate was redeemed.
A taxpayer requested a private letter ruling regarding the taxability of its seeds. The taxpayer also asked whether its customers are required to provide an agricultural exemption certificate.
The taxpayer’s seeds are used for applications including land reclamation and restoration, conservation, ranch grazing, and wildlife habitat enhancements. All the seed species sold can be used as food for wildlife and livestock. They are not used for turf or lawn purposes.
Seeds that produce items that are sold in the regular course of business or used for feed for exempt farm and ranch animals are exempt from sales and use tax. The Comptroller’s office determined taxpayer’s seeds are sold for these purposes and are not taxable. A purchaser is not required to provide an exemption certificate for these types of seeds.
The qualifying owner, operator, and occupant of a large data center project may claim a sales tax exemption on certain equipment necessary and essential for the operation of the project. The Comptroller’s office issued a private letter ruling related to the expansion of a current large data center project.
A taxpayer that is the sole qualifying owner and qualifying operator of an existing project plans to expand the project to a lot it currently owns that shares a boundary with the existing project. The taxpayer plans to sell the lot for the project expansion to an affiliate. The affiliate will build and own all future buildings on this lot, which the taxpayer intends to become part of the large data center project. The taxpayer will remain the qualifying operator of the project.
A large data center project may be composed of one or more buildings and must include at least 250,000 square feet of space located on a single parcel of land or on contiguous parcels of land that are commonly owned or owned by affiliation with the qualifying operator. The Comptroller’s office determined that the proposed expansion will be on a contiguous parcel and owned by affiliation as required. The affiliate may be listed as a qualifying owner of the large data center project.
A taxpayer requested a private letter ruling related to the taxability of its employee benefit and retirement administration services it provides to employers. The taxpayer’s employee benefit administration services include administering employee health reimbursement accounts (HRAs) and flex spending accounts (FSAs), tracking compliance with the Affordable Care Act (ACA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA), and performing benefit eligibility verification audits. The taxpayer’s retirement services include retirement plan administration and 401(k) plan recordkeeping services.
The Comptroller’s office determined the spending account service and the COBRA administration service were not taxable. The taxpayer’s ACA compliance and eligibility verification services involve the evaluation of employees’ eligibility for insurance coverage, therefore, the Comptroller’s office determined these services were taxable insurance services. The taxpayer also provided an ACA reporting-only service that is a taxable data processing service.
The Comptroller’s office determined the taxpayer’s retirement plan administration and 401(k) recordkeeping services were nontaxable financial services to administer retirement plans.
Help is just a click away! Use our website to take care of business.
The Taxes webpage has links to:
Our Account Update Tools make it easy for you to:
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:
The Practitioners’ Corner is a one-stop resource for information about filing and paying taxes, links to tax research sources and searchable databases.