Tax Policy News

If you itemize deductions on your 2022 federal income tax return, you have the option of claiming a deduction for state and local sales taxes paid during 2022. See the IRS Sales Tax Deduction Calculator for more information on claiming the deduction.

Annual franchise tax reports are due May 15. Beat the rush to file your franchise tax report or request an extension of time to file – Webfile is available now!

Webfile makes it easy to submit tax reports, make payments, request extensions, file final reports , request tax clearance letters, and view a summary of your transactions. You can find your franchise tax Webfile number (which starts with "XT") on the franchise tax upcoming due date reminder letter we mailed in January.

You can also call 800-442-3453 at any time to get your XT number via our automated system. When you call, be sure to have your 11-digit taxpayer number and identifying information, such as total revenue from a previous report or the amount of the last tax payment you made (cannot be zero).

View the following video tutorials for help with franchise tax:

• How to Create a Webfile Account.
• How to File a No Tax Due Report.
• How to Find Your 11-Digit Taxpayer Number.

The 2022 independently procured insurance tax report (PDF) and supplement (PDF) are due on or before May 15, 2023.

To qualify as independently procured insurance, you must obtain the insurance policy directly from a non-admitted insurer, and you must not use the services of an agent or broker in the procurement of coverage. If an agent is involved in the placement of the insurance, the policy may be surplus lines insurance with taxes due to the home state of the insured. If Texas is the home state of the insured and the agent does not hold a surplus lines license in Texas, the transaction may be considered unauthorized insurance.

As of January 2021, taxpayers no longer receive a paper tax report. Instead, the Comptroller’s office sends an email reminder about the filing deadline. Email reminders are sent in April.

For any questions regarding insurance tax reports, please contact us at insurance.tax@cpa.texas.gov.

Prepare yourself for emergencies that can cause physical damage like hurricanes, flash floods, and wildfires during the 2023 Emergency Preparation Supplies Sales Tax Holiday. You can purchase certain emergency preparation supplies tax-free during the sales tax holiday. There is no limit on the number of qualifying items you can purchase, and you do not need to give the seller an exemption certificate to claim the exemption.

This year’s holiday begins at 12:01 a.m. on Saturday, April 22, and ends at midnight on Monday, April 24.

Taxpayers can refer to the Emergency Preparation Supplies Sales Tax Holiday publication for additional information.

Texas taxpayers can save money on tax-free purchases of certain ENERGY STAR^® energy-efficient products and certain water-efficient and water-conserving products during the annual ENERGY STAR^® Sales Tax Holiday and Water-Efficient Products Sales Tax Holiday. The 2023 holidays begin Saturday, May 27, and go through Memorial Day (Monday, May 29, ending at midnight). There is no limit on the number of qualifying items you can buy, and you do not need to give the seller an exemption certificate to buy items tax free.

Taxpayers can refer to the ENERGY STAR^® Sales Tax Holiday and the Water-Efficient Products Sales Tax Holiday publications for additional information.

The Comptroller’s office will mail invoices to insurers by the end of May for the Volunteer Fire Department Assistance Fund Assessment, and payment is due Aug. 1, 2023.

This assessment applies to property and casualty insurers writing homeowners insurance, fire insurance, farm and ranch owners’ insurance, private passenger auto physical damage insurance, commercial auto physical damage insurance and the non-liability portion of commercial multi-peril insurance.

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.

Sulphur Production

Rule 3.41 – Definition and Due Dates

Publication date – Feb.24, 2023
Effective date – Feb. 26, 2023

Summary: The Comptroller’s office adopted the repeal of Rule 3.41. Senate Bill 757, 84th Legislature, 2015, repealed Tax Code Chapter 203, Sulphur Production Tax, effective Sept. 1, 2015. The rule is no longer necessary as sulphur producers are not required to file a report and pay this tax and the periods are now outside the four-year statute of limitations for assessments and refund claims. See Tax Code Section 111.107(a), When Refund or Credit Is Permitted and Section 111.201, Assessment Limitation.

Cigarette Tax

Rule 3.102 – Applications, Definitions, Permits, and Reports

Publication date – Feb. 24, 2023
Effective date – March 1, 2023

Summary: The Comptroller’s office adopted amendments to implement Senate Bill (SB) 248, 87th Legislature, 2021, regarding interstate warehouses. SB 248 requires a person in Texas who receives unstamped cigarettes from a manufacturer, bonded agent, distributor, or importer to store the cigarettes exclusively in an interstate warehouse. Comments were received and changes made to the proposed text. The amendments add definitions; provide that "first sale" does not include sales to an interstate warehouse or transfers of cigarettes by an interstate warehouse in interstate warehouse transactions; and clarify permitting requirements.

Franchise Tax

Rule 3.591 – Margin: Apportionment

Publication date – March 10, 2023
Effective date – March 14, 2023

Summary: The Comptroller’s office adopted amendments to Rule 3.591 in response to the Texas Supreme Court opinion in Sirius XM Radio, Inc. v. Hegar, No. 20-0462 (Tex. March 25, 2022). No comments were received regarding the proposed amendments and the rule was adopted without change from the proposed text. The amendments delete the receipt-producing, end-product act discussion and provide that a service is generally performed where the taxpayer’s people and property are doing the work that the customer hired the taxpayer to perform.

General Rules

Rule 3.4 – Tax Refunds for Wages Paid to an Employee Receiving Financial Assistance

Publication date – March 17, 2023
Effective date – March 20, 2023

Summary: The Comptroller’s office filed the proposed repeal and adoption of new Rule 3.4 on Jan. 12, 2023, which was published in the Jan. 27, 2023, issue of the Texas Register (48 TexReg 342). No comments were received, and the rule was adopted without change from the proposed text. The new rule brings the section in line with the current statute, which provides for a tax refund program that is administered in conjunction with the Texas Workforce Commission. The intent of the program is to encourage the employment of individuals who are receiving federal aid to families with dependent children. The section outlines the basics of the program, provides eligibility requirements, and discusses the limitation on the amount of the refund.

STAR Doc. No. 202302001L

STAR Doc. No. 202302002L

Tax Policy Division issued a policy memo to Audit Division summarizing the various federal statutes and regulations relating to Internal Use Software that the Comptroller recognizes as incorporated-by-reference into Texas law. These provisions are also described in the August 2022 amendments to Rules 3.340 and 3.599.

Prior to the August 2022 rule amendments, the Comptroller’s office only recognized federal regulations if taxpayers were required to apply those regulations to the 2011 federal income tax year. With the August 2022 amendments, the Comptroller’s office now recognizes federal regulations if taxpayers were allowed to apply those regulations to the 2011 federal income tax year.

Taxpayers have the option to elect between two prior versions of Treas. Reg. 1.41-4(c)(6) but cannot elect between different provisions within those versions. Whichever regulation the taxpayer selects must be applied in full. Provisions from the 2016 version of the regulations are not incorporated-by-reference into Texas law and should not be used. The memo also includes a table comparing the two versions of the Treasury Regulations side-by-side, with Tax Policy's notes of any differences.

STAR Doc. No. 202302017L

A taxpayer requested a private letter ruling regarding whether the items it purchased that are used by its parent company in research activities are eligible for the research and development (R&D) tax exemption provided by Tax Code, Section 151.3182 (Certain Property Used in Research and Development Activities; Reporting of Estimates and Evaluation).

The taxpayer is a wholly owned subsidiary of its parent and does not have any employees or generate any revenue. The parent funds all of the taxpayer's activities by transferring cash to the taxpayer. Although the parent has a Texas Qualified Research Registration Number, the taxpayer does not.

The Comptroller’s office concluded that only an entity engaging in qualified research is eligible for the sales tax R&D exemption. In this taxpayer's case, the taxable transaction is the sale that occurs when the taxpayer purchases an item. The activities that would be necessary to support an exemption occur when the parent uses that item in its qualified research activities. The Comptroller’s office also determined that the sale-for-resale exemption did not apply as there was no clear consideration from the parent to the taxpayer in exchange for the items.

STAR Doc. No. 202301018L

The Comptroller’s office responded to a private letter ruling request related to the taxability of various charges for the sale and maintenance of audiovisual and videoconferencing equipment and software.

The taxpayer sells a product that includes Voice over Internet Protocol (VoIP) service, videoconferencing software, device and infrastructure management, software monitoring, and analytics. The taxpayer sells the product under a lump-sum charge. The Comptroller’s office determined this charge to be taxable as the sale of telecommunications services.

The taxpayer also offers on-site support and maintenance services for its customers’ software and hardware infrastructure. The support and maintenance services were provided under a lump-sum charge.

The repair of tangible personal property is a taxable service. Tangible personal property includes computer programs and computer hardware. The Comptroller’s office determined the taxpayer’s lump-sum charge for the repair of customers’ software and hardware is taxable as the repair of tangible personal property.

The taxpayer also sometimes performs services related to customers’ communications infrastructure such as the migration of on-premises physical phones to cloud based software. The Comptroller’s office determined these charges were taxable as the repair and maintenance of computer programs.

STAR Doc. No. 202301028L

The Comptroller’s office issued a private letter ruling related to the taxability of tickets to concerts presented by a nonprofit corporation. The nonprofit entered into an agreement with a third-party management company to produce and promote the concerts.

Amusement services, including concerts, are generally subject to sales and use tax. However, amusement services exclusively provided by a nonprofit corporation are exempt. An event may be considered to be exclusively provided by a nonprofit even if it contracts with a for-profit entity to provide the expertise to produce the event. The nonprofit must hold itself out as the provider of the amusement service and may not be part of a joint venture with the for-profit entity.

Under the agreement, the nonprofit does not share losses with the for-profit entity. The nonprofit receives a specified amount per ticket sold regardless of whether the event is profitable. The Comptroller’s office determined that the nonprofit was not engaged in a joint venture and that the concerts are exclusively provided by the nonprofit. Sales of tickets to the concert are not subject to sales and use tax.

STAR Doc. No. 202202027L

A taxpayer requested a private letter ruling regarding the correct location to source the local sales and use tax it collects on sales of its good and services.

The taxpayer rents and repairs oil field equipment and repairs nonresidential real property such as oil well casing. The taxpayer receives all of its orders through its salespersons over their cellphones. These salespersons are located either at the taxpayer’s equipment yard or out in the field.

The Comptroller’s office determined that the taxpayer’s equipment yard is a place of business. The taxpayer should collect and remit local sales and use taxes on its rental and repair of oil field equipment based on the location of the equipment yard; and collect and remit local taxes on its nonresidential real property repair and remodeling services based on the location of the job site.

STAR Doc. No. 202302009L

A taxpayer requested a private letter ruling regarding the taxability of sales of its peer-reviewed scientific journal and its learning materials provided in print and electronic form. Taxpayers also requested a ruling regarding charges for membership in its professional medical association.

Books, magazines, journals, and similar printed materials, either in a printed or an electronic format, are generally taxable as tangible personal property. However, periodicals and writings published and distributed by a religious, philanthropic, charitable, historical, scientific, or other similar organization not operated for profit are exempt from Texas sales and use tax. Based on the taxpayer’s status as a nonprofit professional health care organization under Internal Revenue Code, Section 501(c)(3), the Comptroller’s office determined that sales of the taxpayer’s scientific journal and its learning materials are exempt writings and not subject to Texas sales and use tax.

The taxpayer also offers membership in its professional medical association. Membership includes access to information for medical students and professionals including clinical practice guidelines, clinical guidance statements, best practice papers, and a clinical decision tool that can be used at the point of care. Membership also includes a subscription to the taxpayer’s scientific journal and contact with the taxpayer’s governmental advocacy groups.

Access to general or specialized information gathered and provided to the public or a specific segment of industry is generally a taxable information service. However, taxable information services do not include information derived from medical testing and experimentation and from scientific observation.

The Comptroller’s office found that the clinical practice guidelines, clinical guidance statements, best practice papers, and clinical decision tool included in membership in the taxpayer’s association fell under this exclusion and are not taxable. Other items included as part of the membership, such as a subscription to the scientific journal and access to advocacy groups, are also not taxable. Charges for membership in the taxpayer’s association are a nontaxable information service.

STAR Doc. No. 202302004L

Tax Policy Division previously issued a memo to Audit Division related to the taxability of credit rating services (STAR Doc. No. 202301006L). This memo determined that services to assign credit ratings to legal entities are taxable as credit reporting services.

The memo has been updated to give taxpayers additional time to come into compliance with this policy. The updated memo states that taxpayers should start collecting and remitting sales and use tax on their taxable credit rating services beginning July 1, 2023. STAR Doc. No. 202301006L has been superseded.

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