Texas – New and Amended Sales and Use Tax Rules

SALT Report 1843 – The Texas Comptroller’s office is in the process of updating several existing sales and use tax rules and drafting two new rules.  As the drafts are completed they will be published in the state’s newsletter, Tax Policy News.

Existing Sales and Use Tax Rules

3.284 – Drugs, Medicines, Medical Equipment, and Devices

This rule is being amended to reflect a statutory change to Tax Code Section Section151.313. This rule provides that in order for an over-the-counter drug or medicine to qualify for an exemption, it must be required to be labeled with a Drug Facts panel according to Food and Drug Administration regulations.

The definition of “orthopedic appliance” is being amended and a new section will be added regarding the taxability of equipment, instruments, tools and supplies used by medical service providers.  This rule is being amended as a result of the decision in Zimmer US, Inc. v. Combs, No. 03-11-00178-CV, 2012 Tex. App. LEXIS 1109.

3.324 – Oil, Gas, and Related Well Service

This rule is being amended to clarify that nontaxable services include activities performed to gain access to natural resource materials.

3.295 – Natural Gas and Electricity

This rule is being amended to reflect that fire control, prevention, and emergency services districts and crime control districts have been granted the authority to impose a sales and use tax on the residential use of natural gas and electricity, and that the use of electricity for timber operations is exempt from sales and use tax.

3.346 Use Tax

This rule is being amended to clarify the method in which direct pay permit holders must allocate local taxes so that it is consistent with current tax codes. The amendment will clarify the local tax responsibilities of direct payment permit holders and anyone who purchase items out of state that will be stored in the state, but it is unknown at the time of purchase if the items will be used in Texas or out of state.

New Sale and Use Tax Rules

3.334 – Local Sales and Use Tax

This new rule will provide information about the rules that apply to the collection and accrual of local sales and use taxes by sellers and purchasers. It will replace current rules in subchapters N (County Sales and Use Tax), P (Municipal Sales and Use Tax), and R (Transit Sales and Use Tax) of Title 34, which are being proposed for repeal because they are out of date. The proposed rule will incorporate relevant content from the sections in subchapters N, P, and R and includes updated information regarding the collection of transit sales and use taxes. The new rule will also clarify how to determine the location where a sale is consummated.

3.370 – Natural Resource Material Acquisition and Transportation

This new rule will address the taxability of businesses that sever natural resource materials, such as oil, gas, rock and water from real property and for those that transport the materials once they have become tangible personal property.

For Further Information:

Texas Comptroller – Tax Policy News October 2012