In This Issue . . .
February 2021
The Comptroller's office publishes this newsletter to keep you informed about Texas taxes. Tax Policy News provides general information and is not a substitute for legal or other professional advice.
COVID-19 News
Comptroller COVID-19 Response
The Comptroller's office understands the tremendous strain the pandemic and its related closures have placed on businesses throughout our state. We're grateful that virtually all of our taxpayers are doing their best to remain in compliance with Texas tax requirements, and we want to ease this burden whenever possible.
We will continue to extend the payment deadline for the motor vehicle tax due on purchases until April 14, 2021, which is consistent with the announcement by the Texas Department of Motor Vehicles to end the temporary waiver for title and registration on certain vehicles.
For businesses struggling to pay the full amount of sales taxes they collect from customers, a short-term payment agreement may be available.
We continue to stand with and assist our Texas businesses during these difficult times. For more information on these accommodations in addition to other COVID-19 related information, please see
Agency Response and Changes to Business Operations
Resources for Taxpayers and Small Business Assistance
Local Government Stimulus Assistance
Announcement
We've Made Webfile Better! Simpler, Smarter, Refreshed
Webfile is a secure, online tool for filing and paying taxes and fees. And now it's even better!
If you file and pay sales tax via Webfile, get ready for a streamlined experience! We've updated this tool with an easy-to-follow user interface, so you can
Navigate quickly to frequently used services
Update your accounts
Save and resume your filing progress
If you already use Webfile, your username and password won't change. You will still have 24/7 access and the ability to file early and pay on the due date.
Notification
Certification of the Single Local Use Tax Rate for Remote Sellers — 2021
The Comptroller of Public Accounts, administering agency for the collection of the Single Local Use Tax Rate for Remote Sellers, has determined, as required by Tax Code, Section 151.0595 (e), that the estimated average rate of local sales and use taxes imposed in this state during the preceding state fiscal year ending August 2020 is 1.75 percent. This rate will be in effect for the period of Jan. 1, 2021, to Dec. 31, 2021.
Reminders
2020 Federal Income Tax Returns — Sales Tax Deductions
If you itemize deductions on your 2020 federal income tax return, you have the option of claiming a deduction for state and local sales taxes paid during 2020. See the IRS Sales Tax Deduction Calculator for more information on claiming the deduction.
Cigarette/Tobacco Non-Retailer Permit Renewals
Current cigarette and tobacco products non-retailer permits expire Feb. 28, 2021.
The Comptroller's office mailed renewal packets with preprinted applications to all cigarette, cigar and/or tobacco products manufacturers, importers, distributors, bonded agents and wholesalers to renew their cigarette and tobacco products non-retailer permits for March 1, 2021, through Feb. 28, 2022.
If you did not receive your packet, call us at 800-862-2260 to request one.
Non-retailers should review the preprinted information, make any corrections, sign the renewal form and return all pages of the packet (and any other documentation) with the applicable permit fee to our office by the date printed on the application form.
A $50 late filing fee will be assessed on non-retailer renewals postmarked after Feb. 28, 2021.
Insurance Tax Reports Due March 1, 2021
The 2020 annual insurance premium and maintenance tax reports and payments for licensed insurance companies and miscellaneous organizations (such as HMOs) are due on or before March 1, 2021.
Annual insurance premium tax reports and payments for Texas licensed surplus lines agents and agencies, and for entities required to report unauthorized insurance premium taxes, are also due on or before March 1, 2021.
Taxpayers required to report electronically, and those who have voluntarily reported their taxes electronically for two consecutive years, do not receive a paper tax report. Instead, the taxpayer receives an email reminder about the filing deadline. Email reminders were sent in January 2021.
Taxpayers who are not required to file electronically should have received paper tax reports by the end of January 2021.
For any questions regarding insurance tax reports, please contact us at insurance.tax@cpa.texas.gov.
Motor Vehicle Crime Prevention Authority Fee
Property and casualty insurance companies authorized by the Texas Department of Insurance to write automobile insurance as described in Insurance Code, Art. 5.01(e) must report and pay the Motor Vehicle Crime Prevention Authority Fee on or before March 1, 2021, for automobile policies effective from July 1, 2020, through Dec. 31, 2020. Companies licensed to write automobile coverage must file the form, even if no fee is due. Refer to Form 25-107, Insurance Motor Vehicle Crime Prevention Authority Semi-Annual Fee Report — July thru December (PDF) and our Insurance Taxes Frequently Asked Questions webpage for additional information. Beginning in January 2021 for the report due March 1, 2021, the Comptroller's office will no longer mail Form 25-107 or 25-106.
Statements of Available Premium Tax Credits
Beginning January 2021, for tax year 2020, taxpayers will no longer receive a statement showing their available credits, including any guaranty association assessment credits, Texas Windstorm Insurance Association (TWIA) and Certified Capital Company (CAPCO) credits that may be applied to their 2020 premium tax. The Comptroller's office has moved all insurance filings to an electronic format, and information will automatically populate for taxpayers electronically filing their reports. If you have requested a hardship and plan to file a paper return, but are unable to calculate your credit amount, you can contact the Revenue Accounting Division at 800-531-5441, ext. 34276.
Tax Training Resources
Resources for Texas Taxpayers
Our office offers video tutorials on filing and paying sales tax through Webfile. View them on our Video Tutorials webpage.
The Texas Comptroller's office offers Sales and Use Tax Seminars across the state throughout the year. New taxpayers are especially encouraged to attend these overviews of tax responsibilities for buyers, sellers, and service providers.
In response to Governor Abbott's directive that all in-person state agency-related conferences should be postponed until further notice, we are now offering virtual Taxpayer Seminars using Webex Events. 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
Franchise Tax
Paycheck Protection Program Loans Forgiveness and Franchise Tax
The Texas franchise tax is based on a taxable entity's margin and is directly tied to federal Internal Revenue Code (IRC) sections. Texas is a "static" state in that we do not change our code based on changes to the IRC. Texas Tax Code 171.001(a)(9) "Internal Revenue Code" means the Internal Revenue Code of 1986 in effect for the federal tax year beginning on January 1, 2007, not including any changes made by federal law after that date, and any regulations adopted under that code applicable to that period. Unless a source of income is specifically excepted from being recognized as income in the 2007 code or by Texas statute, the income must be included in total revenue.
The Paycheck Protection Program (PPP), created in the CARES Act passed by Congress last year, is a federal loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The federal government will forgive these loans if all employee retention criteria are met and the funds are used for eligible expenses. If a taxpayer's PPP loan is forgiven, the CARES Act provides that the amount of loan forgiven may be excluded from the taxpayer's federal gross income. Because the federal legislation references the current IRC, and not the 2007 version, the federal statutory exemption of forgiven loan amounts from income does not apply to the Texas franchise tax.
A legislative change is needed to otherwise exclude the loan forgiveness from total revenue. Representative Geren filed such legislation, House Bill 1195, to exempt forgiven PPP loans from revenue for purposes of the franchise tax. We will monitor HB 1195 through the legislative session and will provide an update if passed. Should such legislation not pass, the receipts from a forgiven PPP loan are sourced to the legal domicile of the bank that made the loan (the creditor) which, in most cases, is not likely to result in a Texas receipt.
Note that qualifying expenses can be deducted as Cost of Goods Sold or Compensation, regardless of whether the forgiven loan amounts are exempt from being included in income.
Sales and Use Tax
Natural Gas and Electricity, Part One: Residential Use
There are three categories of electricity-generating energy: fossil fuels, renewable energy sources and nuclear energy. Fossil fuels, also known as hydrocarbons, include coal, petroleum and natural gas. In 2019, the use of natural gas made up approximately 38 percent of the electricity generated in the U.S., according to an article in the U.S. Energy Information Administration's (EIA) Electric Power Monthly, February 2020, titled "Electricity Explained — Electricity in the United States."
For Texas sales tax purposes, there are two types of uses for natural gas and electricity: residential, and nonresidential and/or commercial. This article is part one of a two-part series discussing natural gas and electricity. In part one we will define natural gas and electricity; discuss residential use of natural gas and electricity and its taxability, including exemptions for residential use; and provide information on how to request a refund if you are charged sales tax in error.
What Are Natural Gas and Electricity?
Natural Gas
Natural gas is a flammable gas, consisting largely of methane and other hydrocarbons, occurring naturally underground (often in association with petroleum) and used as fuel. It is one of the primary sources of energy for a lot of our day-to-day activities and is recognized by the EIA as a relatively clean-burning fossil fuel, resulting "in fewer emissions of nearly all types of air pollutants and carbon dioxide (CO2) than burning coal or petroleum products to produce an equal amount of energy."
Electricity
Electricity is the supply of electric current to a house or other building for heating, lighting, or powering appliances. Texas is the largest electricity consumer among the states in this nation. The largest share of Texas' electricity retail sales go to the residential sector, according to the EIA.
Residential Use of Natural Gas and Electricity
As both the largest energy-producing and energy-consuming state in the nation, more than a third of Texas residents use natural gas and electricity for heating and cooling their homes.
Residential use of natural gas and electricity is defined as the use of natural gas or electricity in a building or the portion of a building occupied as a residence, and includes
use by the owner of, or tenant in a(n)
home;
apartment complex;
housing complex;
condominium;
campground;
recreational vehicle (RV) park;
nursing home; or
retirement home; and
use for common areas of a(n)
apartment complex;
housing complex;
condominium;
campground;
RV park;
nursing home;
retirement home; or
homeowner's association (HOA).
Residential use for common areas include a
recreation room
swimming pool
security gate
walkway or parking area
street or exterior lighting
Common areas do not include on-site offices used solely to conduct business. Residential use does not include use in a health care or detention facility, including
hospitals
rehabilitation centers
substance abuse treatment centers
psychiatric facilities
prisons, jails or other detention centers
Exemption for Residential Use
The use of natural gas and electricity is presumed taxable, unless an exemption applies. Residential use of natural gas and electricity is exempt from state and local sales and use tax, except for certain local sales and use tax as described below.
A person who uses natural gas or electricity solely in a single-family residence is not required to furnish an exemption certificate (Form 01-339 (back), Texas Sales and Use Tax Exemption Certification (PDF)) to the utility company. A person whose use of natural gas and electricity is in multifamily apartment complex, housing complex, nursing home, or other residential building may be required to issue an exemption certificate if one is necessary for the utility company to distinguish exempt residential use from taxable use. Although not required by the Comptroller's office, a utility company may request an exemption certificate to document the exemption.
Non-Exempt Local Sales and Use Taxes
Residential use of natural gas and electricity is subject to local sales and use tax when used in the following local taxing jurisdictions:
a municipality that has elected to impose the municipal sales and use tax on the residential use of natural gas and electricity;
a fire control, prevention, and emergency services district whose board of directors, by order or resolution, has imposed a sales and use tax on the residential use of electricity; or
a crime control and prevention district whose board of directors, by order or resolution, has imposed a tax on the residential use of electricity.
You can find a list of cities that currently impose tax on residential use of natural gas and electricity. You can also find a list of fire control, prevention, and emergency medical services districts and crime control and prevention districts that currently impose tax on residential use of natural gas and electricity.
Refund of Sales and Use Tax for Residential Use
If you were charged sales and use tax in error for the residential use of natural gas and electricity, you may qualify for a refund. You must first ask your utility service provider for a refund of any tax paid in error. Your utility service provider can either grant the refund request, or provide you with the form necessary so that you can claim the refund directly from the Comptroller's office. When you request a refund directly from the Comptroller's office, the utility service provider must complete Form 00-985, Assignment of Right to Refund (PDF), and give the form to you.
Refund Claim Requirements
To request a refund from the Comptroller's office, you must
submit a claim in writing that states fully and in detail the reason or ground on which the claim is founded;
identify the period during which the claimed overpayment was made; and
submit the claim within the applicable limitations period, which is generally four years from the date the tax was due and payable.
Submitting a Refund Claim
To submit a claim for refund, you can
use the Texas Claim for Refund web form, and upload PDF or ZIP files that contain supporting documentation;
download and complete the fillable PDF Form 00-957, Texas Claim for Refund, and email it, along with supporting documentation, to refund.request@cpa.texas.gov; or
print Form 00-957 (PDF) and mail it, along with supporting documentation, to
Texas Comptroller of Public Accounts
Attn: Sales Tax Refunds
111 E. 17th Street
Austin, TX 78774-0100
You can also check the status of a previously submitted refund claim by sending an email to refund.status@cpa.texas.gov.
For more information about sales tax refunds, visit our Sales Tax Refunds webpage.
Next Month — Part Two: Nonresidential and/or Commercial Use
In part two of our two-part series on natural gas and electricity, we will discuss nonresidential and/or commercial use, ag/timber and other exemptions for use, utility studies and refunds for tax paid in error. Stay tuned!
More Information
Texas Tax Code Section 151.317 — Gas and Electricity
Texas Tax Code Section 321.105 — Residential Use of Gas and Electricity
Texas Tax Code Section 321.1055 — Imposition of Fire Control or Crime Control District Tax on the Residential Use of Gas and Electricity
Sales Tax Rule 3.295 — Natural Gas and Electricity
Rules
Proposed
The Comptroller's office proposed the following rule for public comment through the Texas Register:
Crude Oil Production Tax
Rule 3.39 — Credits for Qualifying Low Producing Oil Leases
Publication date — March 5, 2021
Comment period end date — April 4, 2021
State Tax Automated Research System
STAR Watch
To see the latest items added to our State Tax Automated Research (STAR) system, use the New Documents link on the STAR home page.
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.
More Information
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Taxpayer Seminars and Videos
We host free taxpayer seminars across the state about the tax responsibilities of buyers, sellers and service providers.
Our Video Library has online tutorials on tax-related topics as well as information about our office.
Practitioners' Corner
The Practitioners' Corner is a one-stop resource for information about filing and paying taxes, links to tax research sources and searchable databases.
Agency Calendars
Tax Due Dates
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