COURT CASES POSSIBLE REFUND OPPORTUNITIES:
Home Interiors – (Franchise Tax) This is the case in which the court found that the throwback rule violated the Commerce Clause. The state refunded the claim to Home Interiors and is currently reviewing trailing claims by other similarly situated taxpayers. If your company filed Texas Franchise tax returns involving throwback sales and paid Texas franchise tax, you may be eligible for a refund.
Chevron USA – (Sales/Use Tax) this is the scaffolding case in which the district court held that possession never transferred to the taxpayer because the vendor maintained a level of control over the equipment, including daily morning inspections of the equipment. Arguments were heard at the court of appeals last week and a decision is pending. Taxpayers that paid tax on scaffolding should file protective claims with the Comptroller’s office.
Margins Tax Update – Jerry Oxford, Tax Policy, noted that their staff have reviewed hundreds and hundreds of comments to the proposed rules and have tried to be very accommodating where the statute allowed. However, he noted that they have to stick to the language of the statute as written. Jerry noted that while they have reached agreement on a number of issues, including the “tiered partnership” issue and the “business loss carry forward” issue, he said they will have to issue policy rulings on issues involving cost of goods sold, flow throughs (net vs. gross) and the “1/2% rate” issue. He also said that the Combined Reporting issue has been very difficult to administer and he foresaw issues in this area for some time to come.
IT Changes - Staff from the technology team discussed changes to the franchise tax reporting system. For the first time, taxpayers will be allowed to file their FT reports electronically if they so desire. They discussed several changes to the reporting system, including tools that will allow a taxpayer to stop in the middle of completing a FT return, allowing them to come back and complete it at a later time. The system will also have a “two dimensional bar code” that will contain all of the data entered onto the form and that will allow for quicker processing of the returns.
SALES & USE TAX - GENERAL
New Water Conservation Exemption
House Bill 4 (effective September 1, 2007)
Equipment used to process, reuse or recycle wastewater for use at oil and gas wells for fracturing work is exempt from sales and use tax.
Biotechnology Cleanroom Exemption
House Bill 3319 (effective September 1, 2007)
Prior to September 1, 2007, Tax Code § 151.318 exempts biotechnology cleanrooms and equipment only for new facilities with a value of at least $150 million on which construction began after July 1, 2003 and before August 31, 2004 . This bill deletes the minimum $150 million value requirement and the requirement that construction begin before August 31, 2004.
Aircraft "Fly-Away" Exemption
House Bill 3319 (effective September 1, 2007)
The "fly-away" exemption is clarified to provide that an aircraft is exempt if sold in Texas to a person for use and registration in another state or nation before any use of the aircraft is made in Texas other than flight training in the aircraft or the transportation of the aircraft out of this state. Current law does not expressly require that the aircraft be sold in Texas although that has been longstanding agency policy.
Locksmiths and Security Service Consultants
House Bill 2833 (effective September 1, 2007)
Services for which a license is required under Occupations Code § 1702.102 are subject to sales tax as security services under Tax Code § 151.0075. This bill requires locksmiths and private security consultant companies to be licensed with the Private Security Bureau of the Texas Department of Public Safety as security service contractors under Texas Occupations Code § 1702.102 starting with new and renewal registrations filed on and after January 1, 2008. Therefore, locksmiths and security service consultants not previously required to be permitted must apply for a sales tax permit and start collecting and remitting sales tax on their services beginning January 1, 2008.
Concrete Sold for Construction and Incorporated into Realty
House Bill 3319 (effective September 1, 2007)
Ready mix concrete contractors who both manufacture concrete for construction purposes and incorporate it into realty will be required to separately state the price of the concrete and individually invoice the customer for each yard sold. The ready mix concrete contractor will also be required to collect and remit tax on the concrete used or consumed. The tax rate will be applied to the greater of the actual invoice price or the fair market value of the concrete on jobs other than public works projects.
Change of Location for Imposition of Transit Taxes
House Bill 142 (effective September 1, 2007)
Beginning September 1, 2007, a seller will collect transit tax on all sales of taxable items shipped or delivered in Texas from a place of business in the transit authority. Prior to this change in the law, a seller within a transit authority collects the transit tax on items delivered in a transit authority but does not collect the transit tax on deliveries outside of a transit authority.
Repeal of 2004 Local Sales and Use Tax Collection Changes
House Bill 3319 (effective date September 1, 2007)
This bill repeals changes to local sales and use tax collection laws that technically became effective July 1, 2004 though House Bill 2425, 78th Legislature (HB 2425). House Bill 2425 made the collection of local sales and use taxes on taxable services based on the point of delivery (i.e., where the service was delivered to the customer) instead of the seller's place of business. It also made a seller of taxable goods responsible for collecting local use taxes regardless of whether the seller was engaged in business in a particular taxing jurisdiction. The Comptroller's office did not implement the changes in HB 2425 due to legislative requests. HB 3319 codifies agency policy. See publication 94-105, for more information about how local sales and use taxes should be collected.
Nonresidential Repair and Remodeling Services
House Bill 3319 (effective date September 1, 2007)
The bill provides that local sales taxes due on nonresidential real property repair and remodeling services are based on the location of the job site, not the service provider's place of business. This change makes the local taxes due on nonresidential real property repair and remodeling jobs consistent with the local tax due on separated contracts for residential real property repair and remodeling and new construction jobs.
Collecting Local Tax within Emergency Services Districts
Senate Bill 1502 (effective June 15, 2007)
An emergency services district (ESD) may call an election to adopt a sales tax rate that applies to only the part of the district where the additional tax rate will not cause the total local tax rate to exceed the 2 percent rate maximum. This bill effectively allows for multiple rates within an ESD's territory.
New Sales Tax Holiday for Energy Efficient Products
House Bill 3693 (effective September 1, 2007)
Certain energy efficient products purchased during Memorial Day weekend will now be exempt from sales tax. There are no limits on the number of items purchased during this new sales tax holiday. The products qualifying for the exemption include air conditioners (priced under $6000), clothes washers, ceiling fans, dehumidifiers, dishwashers, light bulbs, programmable thermostats and refrigerators (priced under $2000). The first Energy Star Sales Tax Holiday will be Memorial Day Weekend in May 2008.
MOTOR FUELS TAXES
Feedstock Diesel Fuel Refund
House Bill 1332 (effective September 1, 2007)
Manufacturers may receive a refund of taxes paid on diesel fuel used as a feedstock in the production of tangible personal property for resale other than diesel fuel used in the production of motor fuel. A manufacturer may claim a refund on its monthly diesel fuel supplier, permissive supplier or distributor tax return, or, if not licensed, submit a refund claim form to the Comptroller. Documentation supporting the refund must be maintained.
Oil and Gas Well Diesel Fuel Refund
House Bill 1332 (effective September 1, 2007)
A refund may be claimed for taxes paid on diesel fuel used to remove drill cuttings from a well bore in the production of oil or gas. The user may claim a refund on its monthly supplier, permissive supplier or distributor diesel fuel tax return, or, if not licensed, submit a refund claim form to the Comptroller. Documentation supporting the refund must be maintained.
Oil Well Servicing Movable Specialized Equipment Diesel Fuel Refund
House Bill 2982 (effective September 1, 2007)
A refund may be claimed for taxes paid on diesel fuel consumed by moveable specialized equipment used in oil well servicing. To qualify for the refund, the person purchasing the diesel fuel must have received, or be eligible to receive, a federal diesel fuel tax refund for the diesel fuel used in the moveable specialized equipment. The user may claim the refund on its monthly supplier, permissive supplier or distributor diesel fuel tax return, or, if not licensed, submit a refund claim form to the Comptroller. Documentation supporting the refund must be maintained.
