Texas – Direct Pay Permit Holder’s Use Tax Election Rule Amended

SALT Report 1897 – The Texas Comptroller of Accounts announced that the state’s use tax regulation has been revised to correct information regarding a direct pay permit holder’s option to pay use tax on an item when it is first stored in Texas or when the item is first removed from storage for use in Texas.

34 TAC §3.346 has been updated to reflect that at the time an item is purchased and stored in Texas, if it is not known whether the item will be used in Texas or removed from the state for use elsewhere, a direct payment permit holder can elect to do one of the following:

  • Pay state and local use tax at the time the item is first removed from storage for use in Texas, or
  • Pay state and local use tax on the item when it is first stored in Texas

Once the election is made it must be applied consistently to all stored items and to all state and local taxes. However, local taxes are owed to the jurisdiction in which the item is first stored regardless of the election chosen by a taxpayer.

Additionally, a direct payment permit holder who elects to pay use tax when items are first stored may claim a refund of taxes paid on items that are removed from storage in Texas for use elsewhere.

For Further Information:

Texas Comptroller of Public Accounts – Tax Policy News