It’s Over: 86th Legislative Session Bills and Resolutions

The 86th Texas Legislative session ended and the major legislation that was signed into law was in the area of sales and use taxes. Below are the major Texas legislative updates by type of tax:

Franchise Tax

Exclusion from total revenue for certain payments made by a performing rights society (SB 1824)

A taxable entity that is a performing rights society may exclude from total revenue payments received from the public performance rights holder and copyright owner for whom the taxable entity licenses the public performance.

Effective: June 4, 2019

Additional deduction in determining margin for entities in the aerospace industry (HB 1607)

Certain taxable entities in the aerospace industry, when determining margin, may deduct costs properly allocated and incurred under the Federal Acquisition Regulation for the sale of goods or services to the federal government that the taxable entity has not already subtracted under either the COGS or compensation deductions. The additional costs allowed will be phased in over a period of time.

Effective: January 1, 2020

Sales and Use Taxes

Marketplace providers (HB 1525)

HB 1525 provides that a “marketplace provider” is required to collect, report, and remit taxes imposed on all sales of taxable items made through the marketplace to the comptroller. A “marketplace provider” is a person who owns or operates a “marketplace” and processes sales or payments for “marketplace sellers.” A “marketplace” is a physical or electronic medium through which persons other than the owner or operator of the medium make sales of taxable items. The term includes a store, internet website, software application or catalog. Finally, a “marketplace seller” is a seller, other than the marketplace provider, who makes a sale of taxable items through a marketplace.

HB 1525 also provides that a marketplace provider is the seller of the items sold on its marketplace platforms. Furthermore, a marketplace provider must certify to each individual selling taxable items through the marketplace that the provider assumed the statutory rights and duties of a seller or retailer.

Effective: October 1, 2019

Single local use tax rate for remote sellers (HB 2153)

In response to the Wayfair decision, “remote sellers” (who were previously not required to collect and remit sales and use tax) may have to begin collecting Texas sales and use taxes on sales in Texas. A “remote seller” is a seller that does not have a physical presence in Texas, but who sells products or services for delivery in Texas of $500,000 or more (this amount is not aggregated with marketplace sales).

According to HB 2153:

• Remote sellers will be subject to a single local use tax rate
  • 1.75% for the period of October 1, 2019 – December 31, 2019
  • The Comptroller is required to compute the tax rate and publish it in the Texas Register prior to the beginning of each calendar year
• A remote seller may choose to collect the single local use tax rate (instead of calculating and remitting local tax for numerous local jurisdictions) by notifying the comptroller

Effective: October 1, 2019

Certain amusement services (HB 1965)

HB 1965 exempts the sale of amusement services from sales and use tax if the services are exclusively provided by certain governmental and not-for–profit entities. Furthermore, this bill allows those entities to contract with another organization that provides touring theatrical productions that qualify for the exemption. Theatrical productions are defined as a live staged play, musical play, opera, or ballet.

To qualify for the exemption, the entity providing the production must enter into a contract with an eligible organization to provide at least five productions a year for a term of at least five years. The productions must be held at a location either owned by, leased by, or licensed to the eligible organization for a least one year.

Effective: September 1, 2019

Sale-for-resale (SB 1525)

SB 1525 makes the following changes to the sale-for-resale exemption from sales and use tax:

• Amusement and personal services do not include services provided through coin-operated machines operated by the customer
• When taxable items integral to the performance of a contract with a not-for–profit organization or with the federal government may be purchased tax-free for resale
• A sale for resale does not include a sale of tangible personal property to be used, consumed, expended in, or incorporated into an oil or gas well in the performance of an oil well service taxable under Chapter 191
• Labor to repair, remodel, maintain, or restore tangible personal property is exempt from sales and use tax if:
  • The repair is required by statute or ordinance to protect the environment
  • The charge for the labor is billed separately from the material

• 65% of a lump sum charge for labor and materials to repair, model, maintain or restore tangible personal property is exempt from sales and use tax if:
  • The repair is required by statute or ordinance to protect the environment
  • The labor and materials are purchased for a health care facility defined by Health and Safety Code Section 108.002 or for an oncology center
• Repeals the sales and use tax exemption for amusement and personal services provided through coin-operated machines operated by the customer

Effective: June 10, 2019

Motor Vehicle Sales and Use Tax

Motor vehicles used for religious purposes (HB 2338)

HB 2338 changes the definition of “motor vehicles used for religious purposes” to mean a motor vehicle used by a church or religious society and not used primarily for the personal or official needs or duties of a minister. A motor vehicle used for religious purposes is not limited to a certain number of passengers and can be a trailer.

Effective: September 1, 2019

Texas Emissions Reduction Plan (TERP) fund surcharge (HB 3745)

The TERP surcharge is a 2.5% surcharge imposed on the retail sale, lease, or use in Texas of an on-road diesel motor vehicle that is over 14,000 pounds. HB 3745 extends the expiration of the TERP surcharge from August 31, 2019, to the last day of the fiscal biennium in which Texas attains compliance with federal ambient air quality standards for ground-level ozone.

Effective: August 30, 2019

Mixed Beverage Tax

Mixed beverage sales tax returns (HB 3006)

Mixed beverage sales tax returns and payments must be filed monthly, due no later than the 20th day of each month. Taxpayers will not be able to file quarterly mixed beverage sales tax returns.

Effective: October 1, 2019

To learn more about these legislative updates and how they can affect you, contact a Weaver professional today.

© 2019