*0 FILED IN 15th COURT OF APPEALS AUSTIN, TEXAS 9/26/2025 10:33:15 PM CHRISTOPHER A. PRINE Clerk *1 ACCEPTED 15-25-00022-CV FIFTEENTH COURT OF APPEALS AUSTIN, TEXAS 9/26/2025 10:33 PM No. 15-25-00022-CV CHRISTOPHER A. PRINE CLERK In the Court of Appeals
For the Fifteenth District of Texas
City of Coppell, Texas, et al., Appellants, v.
Kelly Hancock, in His Official Capacity as Acting Comptroller of Public
Accounts of the State of Texas, Appellee .
Appeal from the 201st Judicial District Court, Travis County, Texas (Hon. Karin Crump, Presiding)
Coppell Parties’ Opening Brief as Appellants
James B. Harris State Bar No. 09065400 james.harris@hklaw.com
Stephen F. Fink State Bar No. 07013500 stephen.fink@hklaw.com
Richard B. Phillips, Jr. State Bar No. 24032833 rich.phillips@hklaw.com
Reed C. Randel State Bar No. 24075780 reed.randel@hklaw.com H OLLAND & K NIGHT LLP 1722 Routh Street, Suite 1500 Dallas, Texas 75201
Phone: (214) 964-9500 Counsel for Coppell Parties Oral Argument Requested
I DENTITY OF P ARTIES AND C OUNSEL
Appellants/Cross-Appellees Counsel
City of Coppell, Texas James B. Harris
Stephen F. Fink
City of Humble, Texas
Richard B. Phillips, Jr. City of DeSoto, Texas Reed C. Randel
Brandon L. King
City of Carrollton, Texas
Cole W. Browndorf City of Farmers Branch, Texas Holland & Knight LLP
1722 Routh Street, Suite 1500 Dallas, Texas 75201 Appellee/Cross-Appellant Counsel
Glen Hegar, in His Official Capac- Kyle Pierce Counce
ity as Texas Comptroller of Public Deputy Division Chief
Accounts Tax Litigation Division
Deborah Rao 1 Matthew Kennedy 2 Amanda K. Romenesko 3 Office of the Attorney General of Texas
P.O. Box 12548
Austin, Texas 78711 Ray Langenberg Special Counsel for Tax Litigation Texas Comptroller of Public Ac- counts
Office of the Attorney General Tax Division MC 029 P.O. Box 12548
Ms. Rao is no longer counsel for the Comptroller. Mr. Kennedy is no longer counsel for the Comptroller. Ms. Romenesko is no longer counsel for the Comptroller. Mr. Langenberg is no longer counsel for the Comptroller.
i *3 Cross-Appellee Counsel
City of Round Rock, Texas Cindy Olson Bourland
Bourland Law Firm, P.C. P.O. Box 546
Round Rock, Texas 78680 Bryan J. Dotson
Chamberlain Hrdicka 112 East Pecan Street, Ste. 1450 San Antonio, Texas 78205 Doug Sigel
Ryan Law Firm, PLLC Terrace 1, 2600 Via Fortuna Drive Suite 150
Austin, Texas 78746 Mr. Dotson is no longer counsel for the City of Round Rock. Mr. Sigel has passed away and is no longer counsel for the City of Round Rock.
ii *4 T ABLE OF C ONTENTS
Page Identity of Parties and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Index of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . viii Statement of the Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. xiii
Statement of Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiv
Statement Regarding Record References . . . . . . . . . . . . . . . . . . . . . . . xv Issue Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . xvi
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 1
Statement of Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 3
1. Local Sales Tax—The Statutory Background: Tax Code Sections 321.002(a)(3)(A) and 321.203 . . . . . . . . . . . . . . 3 2. Local Sales Tax—The Regulatory Background: 34
TAC § 3.334 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 6 3. Internet Sales, Fulfillment Centers, and the
Changes to § 3.334 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4. The Coppell Plaintiffs, Internet Sales, Fulfillment
Centers, and Local Sales Tax . . . . . . . . . . . . . . . . . . . . . . 11 Summary of Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
13
iii
Page Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 16
Argument and Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1. The subsections of current § 3.334 that the Coppell Plaintiffs challenge that collectively re-define “place of business” are facially invalid because they contradict the statute they purport to
implement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 16
2. The limiting conditions adopted by the
Comptroller in § 3.334 on how, when, where, by and from whom, and how often an order can be received contravene the plain meanings of
“receives” and “order” found in the statute the rules purport to implement. . . . . . . . . . . . . . . . . . . . . . . . 18 A. The terms “receives” and “orders” by themselves and as used in the phrases “receiving orders” and “orders are received” must be given their plain meanings. . . . . . . . . . . . . . . . . . . . . . . . 18 B. The plain meanings of “receives” and “order” do not limit how, when, where, by whom, or how often an order can be received or what it must contain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 C. The statutory histories of “place of business” and the directives on “consummation” reinforce that the Legislature intended that the plain meanings of “receives” and “order” controls their interpretation. . . . . . . . . . . . . . . . . . . . . . . . . 21 iv
Page (1) The creation of a statutory definition for place of business was not intended to restrict receipt of an order to only one location by limiting how, when, where, by or from whom, or how often an order can be received or what it had to contain. . . . . . . . . . . . . . . . . . . . . . . 21 (2) The 1979 and later statutory changes to where consummation occurs confirm that the Legislature intended that the plain meaning of “receives” and “order” do not limit how, when, where, by or from whom, or how often an order can be received or what it had to contain. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 D. That the Legislature intended the plain meanings of “receives” and “order” is reflected by the Comptroller’s acceptance of those meanings for 46 years. . . . . . . . . . . . . . . . . . . . . . . 33 3. In § 3.334, the Comptroller has strung together intertwined regulatory provisions that improperly add conditions contravening the plain meaning of “receives” and “order” that result in the
displacement of origin-sourcing. . . . . . . . . . . . . . . . . . . . . 34 4. The arguments advanced by the Comptroller fail to justify his effort to limit the plain meanings of “receives” and “order.” . . . . . . . . . . . . . . . . . . . . . . . . . . 37 A. “Receives” and “order” by themselves or together are not “terms of art,” with a meanings different than their plain meanings. . . . . . . . . . . . . . . . 38 B. The phrase “for the purpose of receiving order” in the definition of “place of business” does not evidence context relevant to the meaning of that phrase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 v
Page C. Other states’ understanding of “receives” is not “context.” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 D. The plain meanings of “receives” and “order” do not create an absurdity. . . . . . . . . . . . . . . . . . . . . 42 5. The Comptroller’s limiting conditions are based on an outdated sales model – person to person – when the definition of place of business and the
consummation directives are broad enough to include new approaches based on technological developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Conclusion and Prayer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
51
Certificate of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Appendix
A — Final Judgment
(CR:2797) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab A B — Conclusions of Law
(CR:2846) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab B C — Texas Tax Code § 321.002 . . . . . . . . . . . . . . . . . . . . . Tab C
D — Texas Tax Code § 321.203 . . . . . . . . . . . . . . . . . . . . . Tab D E — 45 Tex. Reg. No. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . Tab E
F — 45 Tex. Reg. No. 21 . . . . . . . . . . . . . . . . . . . . . . . . . Tab F G — 47 Tex. Reg. 6158 . . . . . . . . . . . . . . . . . . . . . . . . . . Tab G
vi *8 H — 49 Tex. Reg. 2440 . . . . . . . . . . . . . . . . . . . . . . . . . . Tab H
I — 49 Tex. Reg. 4797 . . . . . . . . . . . . . . . . . . . . . . . . . . Tab I J — Comparison of Statutory Language and
Effect of Regulation . . . . . . . . . . . . . . . . . . . . . . . . . Tab J vii
I NDEX OF UTHORITIES
Page C ASES
Brown v. City of Houston ,
Centerpoint Builders GP, LLC v. Trussway, Ltd. ,
Page Lewis v. Jacksonville Bldg. & Loan Ass’n ,
pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 38, 40 Tex. Mut. Ins. Co. v. Ruttiger ,
Ass’n
,
Page Wal-Mart Stores, Inc. v. Forte ,
Acts 1967, 60th Leg., R.S., ch. 36 . . . . . . . . . . . . . . . . . . . . . . 3, 5, 22, 24
Acts 1979, 66th Leg., R.S., ch. 624, § 6(B)(1) . . . . . . . . . . . . . . . . . 5, 6, 28
Acts 2009, 81st Leg., R.S., ch. 1360, § 5 . . . . . . . . . . . . . . . . . . . . . . 6, 31 Acts 2011, 82nd Leg., R.S., ch. 942 . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Acts 2013, 83rd Leg., R.S., ch. 1361 . . . . . . . . . . . . . . . . . . . . . . . . . 26
Tex. Bus. & Com. Code § 7.102(13) . . . . . . . . . . . . . . . . . . . . . . . . . 10
Tex. Gov’t Code § 311.011(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Tex. Gov't Code § 2001.038 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 16
Tex. Tax Code § 151.008(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tex. Tax Code § 151.011(d)–(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Tex. Tax Code §§ 151.401–432 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tex. Tax Code § 231.303(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Tex. Tax Code § 321.002(a)(3)(A) . . . . . . . . . . . . . . . . . . . . . . . passim
Tex. Tax Code § 321.002(a)(3)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Tex. Tax Code § 321.003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3
Tex. Tax Code § 321.101(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Tex. Tax Code § 321.203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
Tex. Tax Code § 321.303(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tex. Tax Code § 321.501 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3
x
Page Tex. Tax Code § 321.502 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3
Tex. Tax Code § 321.510 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 4
R EGULATIONS 34 Tex. Admin. Code § 3.334 . . . . . . . . . . . . . . . . . . . . . . . . . . passim 34 Tex. Admin. Code § 3.374(a)(2) (1986) . . . . . . . . . . . . . . . . . . . . . 6, 33 4 Tex. Reg. 3618 (1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 33
39 Tex. Reg. 9597 (2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 33
41 Tex. Reg. 260 (2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 33
45 Tex. Reg. 98 (2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 7
45 Tex. Reg. 3499 (2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 34
47 Tex. Reg. 6158 (2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
48 Tex. Reg. 391 (2023) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 8
49 Tex. Reg. 53 (2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 8
49 Tex. Reg. 2440 (2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 47
49 Tex. Reg. 4797 (2024) . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 35, 38, 41
O THER UTHORITIES Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation
of Legal Texts (2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Bruce M. Nelson & John C. Healy, Sales and Use Tax Answer Book
(2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 4 Glen A. Rosenbaum, Taxation , 33 S.W.L.J. 569
(1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 23 HB 134, 89 th Leg., R.S. (2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
xi *13 HB 4072, 87 th Leg., R.S. (2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Page HB 5089, 88 th Leg., R.S. (2023) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Webster’s New Universal Unabridged Dictionary
(2d ed. 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 19 xii
S TATEMENT OF THE C ASE
Nature of the Case Plaintiffs sued the Comptroller in his Official Ca-
pacity seeking a declaration that portions of 34 Tex. Admin. Code § 3.334 are invalid because they conflict with the statutes they purport to imple- ment. (CR:6–31; 35–69; 155–84; 1346–1513; 1866–1926; 1989–2026; 2396–2436; 2437–2570.) Course of Proceed- The district court (the 250th Judicial District
ings Court, Travis County, Hon. Karin Crump, presid-
ing) conducted a bench trial. (6RR:8.) Trial Court’s Disposi- Following the bench trial, the district court entered
tion judgment. (CR: 2797 (App. Tab A).) Both the
Comptroller and the Coppell Plaintiffs asked the district court to modify the judgment to clarify its meaning. (CR:2800–15; 2816–20.) The district court denied both motions. (CR:2840; 2841.) At the Coppell Plaintiffs’ request, the district court entered conclusions of law, but those still did not resolve the confusion. (CR:2846 App. Tab B).) The Coppell Parties appealed (CR:2854–58) and the Comptroller cross-appealed (CR: 2859–64). xiii
S TATEMENT OF J URISDICTION This Court has jurisdiction over this appeal from a final judgment of the dis- trict court. Tex. Gov’t Code § 22.220(a). This Court has exclusive jurisdiction over
this appeal because it is a case against an officer of the State in his official capacity
and it does not fall under any of the exceptions to this Court’s jurisdiction. Tex. Gov’t
Code § 22.220(d)(1).
xiv *16 S TATEMENT R EGARDING R ECORD R EFERENCES
The record on appeal comprises:
• The one-volume Clerk’s Record filed in this Court on March 26, 2025, which
will be cited as “CR:[page];”
• The twelve-volume Reporter’s Record filed in this Court on June 27, 2025,
which will be cited as “[volume]RR:[page];”
• The trial exhibits are in volumes 9 through 12 of the Reporter’s Record, and
they will be cited as follows:
o Coppell Parties’ Exhibits will be cited as “CPEx.[number] at [page];”
o Round Rock Exhibits will be cited as “RREx.[number] at [page];”
o The Comptroller’s Exhibits will be cited as “DEx.[number] at [page.]”
xv
I SSUE S TATEMENT The Comptroller cannot adopt rules that (1) contravene specific statu- tory language; (2) run counter to the general objectives of the statutory provisions it is implementing; or (3) impose additional burdens, condi- tions, or restrictions in excess of or inconsistent with the statutory provision. Under those tests, do the following subsections of 34 TAC § 3.334: (a)(9), (a)(18), (b)(1)(A), (b)(5), or (c)(7), individually and in combination, invalidly rewrite the statutory definition of “place of busi- ness of the retailer” in Tax Code § 321.002(a)(3)(A)?
xvi *18 I NTRODUCTION The City of Coppell, Texas, the City of Humble, Texas, the City of DeSoto, Texas, the City of Carrollton, Texas, and the City of Farmers Branch, Texas (the
“Coppell Parties”) read the district court’s judgment as finding (1) that amendments to an administrative rule adopted by the Comptroller of Public Accounts violate the
Tax Code and (2) that the process the Comptroller used to adopt the amendments
violated the Texas Administrative Procedure Act. The Comptroller’s cross-appeal
shows that the Comptroller agrees that the judgment found certain of the challenged
amendments were not properly adopted. But the Comptroller has advised the
Coppell Plaintiffs that he reads the judgment as denying the other, substantive relief
the Coppell Plaintiffs seek. Both sides asked the district court for clarification or explanation of the judgment. (CR:2800–15; 2816–20.) But the district court’s
responses did not resolve the parties’ disagreement. (CR:2840; 2841; 2846 (App. Tab B).)
The Coppell Plaintiffs sought a declaration that the amendments they challenge contravene language in the Tax Code allocating local sales tax, impose
conditions not found in that language, and are at odds with the objectives the
Legislature sought to achieve in the allocation of local sales tax. The Coppell
Plaintiffs seek relief because if the amendments are valid, they will lose millions of
dollars in local sales tax generated by taxable sales from fulfillment centers (the C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 1 *19 brick-and-mortar stores of the 21st century) located in their cities. That local sales tax will instead go to cities where the purchasers are located. The challenged amendments are expressly designed to have this effect on all fulfillment centers that
ship or deliver taxable goods exclusively in response to orders placed on websites
and transmitted through the internet.
If the Coppell Plaintiffs believe the district court’s judgment favors them, why did they appeal? Both sides could wait to argue in future original proceedings about
the meaning of the judgment, and the Coppell Plaintiffs are confident that they would
prevail. But if they are wrong, not appealing now could waive the right to challenge
the judgment later. Moreover, the Comptroller is tasked with enforcing the disputed
local-sales-tax provisions. His disagreement about the meaning of the district court’s
judgment can therefore have practical consequences for the Coppell Plaintiffs. So
they cannot afford to ignore the Comptroller’s stated position, and they had no choice
but to appeal despite believing that the judgment granted them the relief they sought.
Although there is disagreement about the judgment’s meaning, because this Court’s review is de novo, it can simply enter the judgment the trial court should
have rendered.
See Rieves v. Buc-ee’s Ltd.
,
lay out their interpretation of the judgment, the Coppell Plaintiffs will instead argue
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 2 *20 in the first half of their brief why, as a matter of law, the amendments they have
challenged violate the Tax Code. And, in the second half, they will argue why the
Comptroller’s claimed justifications for the challenged amendments fail.
S TATEMENT OF F ACTS
1. Local Sales Tax—The Statutory Background: Tax Code Sections
321.002(a)(3)(A) and 321.203
In 1967 the Legislature authorized municipalities to impose a local sales and use tax. See Acts 1967, 60th Leg., R.S., ch. 36 (the “1967 Act”). This local sales
and use tax was in addition to the state sales and use tax established in 1961. See
Acts 1961, 57th Leg., 1st C.S., ch. 24 (the “1961 Act”). The Comptroller administers the collection of local sales tax by receiving from retailers the local sales tax they
collect in connection with their sale of taxable items with a report that identifies the
municipality the retailer is obligated to pay. See Tex. Tax Code §§ 151.401–432. The
Comptroller then distributes that local sales tax to the identified municipality. See id.
at §§ 321.501–502. The retailer’s decision about what municipality it is obligated to
pay can be audited by the Comptroller. See id. at § 321.510. If the Comptroller The act is now found in Tax Code chapter 321 for cities and chapter 322 for counties. The
two chapters have the same purpose and are substantively identical. This appeal focuses on
chapter 321 because only municipalities are involved. The provisions of chapter 151 of the Tax Code that apply to chapter 321 assign the same broad definition to retailer or seller. Tex. Tax Code §§ 321.003; 151.008. The two words
describe the same entity. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 3 *21 disagrees with the retailer’s decision he can “claw back” that local sales tax and send
it to the municipality he believes the retailer was obligated to pay. See id.
A fundamental issue presented to the Legislature in deciding what municipality should receive the local sales tax from a taxable sale is how to define
where a sale was “consummated,” i.e., made or completed. That issue determines
which city could receive the local sales tax and whether tax has to be collected at all
(not every city has adopted a local sales tax). The choice has nearly universally been
between the purchaser’s location (destination-sourcing) and the retailer’s location (origin-sourcing). See Bruce M. Nelson & John C. Healy, Sales and Use Tax Answer
Book , Q 20:11 (2022); (7RR:22–24.) Deciding which approach to implement
involves balancing the administrative burden on retailers to determine what local sales tax applies against the wish to compensate the city that has the most direct
connection to and greatest investment in the activities that result in the sale. See, e.g.,
Combs v. City of Webster
,
denied). If the local sales tax imposed is based on the retailer’s location, all sales are subject to the
same rate. If the local sales tax is based on the purchaser’s location, the retailer must
determine the rate where each purchaser is located. In Texas, there are over 1700 local
taxing jurisdictions, and each can set its own rate to a maximum of 2%. See 49 Tex. Reg.
2440, 2441 (2024) (App. Tab H); Tex. Tax Code § 321.101(f). The administrative burden on the retailer is obviously greater if the amount of tax collected is determined by the purchaser’s location. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 4
The 1967 Act addressed “consummation” by adopting origin-sourcing. 10 If a retailer 11 did business in one location all taxable sales were consummated at that
place of business. 12 See 1967 Act, § 6(B)(1). If a retailer did business in more than
one location, the taxable sale was consummated at either the place of business: (a)
where the buyer took possession of and removed the items or (b) from where the
items were delivered to the purchaser. See id. For a city to receive local sales tax,
two conditions had to exist. The retailer had to have a place of business in the city,
and a sale had to be consummated at that place of business. No sale could be
consummated at a location other than a place of business. See id.
The 1967 Act did not define place of business. In 1979, the Legislature enacted a definition: an established location operated by the seller that has the
purpose of receiving orders or receives three or more orders in a calendar year. See
Acts 1979, 66th Leg., R.S., ch. 624, § 6(B)(1) (the “1979 Act”). The Legislature, however, cabined a retailer’s ability to treat certain specified locations (a warehouse, This preference for origin-sourcing continues. Texas has been and continues to be
considered an origin-sourcing state. See Nelson & Healy, Q 20:11. Defined in pertinent part, at the time and currently, as “a person who makes more than two sales of taxable items during a 12-month period, including sales made in the capacity
of an assignee for the benefit of creditors or receiver or trustee in bankruptcy” Tex. Tax
Code § 151.008(b)(2). The Legislature referred to locations where the retailer conducted business as, fittingly,
“places of business of the retailer.” In this brief that term is shortened to “place of business.” Given the statute’s subject-matter – sales tax – “place of business” necessarily
referred only to locations in Texas. The Coppell Plaintiffs use the phrase throughout this
brief with the same understanding.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 5 *23 storage yard, or manufacturing facility) as places of business by providing that, to
qualify, those facilities must receive at least three orders in a calendar year. See id.
Those statutory requirements have remained essentially unchanged for 46 years and
are currently found in Tax Code section 321.002(a)(3)(A). Their primary purpose—
to maximize tax collection by capturing the entire universe of locations involved in
the process of taxable sales—is evident from the original provision that is now Tax
Code section 321.303(a) (“Each place of business of a retailer must have a [sales tax] permit issued by the comptroller… .”).
In 1979, and again in 2009, the Legislature also added to the statutory directives on where consummation occurs to deal with circumstances not previously
addressed. See Acts 2009, 81st Leg., R.S., ch. 1360, § 5 (the “2009 Act”). Those
additions were consistent with the Legislature’s preference for “origin-sourcing.”
The statutory consummation directives are currently found in Tax Code section
321.203. (App. Tab D.) Those directives, not the definition of “place of business of
the retailer,” express the Legislature’s intention for which municipality, if any,
should receive local sales tax.
2. Local Sales Tax—The Regulatory Background: 34 TAC § 3.334
In response to the 1979 Act, the Comptroller issued rules about what is a place of business and where consummation occurs. Those rules were amended several
times before 2020. See 4 Tex. Reg. 3618, 3621 (1979); 34 Tex. Admin. Code § C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 6 *24 3.374(a)(2) (1986); 39 Tex. Reg. 9597, 9604 (2014); 41 Tex. Reg. 260, 262 (2016).
The pre-2020 rules were consistent with the statutory requirements in the Tax Code:
they did not condition the existence of a place of business on how, when, where, by or from whom, or how often an order can be received, or what that order had to
consist of. See id .
All that changed in January 2020, when the Comptroller proposed amendments to 34 Tex. Admin. Code § 3.334. See 45 Tex. Reg. 98, 98-115 (2020)
(App. Tab E). The amendments were adopted as final on May 22, 2020, but the
provisions of concern to the Coppell Plaintiffs did not become effective until October
1, 2021. 45 Tex. Reg. 3499, 3511 (2020) (App. Tab F). Before the effective date, the
Coppell Plaintiffs asked the district court to temporarily enjoin the amendments that
affected them. The parties then agreed to a temporary injunction prohibiting
enforcement of the rules challenged by all plaintiffs. That injunction remained in There is a distinction between how many individual orders a location must receive to be a place of business and what conditions attach to an individual order for it to be considered
received. This brief addresses the latter and argues that the statutory definition does not
allow the Comptroller to impose the limitations found in the current version of § 3.334. In this brief, 34 Tex. Admin. Code § 3.334 is referred to as § 3.334. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 7 *25 effect until entry of a final judgment in December 2024. (CR:121–23; 1338–39;
1340–45; 1745–46; 2797 (App. Tab A).)
The series of amendments that began in May 2020 ultimately resulted in the current version of § 3.334 (adopted in July 2024), which provides for the first time
that a location is not a place of business for local sales tax purposes if it: (1) does not
have sales personnel; (2) is not where a determination is made that an order can be
accepted; or (3) get orders processed by computers connected to the Internet making use of a shopping website or shopping software application.
Those limiting conditions reversed the Comptroller’s previous interpretation of the words “receives” and “order” in Tax Code section 321.002(a)(3)(A) and thus
where consummation occurs as specified in Tax Code section 321.203. (App. Tab
D.) The changes effectively mean that only one location operated by a retailer can
get a buyer’s request to purchase taxable items and that, if a computer gets such a request and “forwards” it, the request can never be an “order” “received” at a place
of business. In other words, the amendments rewrite the statutory definition of place of business. The demonstrative attached at Appendix Tab J shows the words that would have to be added to the statutory definition of place of business to make the
current version of § 3.334 consistent with the statute. (App. Tab J.) A quick glance
See 48 Tex. Reg. 391 (2023); 49 Tex. Reg. 53 (2024); 49 Tex. Reg. 4797 (2024) (App.
Tab I).
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 8 *26 establishes that version is quite different from what the Legislature adopted 46 years
ago.
3. Internet Sales, Fulfillment Centers, and the Changes to § 3.334
The Comptroller’s changes to § 3.334 were made at least in part in response to the rise of e-commerce. Public use of the Internet began long after the Legislature
defined “place of business” in 1979. (7RR:181.) The development of a way for
computers with different operating systems to communicate with each other and of
order-management software with the ability to confirm credit-card transactions
allowed retailers to engage in what will be described here as “Internet Sales.”
(7RR:193–94.) This type of taxable sale involves a purchaser using a website to
place an order that is almost instantaneously transmitted through the Internet with the help of order-management software (what the Comptroller calls an “automated shopping cart software program”) to a location that uses the orders to pull, pack, and
ship the requested item to the purchaser from on-site inventory. (CPEx.42:5–7;
7RR:180–84.)
By going to a website, a purchaser is thus virtually visiting an established physical location operated by a retailer, indistinguishable in function from a retailer’s
brick-and-mortar store with a very large inventory on display. (CPEx.32:119–21; 7RR:180–81; 187–96.) Once the purchaser identifies an item from the inventory
accessed through the website and decides to purchase it, the purchaser enters a
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 9 *27 credit-card (or debit-card) number, just as a buyer presents a credit card (or debit-
card) to a cashier or inserts it in a self-checkout device at a brick-and-mortar store.
(7RR:193–94; CPEx.32:119–21.) The only difference between Internet Sales and
purchases at a brick-and-mortar store that uses point-of-sale software is that, with Internet Sales, the purchaser is virtually present at the location with inventory versus
being physically present at a brick-and-mortar location with inventory. The location
that the purchaser visits virtually in the case of Internet Sales is referred to as a
“fulfillment center.” (7RR:178–80; 8RR:28–34.)
The request by a purchaser to be supplied a taxable item communicated to the fulfillment center includes the purchaser’s name and address, a description of the
item or items being purchased, the quantity of items requested, and the price of the item. (7RR:200–02.) The purchaser’s request is accessed and acknowledged by the
retailer’s employees at the fulfillment center who pick, pack, and arrange to ship the
requested item to the purchaser. (7RR:180; 8RR:28–29.) Typically, the purchaser’s Point of Sale (POS) software serves as the digital “command center” for a business’s sales, processing payment types, managing transactions, tracking inventory, and providing
sales data. See https://squareup.com/us/en/the-bottom-line/operating-your-business/what-
pos-system. In § 3.334 the Comptroller describes fulfillment centers as “warehouses” or “fulfillment warehouses.” But they are not warehouses under the Tax Code. The statutory definition of
a “warehouse” is a “person engaged in the business of storing goods for hire,” Tex. Bus. & Com. Code § 7.102(13). Yet the Tax Code defines “storage” as including “the keeping
of retaining of tangible personal for sale in the regular course of business .” Tex. Tax Code
§ 151.011(d)–(e)(emphasis added). Because fulfillment centers keep goods for sale in the
regular course of business they are not “storing” the goods, and they are not warehouses.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 10 *28 credit-card (or debit-card) is charged only after the item is shipped. (7RR:193–94;
198.)
Fulfillment centers are, in other words, the 21st century’s version of brick- and-mortar stores. Yet the changes to § 3.334 beginning in 2020 result in fulfillment
centers not being places of business because supposedly: (1) they do not have “sales
personnel”; (2) review and approval of the purchaser’s request to be supplied a
taxable item occurs elsewhere; and (3) the purchaser’s request is processed by software running on computers connected to the Internet, which is used to continue
the almost instantaneous movement of the request to fulfillment centers
(“forwarded” in the words of the Comptroller). See §§ 3.334(a)(9); (a)(18);
(b)(1)(A); (b)(5); (c)(7). Stated more directly, the current, amended version of § 3.334 treats the orders that are a fundamental part of Internet Sales as not “received”
at fulfillment centers, meaning the locations are not places of business and thus no
taxable sales can be consummated there. 4. The Coppell Plaintiffs, Internet Sales, Fulfillment Centers, and Local
Sales Tax
The Coppell Plaintiffs have all promoted and supported fulfillment centers in their cities. By way of example, Coppell actively encouraged and continues to
encourage fulfillment centers to come there. ( See, e.g. , 7RR:116–17.) In part, that decision was a function of Coppell being near major transportation hubs and in part
because of its central location in a large and densely populated metropolitan area C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 11
allowing for efficient distribution of purchased retail goods. ( See id. ) That policy decision also meant a commitment to provide and maintain costly infrastructure
necessary to deliver the services required to support fulfillment centers. (7RR:119– 20.)
The cost of that support has been offset by local sales tax fulfillment centers generate. (7RR:123–24.) The fulfillment centers that operate in the Coppell
Plaintiffs’ communities are established locations of a retailer, each with tens of
thousands of square feet of space, hundreds of retailer employees, and inventory
worth millions of dollars consisting of thousands of different items for sale directly
to buyers. (7RR:121–23; 8RR:28–30.) The fulfillment centers rely, moreover,
exclusively on orders placed on websites linked by order-management software to
computers at the center. (CPEx.32:119–21.) They engage only in Internet Sales.
If the Comptroller’s 2024 amendments to § 3.334 are valid, all of the local sales tax generated from those fulfillment centers, except for items delivered to
purchasers within the jurisdiction of the Coppell Plaintiffs where the fulfillment
centers are located, will no longer be sent to the Coppell Plaintiffs. (CPEx.18:18– 19.) Instead, it will be sent to the community to which the taxable item is delivered—
but if, and only if, that community has a local sales tax. ( Id. ) In other words, instead
of the Legislature’s long-preferred regime of “origin-sourcing” applying to taxable C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 12 *30 sales from fulfillment centers, the Comptroller will impose “destination-sourcing” . ( See CPEx.39:9–11; 15; 27.)
The loss of local sales tax will be significant in amount and effect. The Coppell Plaintiffs’ comments on the Comptroller’s proposed amendments to § 3.334
estimated that the combined local-sales-tax reduction at millions of dollars annually,
with Coppell alone losing as much as 60% of its total sales-tax revenue. (CPEx.18:18–19.) The Coppell Plaintiffs’ losses will, theoretically, represent a gain
to the other 1700 local taxing entities. But because of the large number of other
taxing entities, the Coppell Plaintiffs’ substantial losses will result in no material
equalizing gain to any other single community. (CPEx.39:37; 56–57.) In fact, the only study available to the Comptroller in connection with his proposed amendments
to § 3.334 was submitted by the Coppell Plaintiffs, and that study demonstrated that Internet Sales have not resulted in any material shift in the pattern of local-sales-tax
collections compared with the period before the advent of Internet Sales. ( See id. at
46–59.)
S UMMARY OF A RGUMENT Section 3.334 contravenes the plain meanings of the words used in Tax Code section 321.002(a)(3)(a) to define “place of business.” The text, structure, and
statutory history of the relevant tax code sections evince the Legislature’s intent to
adopt “origin sourcing” for determining what city is entitled to local-sales-tax C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 13 *31 revenue. The words “receives” and “orders” have broad meanings that do not limit
how, when, where, by whom, or how often an order can be received or what it must
contain. Thus, all that is required for a location to be a “place of business” is that it
be an established location operated by the retailer that has the purpose of getting
requests from a purchaser to be supplied or delivered a taxable item or that gets at
least three requests from a purchaser to be supplied a taxable item in a calendar year.
The fulfillment centers in the Coppell Plaintiffs’ cities qualify as places of business
under the plain meaning of the statute.
But § 3.334 would effectively prevent fulfillment centers from being considered “places of business.” In doing so, the Comptroller is attempting to freeze
retail commerce into a construct from the 1970s. But the Supreme Court has
repeatedly affirmed the opposite: that broad statutory terms are presumed to
encompass, not exclude, new technologies. But the current § 3.334 does more than
require that particular people be involved in the ordering process. It also directs that
for any order there can only be one place of business, where it is determined an order
can be accepted. And if that order is determined to be acceptable by computer
software, then its instantaneous transmission through the Internet to another location
(or “forwarding”) has not been received at that location. None of these limitations are found in the statutory definition of place of business. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 14
The Comptroller does not contest that the provisions of § 3.334 that the Coppell Plaintiffs are challenging are at odds with the common, ordinary meaning
of the words defining a “place of business.” The reasons he offered in the district
court for avoiding the plain meaning cannot survive scrutiny. “Receives” and “order”
are not terms of art. Nor does the phrase “for the purpose of receiving orders”
provide any basis to avoid the plain meaning. The Comptroller next relies on other
states’ approach to determining how to allocate local-sales-tax revenue. But other states’ approaches to allocating local sales tax has no legal (or logical) bearing on
how the Texas Tax Code should be understood. The Comptroller’s reliance on the
absurdity doctrine is misplaced because the plain meanings of the words used to
define “place of business” do not lead to absurd results.
In rewriting by rule the statutory definition of “place of business,” the Comptroller also overlooks the axioms that he must not: (1) add words to the Tax
Code; (2) ignore the absence of words omitted by Legislature; (3) ignore words that
the Legislature used in the Tax Code; (4) ignore the history of the disputed statute;
(5) ignore the purpose of the disputed statutory provision as shown by the statutory
text; or (6) reject his own previous positions about the meaning of the disputed
provision. This Court should therefore render judgment that § 3.334 is invalid. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 15
S TANDARD OF R EVIEW In an appeal concerning a challenge to the validity of an administrative rule under Texas Government Code section 2001.038, a trial court’s declaratory
judgments issued following a bench trial are reviewed de novo . See Tex. Mut. Ins.
Co. v. Vista Cmty. Med. Ctr., LLP
,
pet. denied) (citing City of San Antonio v. City of Boerne , 111 S.W.3d 22, 25–26
(Tex. 2003)). Moreover, administrative rules, which have the same force and effect
as statutes, are to be construed in the same manner as statutes. See id. (citing
Rodriguez v. Serv. Lloyds Ins. Co. , 997 S.W.2d 248, 254 (Tex. 1999); Lewis v.
Jacksonville Bldg. & Loan Ass’n
,
matters of statutory construction are reviewed de novo . See City of Boerne , 111
S.W.3d at 25.
A RGUMENT AND A UTHORITIES
1. The subsections of current § 3.334 that the Coppell Plaintiffs challenge
that collectively re-define “place of business” are facially invalid because they contradict the statute they purport to implement . An administrative rule adopted under the Texas Administrative Procedure Act is invalid if:
(1) it contravenes specific statutory language;
(2) it runs counter to the general objectives of the statutory
provisions it is implementing; or
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 16
(3) it imposes additional burdens, conditions, or restrictions in excess of or inconsistent with the statutory provisions it is implementing.
Tex. State Bd. of Exam’rs of Marriage & Fam. Therapists v. Tex. Med. Ass’n , 511
S.W.3d 28, 33 (Tex. 2017).
Here, the parts of § 3.334 the Coppell Plaintiffs challenge contravene the plain meanings of words used in section 321.002(a)(3)(A) to define “place of business.”
They also impose conditions beyond those allowed by the statutory language. As a
result, they run counter to the general objective of section 321.203, which is to
impose origin-sourcing. While the challenged parts of § 3.334 violate all three tests,
violation of one test is enough to demonstrate invalidity.
As discussed below, demonstrating that the challenged subsections of § 3.334 violate the Tax Code turns on: (1) the meanings of “receives,” “orders,” “receiving
orders,” and “orders are received” in the statutory definition of “place of business” found in section 321.002(a)(3)(A); and (2) how those meanings relate to the statutory directives in section 321.203 for determining where “consummation” of a sale
occurs. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 17
2. The limiting conditions adopted by the Comptroller in § 3.334 on how,
when, where, by and from whom, and how often an order can be received contravene the plain meanings of “receives” and “order” found in the statute the rules purport to implement.
A. The terms “receives” and “orders” by themselves and as used in the phrases “receiving orders” and “orders are received” must be given their plain meanings.
In re Texas Education Agency , provides the road-map for statutory construction:
We apply the plain meaning of statutory language unless (1) the Legislature has prescribed definitions, (2) the words have acquired a technical or particular meaning, (3) a contrary intention is apparent from the context, or (4) a plain-meaning construction leads to nonsensical or absurd results.
Court has cautioned that the “plain meaning” controls unless one of the four listed
principles
compels
a different meaning.
Tex. Med. Ass’n
,
Retail Rowlett, LP v. City of Rowlett
,
B. The plain meanings of “receives” and “order” do not limit how, when, where, by whom, or how often an order can be received or what it must contain.
A “place of business” as defined in section 321.002(a)(3)(A) exists if: (1) it is an established location; (2) it is operated by the retailer or its agent or employee; and
(3) it either has the purpose of receiving orders or it actually receives three orders in
a calendar year. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 18
What constitutes an established location operated by the retailer is not disputed here. The Comptroller has suggested that the Coppell Plaintiffs believe a
computer or computer server by itself can be a place of business. Not so. The Coppell
Plaintiffs consider a computer or computer server to be a piece of equipment that
may be used at an established location operated by the retailer. The presence of a computer or computer server may be a necessary condition for the existence of a
place of business, but it is not a sufficient condition.
The parties disagree about what “receives” and “orders” mean, and, therefore, what “receiving orders” or “orders are received” mean. 19 The Comptroller does not
dispute that the plain meaning of “receiving” or its base “receive” means “to get,
accept, take, or acquire something,” and that an “order” in connection with a
taxable sale means “a request or commission to make or supply something.” In
response to comments challenging the proposed changes to § 3.334, the Comptroller agreed that using the plain meanings of “receives” and “order” reasonably leads to
the conclusion that fulfillment centers receive orders:
The City of Coppell and others have advanced a contrary explanation regarding fulfillment warehouses that has superficial appeal: a warehouse cannot fulfill an order unless the warehouse has “received” the order, and therefore a fulfillment warehouse is inherently a “place For the rest of the brief the focus will be on the meanings of “receives” and “orders.”
What those words mean determines what any phrase containing those words means. Receive , Webster’s New Universal Unabridged Dictionary (2d ed. 1983). Order , Webster’s New Universal Unabridged Dictionary (2d ed. 1983). C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 19
of business.” In the abstract, this argument may seem like a reasonable interpretation of the word “received.”
47 Tex. Reg. 6158, 6160 (2022) (App. Tab G).
The Legislature’s intent that the plain meanings control is demonstrated by the following. There is no statutory definition of “receives” in connection with the
definition of “place of business.” Nor is there a definition of the word “order” as
used in the definition of “place of business.” Nor has the Legislature placed any
limiting conditions on how, when, or where an order is received or what it must
contain. If the Legislature does not expressly define the words used in a statutory
definition, or expressly condition their application, plain meaning controls. See
Harris Cnty. Appraisal Dist. v. Tex. Workforce Comm’n
,
2017) (“In the absence of a statutory definition, we must ‘determine a term’s plain
or ordinary meaning,’ unless a contrary meaning is apparent from the statute’s
language.” (quoting Wal-Mart Stores, Inc. v. Forte , 497 S.W.3d 460, 471 (Tex.
2016)).
With that background in mind, the Coppell Plaintiffs submit that a “place of business” is an established location operated by the retailer that has the purpose of
getting requests from a purchaser to be supplied or delivered a taxable item or that
gets at least three requests from a purchaser to be supplied a taxable item in a C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 20 *38 calendar year. How such a request is gotten, when it is gotten, where else it is gotten, how often it can be gotten, who must get it, and what the request must consist of or contain are limitations not provided for by the plain—and broad—meaning of
the words.
C. The statutory histories of “place of business” and the directives on “consummation” reinforce that the Legislature intended that the plain meanings of “receives” and “order” controls their interpretation.
(1) The creation of a statutory definition for place of business was not intended to restrict receipt of an order to only one location by limiting how, when, where, by or from whom, or how often an order can be received or what it had to contain.
The history of the development of the statutory definition of “place of business” can affect how it should be understood. See Brown v. City of Houston, 660
S.W.3d 749, 755 (Tex. 2023) (“Statutory history concerns how the law changed ,
which can help clarify what the law means .”) (emphasis in original). Statutory
history is not to be confused with legislative history. See id. (quoting Antonin Scalia
& Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 167, 256
(2012)).
In 1967, when the Legislature decided to allow cities to impose a local sales tax, it made clear that a taxable sale could only be consummated at a place of
The Comptroller agrees that an established location operated by a retailer, other than a
warehouse, storage yard, or manufacturing plant, can also exist even if it does not receive
three orders in a year so long as it has the “purpose of receiving orders.” § 3.334(a)(18). C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 21 *39 business, but no statutory definition was provided for that phrase. 1967 Act, § 6(B)(1). The only directive on where consummation occurred was:
If the retailer has more than one place of business in the State, the place or places at which retail sales, leases, and rentals are consummated shall be the retailer's place or places where the purchaser or lessee takes possession and removes from the retailer's premises the articles of tangible personal property, or if the retailer delivers the tangible personal property to a point designated by the purchaser or lessee, then the sales, leases, or rentals are consummated at the retailer's place or places of business from which tangible personal property is delivered to the purchaser or lessee. 23
Id.
In the absence of a statutory definition for place of business, the Comptroller issued rulings in 1967 and 1975 discussing the term. See Ruling No. 95-L.04 (Oct.
2, 1967), available at STAR 6710R0076A10 (the “1967 Ruling”); Local Ruling
.004 (Dec. 31, 1975), available at STAR 7512R0502C04 (the “1975 Ruling”). The 1967 Ruling described a “retail establishment,” which holds goods for sale in the
regular course of business, as a place of business. The 1975 Ruling expanded that
guidance by including locations that take orders as part of the sales process. Both Although not explicitly stated in the language of the 1967 Act, its clear implication was
that if a retailer had one place of business, all taxable sales were consummated at that
location. It is unclear why the guidance was provided in the form of “rulings” instead of “rules.” The “rulings” discussed what the Comptroller considered to be a place of business rather
than providing a formal definition. STAR is the Comptroller’s State Tax Automated Research System, which is available at
https://star.comptroller.texas.gov/.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 22 *40 rulings focused on places of business as locations that the retailer considers as
necessary for the completion of a taxable sale.
The 1975 Ruling was at issue in Bullock v. Dunigan Tool & Supply Co ., 588 S.W.2d 633 (Tex. App.—Austin 1979, writ ref’d n.r.e.). The retailer, Dunigan,
claimed that it consummated the sale of oil field equipment at a truck yard located
where there was no local sales tax. See id. at 635. The yard was operated by a third-
party that did not own but temporarily stored some of Dunigan’s goods for pickup. The Comptroller argued that the truck yard was not a place of business and
consummation happened at a Dunigan sales office in a community with a local sales tax where the order was taken. Id. at 635.
The district court agreed with Dunigan that consummation occurred at the truck yard, and no local sales tax could be imposed. See id. On appeal the
Comptroller did not challenge the district court’s finding that the truck yard was a
place of business. He claimed, though, that consummation happened at the sales
office because that is where “paper segregation” (that is, acceptance of an order) The facility Dunigan claimed was a place of business was a “bonded, unrelated [to Dunigan] trucking yard facilit[y] where Dunigan leased storage space on a month-to-month basis.” Glen A. Rosenbaum, Taxation , 33 S.W. L.J. 569, 582 (1979). “Dunigan did not keep
full-time personnel at the storage facilities, [although] the storage facilities were open
twenty-four hours a day, and Dunigan’s employees or representatives periodically entered the premises to conduct inspections and inventories.” Id. The truck yard did not get the
request from the purchaser to be supplied a taxable item. See id. Instead, Dunigan notified
the truck yard to release the item to the purchaser. See id.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 23 *41 occurred. 27 See id. The court of appeals rejected that claim. It noted that the statutory
directives on consummation did not include “paper segregation.” See id. at 636.
Rather, if “physical segregation” (that is, pick-up or delivery of the item) happened
at a place of business that is where consummation occurred. See id.
At the Comptroller’s urging, the Legislature reacted to the district court’s decision, 28 by adopting the following statutory definition for “place of business:” 29
A. (1) For the purposes of the local sales and use tax, ‘place of business of the retailer’ means an established outlet, office, or location operated by the retailer, his agent, or employee for the purpose of receiving orders for taxable items. The term ‘place of business of the retailer’ includes any location at which three or more orders are received by the retailer in a calendar year. A warehouse, storage yard, or manufacturing plant may not be considered a 'place of business of the retailer' unless three or more orders are received by the retailer in a calendar year at such warehouse, storage yard, or manufacturing plant .
1979 Act, § 6(B)(1).
By mandating that the location had to be established and operated by the retailer the Legislature ensured that a retailer could not claim that a facility in the
Apparently, the Comptroller was willing to concede that a taxable sale occurred at the
truck yard given that the factual finding that the truck yard was a place of business was not
appealed. In other words, the Comptroller agreed that the truck yard was part of the sales
process. See DEx.27. The definition adopted in 1979 now found in §321.002(a)(3)(A) has remained essentially
unchanged since then. Any legislative modifications have not been substantive. As a result of the adoption of the statutory definition, the truck yard used by Dunigan
was no longer a place of business for purposes of local sale tax allocation because it was
not an established location of Dunigan’s and it was not operated by Dunigan. It could not
qualify as “place of business” even if it received an order.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 24 *42 possession of and run independently by a third-party (such as the truck yard in Dunigan ) was a place of business of the retailer. That change severely constricted a
retailer’s ability to avoid local sales tax by positioning taxable items for pick-up,
delivery, or shipment in areas without a local sales tax. Additionally, by requiring
that the location have a purpose of receiving orders, or receive three orders in a
calendar year, the Legislature concurred with the Comptroller’s position that for a
location to be a place of business it needed to play a role in the retailer’s sales process.
The Legislature could have added then, or at any time over the next 46 years, limiting conditions on how, or when, or where, or by or from whom, or how often
an order is received at a location or what it must contain. But the Legislature did not
and has not. It could have added definitions for “receives,” “order,” or both. But it
did not and has not. In short, the statutory history is consistent with the Legislature intending that the words used to define place of business would have their plain,
broad meanings. As a result, many locations operated by a retailer could receive an
order, regardless of its form or the means by which it is communicated. In any case,
the statutory directives on where consummation of a sale occurred, not the definition
of place of business itself, determined to which municipality the sale was attributed
for local-sales-tax purposes. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 25
In 2011 (and supplemented in 2013), the Legislature chose to be more specific about which locations receiving an order were part of the sales process. S ee Acts
2011, 82nd Leg., R.S., ch. 942 (the “2011 Act”); Acts 2013, 83rd Leg., R.S., ch. 1361
(the “2013 Act”). The amendments added a limiting condition—a location acting on behalf of a retailer through a contract and receiving an order needed to have more
than just some connection to the sales process. It needed to deliver significant business services. The limiting condition specifies:
(B) An outlet, office, facility, or any location that contracts with a retail or commercial business to process for that business invoices, purchase orders, bills of lading, or other equivalent records onto which sales tax is added, including an office operated for the purpose of buying and selling taxable goods to be used or consumed by the retail or commercial business, is not a "place of business of the retailer" if the comptroller determines that the outlet, office, facility, or location functions or exists to avoid the tax legally due under this chapter or exists solely to rebate a portion of the tax imposed by this chapter to the contracting business. An outlet, office, facility, or location does not exist to avoid the tax legally due under this chapter or solely to rebate a portion of the tax imposed by this chapter if the outlet, office, facility, or location provides significant business services, beyond processing invoices, to the contracting business, including logistics management, purchasing, inventory control, or other vital business services.
Tex. Tax Code § 321.002(a)(3)(B) ( App. Tab C).
The first part of the addition describes what are considered to be places of business created to evade local sales thereby skewing the allocation process and
providing an economic advantage to certain retailers. It does so by defining when an established location operated on behalf of a retailer through a contract does not have
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 26 *44 a sufficiently direct connection to the completion of the sale of taxable items to be considered a place of business. By saying what is not a place of business, it also says
a location that provides “significant business services” or “vital business services”
including logistics management, or purchasing, or inventory control has a sufficient connection to the completion of the sales process to be a place of business.
By specifying that a location operated on behalf of a retailer that performs only limited, albeit vital, business services could be a place of business, the
Legislature confirmed its understanding, consistent with the plain meanings of
“receives” and “order,” that the same order could be received at different locations.
A location providing only “logistics management,” or “purchasing inventory control” on behalf of the retailer, which the Legislature identified as vital business services (among others), would need to have the order passed on from the retailer. Yet the Legislature still considered that location to be a place of business. And if a
location operated on behalf of the retailer was not the first location that received the
order, yet was a place of business as long as it provided a “vital business service,”
the same would be true for a location operated directly by a retailer.
In short, the statutory history of the definition of place of business supports the conclusion that the Legislature was not concerned with how, or when, or where,
or by whom, or how often an order was received at a location or what it contained
for that location to be a place of business.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 27
(2) The 1979 and later statutory changes to where consummation occurs confirm that the Legislature intended that the plain meaning of “receives” and “order” do not limit how, when, where, by or from whom, or how often an order can be received or what it had to contain.
In addition to adopting a definition for place of business, the 1979 amendments provided additional directives on where consummation of a taxable sale
occurs. Those changes indirectly confirm that the Legislature intended that the plain, yet broad, meanings of “receives” and “order” allowed more than one established
location operated by a retailer to receive an order.
One of the 1979 statutory changes to the consummation directives addressed where consummation occurs when an order is initially received out of state, and the
taxable item sold is shipped or delivered from or picked up at a location that is a
place of business of the retailer in Texas. See 1979 Act, § 6(B)(1)(d)(ii). In that
circumstance, consummation occurs at the location to which the item is shipped. In
other words, the change imposes “destination-sourcing” not “origin-sourcing” on
that taxable sale. One necessary implication of this statutory directive is that an order
can be received by more than one location. Otherwise, there is no reason to refer to where an order is received initially . A second implication is that if the order is initially received out of state, but it is also received at the retailer’s place of business
in Texas, and the item sold is shipped, delivered, or picked up there, the taxable sale is consummated at that location in Texas for purposes of local sales tax. In other C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 28 *46 words, this 1979 addition to the statutory consummation directives confirmed the
Legislature’s understanding that orders can be received at more than one location, creating multiple place of business eligible to be where consummation occurs—
although consummation will happen at only one. A third implication is that unless
the Legislature has explicitly directed that consummation occurs where the taxable
item is shipped to (destination-sourcing) consummation occurs where the taxable
item is shipped (origin-sourcing).
In 2009, the Legislature reinforced those implications by making a further change to the statutory consummation directives in response to Combs v. City of
Webster . At issue was whether a sale was consummated (1) at the “brick-and-mortar”
store where the purchaser walked in and placed an order for furniture or (2) at the
warehouse that got (through the Internet) the purchaser’s confirmed request and
shipped the furniture to the purchaser.
See
Webster. Id. at 90. The warehouse from which the furniture was shipped was in
Grand Prairie. Id. The Comptroller had decided that Grand Prairie should receive the
local sales tax because the warehouse had received the order, and physical separation
happened there. Id. Webster sued, claiming the Comptroller was misapplying the consummation rules because the brick-and-mortar store received the order, not the warehouse, and Webster should have received the local sales tax. Id. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 29
In response, the Comptroller argued, in direct conflict with his current position, that a warehouse could receive orders through an “Internet computer
system” that connected a purchaser with a retailer. Id. at 97. The Comptroller was
thus necessarily arguing that orders could be forwarded from one location (the brick-
and-mortar store in Webster) to another (the warehouse in Grand Prairie). See id.
The court of appeals agreed with the Comptroller’s position. See id. at 98–99.
In response to the litigation, and apparently concerned that the warehouse location had less connection with the sale than the brick-and-mortar retail location
at which the purchaser appeared in-person to place an order, the Legislature amended the statutory consummation directives as follows:
SECTION 2. Section 321.203, Tax Code, is amended by amending Subsections (c) and (d) and adding Subsections (c-1), (c-2), and (c-3) to read as follows:
(c) If a retailer has more than one place of business in this state, each [a] sale of each [a] taxable item by the retailer is consummated at the [retailer's] place of business of the retailer in this state where the retailer first receives the order , provided that the order is placed in person by the purchaser or lessee of the taxable item at the place of business of the retailer in this state where the retailer first receives the order.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 30 *48 2009 Act, § 5 (emphasis added).
According to the Author’s/Sponsor’s Statement of Intent: Current Texas law requires that the local sales tax on an item be sourced to the place of business from where it was shipped, provided the company has more than one place of business in this state. This has caused some confusion with regard to local sales tax sourcing of certain purchases. In some instances, a customer walks into a local retail outlet, selects, and pays for merchandise that will be shipped to his or her home, but the local sales tax is legally due to a warehouse or distribution facility in another community.
As proposed, S.B. 1202 amends Chapters 321 and 323 of the Tax Code to clarify the local sales tax sourcing laws and ensure that local sales tax is allocated to the retail location where the customer makes his or her purchase. S.B. 1202 allows business transactions and sales made through non-traditional sales channels such as call centers and the Internet to remain sourced to the warehouse or distribution center and benefit the community that is supporting that business infrastructure. (CPEx.45:930–31) (emphasis added).
For the actions on and the final language of S.B. 1202, See : https://capitol.texas.gov/BillLookup/Amendments.aspx?LegSess=81R&Bill=SB636
dealing with S.B. 636. Compare the language in House amendment 2 to S.B. 636, identified
in that link, to the version of S.B. 1202 passed by the Senate and found at
https://capitol.texas.gov/tlodocs/81R/billtext/pdf/SB01202E.pdf#navpanes=0. They are
identical. For procedural reasons, S.B.1202 could not be passed in the House as S.B. 1202
so it was added, with no changes, as House amendment number 2 to S.B. 636 then pending in the House, which could be passed, and then sent back over to the Senate, which adopted
S.B. 636 with the addition of S.B. 1202 by the House. In short, everything that was said
about S.B. 1202 applies to the portion of S.B. 636 containing S.B. 1202. There was also a “Statement of Legislative Intent” found at
https://capitol.texas.gov/BillLookup/Actions.aspx?LegSess=81R&Bill=SB1202 that
included the following about S.B. 1202: “It [S.B. 1202] does not impact other types of
transactions including catalog, Internet, 1-800 call centers, business to business invoicing,
purchase orders, etc., retain the same sourcing treatment that exists under current law.”
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 31
The Legislature thus modified the consummation directives based on a policy disagreement with the Comptroller about which of two places of business (each
having received the same order) should receive local sales tax. The Legislature
decided that the location operated by the retailer where the order is first placed in-
person and confirmed (a brick-and-mortar store) makes a more significant
contribution to the transaction than the warehouse that the purchaser did not personally visit and from which the taxable item is shipped, delivered, or picked up.
Therefore, the Legislature chose the brick-and-mortar store as the origin of the
taxable sale entitling the municipality in which it was located to receive the local sales tax.
The need for those restrictions necessarily reflects the Legislature’s understanding that, for local-sales-tax purposes, “orders” can be placed and received
other than in-person, that they can be forwarded, and most importantly for this case,
“orders” can be “received” at multiple locations. Otherwise, the Legislature would
have had no reason to include the limiting conditions “first received” and “in
person.” Moreover, and critically for the dispute here, the Author’s/Sponsor’s Statement of Intent confirms the Legislature’s understanding and intention that if an
order is not received in-person, but instead is received through “non-traditional sales
channels” (such as an order placed on a website and transmitted over the Internet, C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 32 *50 an Internet Sale) the taxable sale is consummated at the established location operated
by the retailer from which shipment or delivery to, or pickup by, the buyer occurs.
D. That the Legislature intended the plain meanings of “receives” and “order” is reflected by the Comptroller’s acceptance of those meanings for 46 years.
Until 2020, the Comptroller had never in a rule placed any conditions on how, when, where, by or from whom, how often an order is received, or what it must
consist of. See 4 Tex. Reg. 3618, 3621 (1979); 34 Tex. Admin. Code § 3.374(a)(2) (1986); 39 Tex. Reg. 9597, 9604 (2014); 41 Tex. Reg. 260, 262 (2016). And the pre-
2020 pronouncements generally tracked the words used in the statute to define a place of business. See id. Consistently from 1979 until 2020, the Comptroller considered a place of business either a retailer location with the purpose of selling
or such a location that “takes orders.” See id . Both were locations connected with
the sales process. Moreover, before 2020, the Comptroller offered no regulatory definition, by rule or ruling, of “receives.” There still is no regulatory definition of “order.” Although that regulatory acceptance of the plain meanings of the statutory
words is not conclusive, it supports the Coppell Plaintiffs’ argument about what the C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 33
Legislature intended.
See Tex. Dep’t of Protective & Regul. Servs. v. Mega Child
Care, Inc.
,
Further, until 2020 the Comptroller also agreed that orders that are a fundamental part of Internet Sales (orders placed on websites) could be received at
an established location operated by the retailer. (CR:1026–30; CPExs.1–7; CR:737–
38, 739–41, 859–917, 663–74, 687–709, 675–86, 742–53, 1021–22, 756–67.) And consistent with that past acceptance, the May 2020 version of § 3.334 provided that the new position on Internet Sales did not become effective for more than a year after the rule was adopted. See 45 Tex. Reg. 3499, 3511 (2020) (App. Tab F). There
would have been no need to delay implementation if there was no change. 3. In § 3.334, the Comptroller has strung together intertwined regulatory
provisions that improperly add conditions contravening the plain meaning of “receives” and “order” that result in the displacement of origin-sourcing.
In 2020 the Comptroller set out to rewrite the statutory definition of place of business through a series of four amendments to § 3.334. The final amendment,
effective July 4, 2024, adds language not found in versions of § 3.334 predating 2020 In the last three legislative sessions the Comptroller has supported bills that would have
amended Chapter 321 to make it consistent with the current version of § 3.334. That is, the Comptroller seeks to have the Legislature impose “destination-sourcing” on Internet Sales.
None of the bills the Comptroller supported made it out of the House of Representatives.
( See CPEx.51:932–35); HB 4072, 87th Leg., R.S. (2021); (CPEx.52:936–43); HB 5089,
88th Leg., R.S. (2023); HB 134, 89th Leg., R.S. (2025), available at
https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=HB134. If the statutory definition of place of business meant what the Comptroller insists in § 3.334 it
does, no change to the statutory definition would be needed.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 34
in the following subsections: (a)(9), (a)(18), (b)(1)(A), (b)(5) and (c)(7). See 49 Tex. Reg. 4797, 4797–4808 (2024) (App. Tab I).
Subsection (a)(9) for the first time defines “fulfill” as not involving any steps leading to the transfer of possession of a taxable item to a purchaser or the shipment
or delivery of a taxable item to a location designated by the purchaser.
Subsection (a)(18) for the first time introduces the concept that established locations operated by a retailer should have sales personnel (an undefined term) and
that a computer server is not a place of business.
Subsection (b)(1)(A) for the first time requires that for certain established locations operated by the retailer to be places of business [distribution centers,
manufacturing plants, storage yards, warehouses, or similar facilities] they (1) must
have sales personnel present that receive the orders, and (2) must not receive
forwarded orders (an undefined term).
Subsection (b)(5) for the first time dictates that (1) a “facility” not described by subsection (b)(1)(A) without sales personnel is presumed to not be a “place of
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 35 *53 business of the retailer” 34 and (2) a computer used in connection with an Internet Sale is neither an established location nor a place of business.
Subsection (c)(7) for the first time says (1) that an order can be received only once and only at the location where the information from the purchaser is received
and reviewed to determine whether the order can be accepted and (2) once that acceptance determination is made whatever information is “forwarded” is not an
order.
As a result, a retailer that keeps taxable items to sell in the ordinary course of its business at an established location it operates and relies entirely on Internet Sales,
such as a fulfillment center, does not have a place of business at that location. No
taxable sales can be consummated there. Instead, under the Comptroller’s amended § 3.334, sales of taxable items shipped from such locations are consummated at the
location to which the item is shipped or delivered. In other words, the Comptroller
has purported to impose “destination-sourcing” on such taxable sales without any
action by the Legislature authorizing the change. There is nothing in § 3.334 that provides any guidance on how this “presumption” can
be overcome. It is effectively irrebuttable. This limiting condition when combined with the others means a computer that “reviews”
an order for acceptability “receives” the order but is not still not a place of business and
the location that receives the order that has passed through that computer has received a
“forwarded” order, meaning that order cannot create a place of business. The Comptroller has never identified a statutory basis for this conclusion. It appears to
be ipse dixit .
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 36
Adding conditions to § 3.334 to single out Internet Sales and the fulfillment centers that are integral to such sales violates a fundamental tenet of statutory
construction—administrative agencies no more than courts can add words to a
statute. The Legislature is presumed to have “included each word in the statue for a
purpose and that words not included were purposefully omitted.” ExxonMobil
Pipeline Co. v. Coleman, 512 S.W.3d 895, 899 (Tex. 2017); TGS-NOPEC
Geophysical Co. v. Combs
,
Co. v. Ruttiger
,
LLC v. Trussway, Ltd.
,
deliberately and purposefully selects words and phrases it enacts, as well as
deliberately and purposefully omits words and phrases it does not enact.”) (cleaned
up);
In re Christus Santa Rosa Health Sys.
,
imposed by the Comptroller in § 3.334 is found in the statutory definition of that term. ( See App. Tab J.)
4. The arguments advanced by the Comptroller fail to justify his effort to
limit the plain meanings of “receives” and “order.” In the district court, the Comptroller argued that term of art, context, and avoiding absurdity required rejection of the plain meanings of “receives” and “order.” As
explained in detail below, the Comptroller’s justifications fail. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 37
A. “Receives” and “order” by themselves or together are not “terms of
art,” with a meanings different than their plain meanings. The Comptroller has asserted that because the Legislature has defined place of business, the phrase “place of business” is a “term of art.” (CR:1822–23); 49 Tex.
Reg. 4797, 4798 (2024) (App. Tab I). There are four problems with that argument.
First, the phrase “place of business” is not a “term of art” simply because it has been defined by the Legislature. Courts recognize that words can acquire
particular meanings by legislative definition. They can also have a particular
meaning by being applied in a specific way in some art, science, or trade in which
case courts “look to the particular craft in order to ascertain its proper significance.”
RJR Vapor Co., LLC v. Hegar
,
granted) (quoting Tex. Gov’t Code § 311.011(b)); Tex. Health Harris Methodist
Hosp. Fort Worth v. Featherly
,
some art, science, or trade for what it means. They look to the statutory definition.
Second, the issue in this appeal is not what the phrase “place of business” means, divorced from the words the Legislature chose to define it. Rather, at issue
is what the words the statutory definition mean.
Third, the words “receives” and “order” are not terms of art. Nothing in the record identifies a “given specialty” or any “particular trade, subject matter, or art”
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 38 *56 with experts in that specialty that understand “receives” or “order” differently than
their plain meanings when used to describe sales transactions.
Fourth, the meanings of “receives” and “order” must be read in conjunction with the purpose of the phrase “place of business” which is to help determine, in
connection with the statutory consummation directives, which city should receive local sales tax from a taxable sale. The words “receives” and “order” only make a
location in a municipality eligible to receive local sales tax because it is a place of
business. The consummation directives determine whether that place of business
gets the local sales tax. The Legislature is the expert on how that purpose—who gets the local sales tax—is to be achieved. If it intended the words “receives” or “order”
to limit the potential locations eligible to receive local sales tax, it would have given
them specialized meanings. It did not.
B. The phrase “for the purpose of receiving order” in the definition of “place of business” does not evidence context relevant to the meaning of that phrase.
According to the Comptroller, the phrase “for the purpose of receiving orders,” which is found in the definition of place of business, provides “context” for
rejecting the plain meanings of “receives” and “order.” ( See CR:2594–97.) The
Comptroller’s argument goes like this. Traditionally, sales offices have the purpose
of receiving orders, and traditionally, they had (and have) sales personnel to receive those orders. Therefore, “for the purpose of receiving orders” suggests to the mind
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 39
of the ordinary reader locations that have sales personnel. See id. There are several
problems with this argument.
First, as the Comptroller has consistently recognized, an established location operated by a retailer does not have to have the purpose of receiving orders to be a
place of business. (CR:2597); City of Webster , 311 S.W.3d at 96. If the location
receives three orders in a calendar year, it is a place of business. ( See id. ) Because
the purpose condition need not be satisfied for a place of business to exist, it
necessarily follows that sales personnel need not be present for a location to be a place of business. And consistent with this conclusion, the Legislature provided that a warehouse, storage yard, or manufacturing facility, none of which is commonly
understood as having sales personnel, can be places of business. All the Legislature required is that they must receive three orders.
Second, even for locations that are places of business based on having a “purpose of receiving orders,” a need for them to have sales personnel does not
follow logically. It is an example of the distributive fallacy, in which it is incorrectly assumed that a group has all the properties of one of its members. Just because one
place of business with a “purpose of receiving orders” may have sales personnel does not mean all such places of business must have sales personnel.
Third, even if the Comptroller were correct in his speculation about the images that the words “for the purpose of receiving orders” would have called up in the
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 40 *58 mind of the ordinary person in 1979—the record contains no evidence to support
this speculation—statutory interpretation today does not turn on such legislative mindreading. It focuses instead on the meanings of the words the Legislature used. And as discussed in Part 5, the approach is not different even if the meanings of the
words encompasses notions unthought of at the time the statute was enacted—such
as receipt of orders by computers running software rather than by “sales personnel.”
C. Other states’ understanding of “receives” is not “context.” The Comptroller asserted in the district court that the word “receive” in section 321.002(a)(3)(A) should be understood consistently with guidelines found
in the Streamlined Sales and Use Tax Agreement (the “Streamlined Agreement”).
See (7RR:93–101; CR:2594–95). He suggests, in other words, that the local-sales- tax-practices in other states is relevant “context” for the interpretation of the Texas
Tax Code. So, he inserted section (c)(7) into § 3.334 verbatim from the Streamlined
Agreement, using 125 words to define the single word “receive.” See 49 Tex. Reg.
4797, 4801 (2024) (App. Tab I). In adopting the language from the Streamlined
Agreement, the Comptroller contradicted the plain but broad meanings of “receives”
and “order.” Contrary to those plain meanings, the Streamlined Agreement limits
receipt of orders to a single location and limits how, when, where, by or from whom,
or how often an order can be received. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 41
But the Legislature rejected becoming a member of the Streamlined Agreement because the guidelines were based on “destination-sourcing” not “origin-
sourcing.” (CPEx.36:9–10.) The Coppell Plaintiffs are unaware of any Texas
decision that has considered “context” to include using how other states have
expressly defined a word. To the contrary, the Legislature’s rejection of the
Streamlined Agreement suggests that the Legislature was also rejecting the very
definition the Comptroller seeks to use to displace the plain meanings of the words
in the Texas definition of “place of business.”
Any doubt that the definition of “receives” as taken from the Streamlined Agreement is of no use in understanding the meaning of a word used by the Texas
Legislature is laid to rest by the Supreme Court’s decision in Graphic Packaging
Corp. v. Hegar,
clear that, even when the state is a party to a multi-state agreement, it reserves its
right to administer its laws without reference to or consideration of what other states
have decided to do under that agreement. See id. at 102. If that rule applies to multi-
state agreements to which the state a party, it applies more strongly when the state
has rejected becoming a party.
D. The plain meanings of “receives” and “order” do not create an absurdity.
For an asserted absurdity to defeat plain meaning, the result of applying plain meaning must be more than peculiar, odd, unfair, or illogical. Jaster v. Comet II
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 42
Constr., Inc.
,
must be “unthinkable or unfathomable.” Rodriguez v. Safeco Ins. Co. of Indiana ,
close to meeting those standards.
According to the Comptroller, if “receives” and “order” are given their plain meanings in the definition of place of business, any established location operated by
the retailer that gets a purchaser’s request to be supplied a taxable item is a place of
business and, in one limited situation addressed in section 321.203(d)(1) of the
statute, there is no way for the retailer or the Comptroller to determine where the
taxable sale is consummated. (CR:2596–97.) The only way to deal with the issue, as
far as the Comptroller is concerned, is to impose limiting conditions on the definition
of place of business to reduce to one, the established locations operated by a retailer
that qualify as a place of business, and, in turn limiting to one where consummation
happens. ( See id. )
The Comptroller is wrong. He is disregarding both the statutory history and the structure of Chapter 321. As already discussed, statutory history establishes that
the Legislature did not intend to cabin what is a place of business as has the
Comptroller in § 3.334. And the structure establishes that the definition of place of As discussed earlier, not every established location operated by the retailer that receives
an order qualifies as a place of business.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 43 *61 business, based on the plain meaning of the words in that definition, controls all the sections that follow because the definitional section says that “In this chapter” (the
whole chapter) those definitions apply. That command necessarily includes the
consummation directives. Most tellingly, the plain but broad meaning of place of
business also necessarily applies to the requirement imposed in the 1979 Act, and
unchanged since, that each place of business must have a permit. See Tex. Tax Code
§ 231.303(a). In other words, to capture every retailer location involved in sales
activity, and thus all sales tax properly payable, the legislature defined “place of
business” capaciously, as any location with the purpose of or that does in fact receive
at least three orders.
The Comptroller rejects this sequencing and he would instead have (d)(1) require that the plain meaning be limited in order to answer at which place of
business to which (d)(1) applies consummation happens. The Comptroller’s
assertion overlooks that the history and structure of section 321.203 provide an answer without the need to make “receives” and “order” mean something other than
a request to be supplied a taxable item: their plain meanings . So the Comptroller has things backward—the consummation directives cannot be read to limit the Chapter-
wide definition of place of business.
Those directives identify where the consummation of taxable sales occurs in four different situations involving four different types of places of business. For a
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 44 *62 retailer with a single place of business, all sales are consummated at that location. See Tex. Tax Code § 321.203(b) (App. Tab D). For a retailer with multiple places of business, consummation occurs where physical segregation (delivery or shipment
to, or pick-up by, the purchaser) occurs. See id. at §§ 321.203(c)–(c-1) (App. Tab
D). For a retailer with multiple places of business, but an order is placed in-person
by the purchaser, consummation occurs at the place of business that first receives
that order and not where physical segregation occurs. See id. If none of those
circumstances exist, consummation occurs at the place of business where order
was received. See id. at § 321.203(d)(1) (App. Tab D).
Subparagraphs (b), (c), and (c-1) in section 321.203 each describe conditions for determining the location where a taxable sale is consummated that either have
nothing to do with receipt of a specific order (a single place of business on one hand or where physical segregation occurs on the other) or cover an order made in a
distinctive way (where an in-person order is first placed). Those conditions allow
immediate identification of the exact place of business, out of all eligible places of
business, where consummation occurs. Subsection (d)(1) does not do that. Section 321.203(d) was added in 1979 when the statutory definition of place of business
was adopted in response to Dunigan . Given that it was added to the statutory consummation
directives that recognized physical segregation, which was not deleted, it necessarily
described paper segregation, which the Comptroller argued in Dunigan is where
consummation occurs.
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 45
But the Legislature, by a process of elimination, has made clear where consummation occurs in the circumstance addressed by (d)(1). As recognized in
Dunigan, consummation of a taxable sale can occur where physical segregation
happens or where paper segregation occurs. At a single place of business, either or both happen at the same location. Where an order is first placed in-person, paper
segregation happens at that location. Where a taxable good is shipped, delivered, or
picked up, physical segregation occurs at that location. Physical segregation cannot
happen in the circumstances covered by (d)(1) because by the terms of subsection
(d), it applies only if (b), (c), or (c-1) do apply. That necessarily means that in
the (d)(1) situation, only paper segregation can determine where consummation happens.
And “paper segregation” by its nature only occurs once and in one location, which explains the use in (d)(1) of “the” order and “the” place of business. So, the
allegedly “absurd” problem facing the Comptroller is at most a purely technical and
easily manageable question: for taxable sales covered by (d)(1), where does “paper
segregation” occur? It is not “unfathomable” or “unthinkable” that the Legislature
would leave to the Comptroller to decide, as a practical matter, where “paper
segregation” occurs in the (d)(1) situation. There is neither need nor occasion for
policymaking by the Comptroller. Nor a need to overrule the plain meanings of
“receives” and “order” as used in the statutory definition of place of business. The C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 46
Legislature has decided where consummation occurs in the limited (d)(1) situation:
where paper separation happens. The Comptroller simply needs to identify which
place of business that is factually, taking into account the varying kinds of sale
transactions conducted in today’s economy.
5. The Comptroller’s limiting conditions are based on an outdated sales
model – person to person – when the definition of place of business and the consummation directives are broad enough to include new approaches based on technological developments .
Why did the Comptroller wait until 2020 to add limiting conditions to the plain meanings of “receives” and “order?” Based on the comments received to the
proposed amendments, it appears the new rule was a response to concerns that
Internet Sales were significantly diverting local sales tax from communities with “main street” brick-and-mortar stores to communities with fulfillment centers. See
49 Tex. Reg. 2440, 2448 (2024) (App. Tab H). Apart from the fact that this concern has no factual support, the solution cannot be to rewrite the statutory definition of
place of business.
Significantly the Comptroller never identified in any of proposed amended rules
beginning in 2020 that the application of (d)(1) had presented problems in the past for the agency or retailers. The purported need to issue rules making explicit how it applies, is creating a solution in the absence of a problem The only study in the administrative record on this issue demonstrates that fulfillment
centers in one community do not materially reduce the amount of local sales tax other communities collect, and that if fulfillment centers are not places of business there would
be no material increase in the local sales tax allocated to communities with no or few
fulfillment centers. (CPEx.39:48–59.) C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 47
According to the Comptroller, if a fulfillment center ships taxable items to a purchaser based solely on Internet Sales, the fulfillment center is not a place of
business. Yet as the Comptroller concedes, if three purchasers were to walk into the
fulfillment center and use a computer at the fulfillment center to place an order on a
website and the taxable item ordered was shipped from that fulfillment center, it
would then be a place of business not only for that order but for every Internet Sales
item shipped or delivered from or picked up at that location. In that circumstance every sale is consummated at the fulfillment center. (CR:2597; 12RR:102–04.) And
likewise, as the Comptroller agrees, if a fulfillment center takes in three emailed or
faxed requests to be supplied a taxable item and that item is shipped or delivered
from or picked up at that location, then the sale of every Internet Sales item shipped or delivered from or picked up at that location is consummated there. But if that
same location handles only Internet Sales, it is not a place of business, and no taxable
sale of any taxable item shipped or delivered from or picked up at that location is
consummated there. If the definition of place of business creates any absurdity, it is
the application of anything other than the plain meanings of “receives” and “order”
that produces these absurd results.
As explained, nothing in the definition of place of business supports such distinctions. Rather, the plain and broad meanings of “receives” and “order” compel
the opposite result: the orders that are part of and fundamental to Internet Sales are C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 48 *66 received at fulfillment centers and consummated there. The only plausible
explanation for the Comptroller refusing to recognize those facts is an unwillingness
to accept technological developments over the last 40 years in how people buy
things—the use of order management software (automated website ordering software) that runs on computers connected via the Internet. The provisions of § 3.334 that the Coppell Plaintiffs challenge impose a person-to-person sales process
that did not exist even in 1979 (think sales by fax or mail order), and has continued
to evolve since, but only because what was done by actually visiting retail locations
is now often done virtually and more efficiently with greater choice and lower costs
through Internet Sales.
In Miles v. Texas Central Railroad & Infrastructure, Inc. , the Supreme Court noted:
We have long interpreted statutes … to embrace later-developed technologies if the [statutory] language used is broad enough to embrace a subsequently developed method.
647 S.W.3d 613, 623 (Tex. 2022). At issue in Miles was whether the phrase
“interurban electric railway company” was limited to a specific type of beefed-up
urban trolley or included a modern high-speed electrically powered passenger train.
See id. at 621. In agreeing that an “interurban electric railway company” described an entity operating a high-speed electric passenger train the court concluded:
[H]igh-speed rail was unimaginable when the Legislature passed the 1907 statute at issue here. But if technology had accelerated such that C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 49
high-speed rail became available in 1908, no one would have thought that the Legislature would need to pass another statute to accommodate it. We agree with the dissent that courts must give a statutory provision the ordinary meaning that it had at the time it was enacted. The 1907 statute’s text may have been capacious, but it was not unclear.
Id. at 623 (emphasis added) (internal citations omitted).
In the same way, the plain meanings of the words “receives” and “orders” are broad but not unclear. Their reach is not limited to what images their use may have
brought to the mind of the ordinary person or the ordinary retailer or the ordinary
legislator in 1979. The Legislature is deemed to have understood the breadth of the
words used and that they would encompass future as well as then-current ways for orders to be received. The teaching of Miles could not be more plain—words that
are capacious but clear include technological developments that were unknown at
the time the disputed statutory language was adopted. The Legislature could,
naturally, rewrite the definition of place of business to preclude locations that
received orders through non-traditional sales channels from being places of business.
It has not done so. And the Comptroller lacks authority to act in the Legislature’s place.
Because the limiting conditions imposed by the amendments to § 3.334 challenged by the Coppell Plaintiffs simply reject technological advancements in the
sales process (Internet Sales), they contravene the statutory definition of place of
C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 50 *68 business, run counter to the general objectives of the definition, and impose
conditions not found in that definition. They are invalid.
C ONCLUSION AND P RAYER Subsections (a)(9), (a)(18), (b)(1)(A), (b)(5) and (c)(7) of § 3.334 violate the statute they purport to implement. Specifically, they individually and in
combination, invalidly rewrite the statutory definition of “place of business.” And
in doing so they (1) contravene specific statutory language; (2) run counter to the
general objectives of the statutory provisions it is implementing; or (3) impose
additional burdens, conditions, or restrictions in excess of or inconsistent with the stator definition of “place of business.” This Court should therefore render judgment
that the identified portions of § 3.334 are invalid. The Coppell Parties also request
general relief. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 51 *69 Dated: September 26, 2025
Respectfully submitted, H OLLAND & K NIGHT LLP
By: /s/ Richard B. Phillips, Jr.
James B. Harris State Bar No. 09065400 james.harris@hklaw.com Stephen F. Fink State Bar No. 07013500 stephen.fink@hklaw.com Richard B. Phillips, Jr.
State Bar No. 24032833 rich.phillips@hklaw.com Reed C. Randel State Bar No. 24075780 reed.randel@hklaw.com Cole W. Browndorf State Bar No. 24127229 cole.browndorf@hklaw.com 1722 Routh Street, Suite 1500 Dallas, Texas 75201 Phone: (214) 964-9500 Fax: (214) 964-9501 Counsel for Coppell Parties C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 52
C ERTIFICATE OF C OMPLIANCE I certify that this brief complies with the typeface requirements of T EX . R. A PP .
P. 9.4(e), because it has been prepared in Times New Roman font in 14-point for
text and 13-point for footnotes. This document also complies with the word-count
limitations of T EX . R. A PP . P. 9.4(i), because it contains 13,001 words, excluding any
parts exempted by T EX . R. A PP . P. 9.4(i)(1).
/s/ Richard B. Phillips, Jr. Richard B. Phillips, Jr. C OPPELL P ARTIES ’ O PENING B RIEF AS PPELLANTS —P AGE 53
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12/03/2024 11:08:06 AM Velva L. Price District Clerk Travis County D-1-GN-21-003198 CAUSE NO. D-1-GN-21-003198*
(Consolidated with D-1-GN-21-003203) CITY OF COPPELL, TEXAS, § IN THE DISTRICT COURT OF
CITY OF HUMBLE, TEXAS, §
CITY OF DESOTO, TEXAS, §
CITY OF CARROLLTON, TEXAS, § CITY OF FARMERS BRANCH, TEXAS, and § CITY OF ROUND ROCK, TEXAS, §
§
Plaintiffs , § TRAVIS COUNTY, TEXAS § v. §
§ GLENN HEGAR, in his official capacity
§ as Comptroller of Public Accounts of
§ the State of Texas,
§ Defendant . ST JUDICIAL DISTRICT §
(*Assigned to the 250th District)
§
FINAL JUDGMENT
On October 14
– 16, 2024, the Court heard the merits of these consolidated causes. Attorneys James Harris and Reed Randel appeared for Plaintiffs City of Humble, Texas; City of Desoto, Texas;
City of Carroll, Texas; City of Coppell, Texas; and City of Farmers Branch, Texas (the Coppell
Plaintiffs). Attorneys Cindy Olsen Bourland and Bryan Dotson appeared for Plaintiff City of Round
Rock, Texas (the Round Rock Plaintiff). Attorneys Kyle Counce and Ray Langenberg appeared for
Defendant Comptroller of Public Accounts of the State of Texas (the Comptroller). The parties
announced ready and proceeded to trial.
After careful consideration of the evidence and arguments of counsel, the Court renders judgment as follows:
FIFFFIFIFIFFFIFFFIFFIIFIFFFFFIIIIFFFFFIIIIIFFFFFFIFFIFFFIIFIINANANANAANANANNNNNNNANNAAAAAAAAANAANANANNNNANNAAAAAANANNNANANNANAAAANNANANNAAANNNANNNNAAAAAANNNNNNNNAAAAAAANNNAAALLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL JJJUJUJJJJJJUUUUJJJJUUJJJJ DGM FINAL JUDGMENT Page 1 of 3
Cause No. D-1-GN-21-003198 (Consolidated)
2797
The Court FINDS that Section 321.002(a)(3)(A) of the Tax Code requires a determination of whether at least three orders were received by the retailer during the calendar year. Therefore,
the Court cannot prospectively declare Fulfillment Centers as places of business.
Accordingly, the Court FINDS that Coppell Plaintiffs’ request to declare Fulfillment Centers receiving only Website Orders places of business under the 2016 version of 34 TAC § 3.334 should
be and is DENIED.
The Court FINDS that 34 TAC § 3.334(a)(9) contravenes existing statutes by adding a definition at the agency level that the Legislature has not defined in Chapter 151 of the Texas Tax
Code and for which Sections 321.203 and 323.203 already provide a detailed statutory scheme for
determining where a sale of taxable item is “consummated.”
The Court FINDS that 34 TAC § 3.334(a)(18), (b)(5), and (c) contravene specific statutory language set forth in Texas Tax Code sections 321.002(a)(3)(A), 321.203, and 323.203.
The Court FINDS that 34 TAC § 3.334(c) [(c)(1) and (c)(2) inclusive] contravenes the statutory schemes for determining where a sale is consummated, under Sections 321.203 and
323.203.
The Court FURTHER FINDS that the Comptroller did not substantially comply with the notice requirements under the APA.
The Court FURTHER FINDS that Defendant Comptroller did not substantially comply with the “reasoned justification” requirement under the APA.
FIFFFIFIFIFFFIFFFIFFIIFIFFFFFIIIIFFFFFIIIIIFFFFFFIFFIFFFIIFIINANANANAANANANNNNNNNANNAAAAAAAAANAANANANNNNANNAAAAAANANNNANANNANAAAANNANANNAAANNNANNNNAAAAAANNNNNNNNAAAAAAANNNAAALLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL JJJUJUJJJJJJUUUUJJJJUUJJJJ DGM FINAL JUDGMENT Page 2 of 3
Cause No. D-1-GN-21-003198 (Consolidated)
2798 *74 IT IS JUDICIALLY DECLARED that 34 TAC § 3.334 or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the Coppell
Plaintiffs.
IT IS JUDICIALLY DECLARED that 34 TAC § 3.334 or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the Round Rock
Plaintiff.
IT IS THEREFORE ORDERED that Defendant Comptroller of Public Accounts of the State of Texas is hereby PERMANENTLY ENJOINED from enforcing 34 TAC § 3.334, subsections (a)(9),
(a)(18), (b)(5), and (c), effective July 4, 2024, and those subsections are hereby REMANDED to the
Comptroller of Public Accounts of the State of Texas for further consideration not inconsistent with
Chapters 151, 321, and 323 of the Texas Tax Code.
All other relief not expressly granted herein is DENIED. This judgment finally disposes of all parties and all claims and is appealable.
Signed on this third day of December 2024,
___________________________________________________________________________ ________________________________________________________________________________________________________________ ____________________________________ __
KKKKKAKKKKKKKKKK RIN CRCRCCCRCCCRCCRUMUMUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU P KARIN CRUMP JUDGE PRESIDING 250th DISTRICT COURT 03/03/03/03//3/26/26/26/26/26/26/26/26 2022022022022022022022225 05 05 05 05 05 055 05 1:01:01:01:01:01:01:01:001:41:41:41:41:411:4666666
FINAL JUDGMENT Page 3 of 3
Cause No. D-1-GN-21-003198 (Consolidated)
2799
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12/30/2024 04:16:17 PM Velva L. Price District Clerk Travis County D-1-GN-21-003198 CAUSE NO. D-1-GN-21-003198* (Consolidated with D-1-GN-21-003203) CITY OF COPPELL, TEXAS, § IN THE DISTRICT COURT OF
CITY OF HUMBLE, TEXAS, §
CITY OF DESOTO, TEXAS, §
CITY OF CARROLLTON, TEXAS, § CITY OF FARMERS BRANCH, TEXAS, and § CITY OF ROUND ROCK, TEXAS, §
§
Plaintiffs , § TRAVIS COUNTY, TEXAS § v. §
§ GLENN HEGAR, in his official capacity § as Comptroller of Public Accounts of
§ the State of Texas,
§ Defendant . ST JUDICIAL DISTRICT §
(cid:36) ssigned to the 250th District (cid:3)(cid:38)(cid:82)(cid:88)(cid:85)(cid:87)
§
CONCLUSIONS OF LAW
On December 3, 2024, the Court issued its Final Judgment for this cause. The Coppell Plaintiffs’ Request for Findings of Fact and Conclusions of Law was filed on December 23, 2024. On
December 30, 2024, the Coppell Plaintiffs informed the Court that they have “concluded that findings
of fact are unnecessary in this case [and] therefore withdraw that portion of the December 3, 2024
request for findings of fact.” Accordingly, the Court hereby issues the following Conclusions of Law:
1. 34 Texas Administrative Code (TAC) § 3.334(a)(9) contravenes existing statutes by adding a definition at the agency level that the Legislature has not defined in Chapter 151 of the Texas
Tax Code and for which Sections 321.203 and 323.203 already provide a detailed statutory scheme for
determining where a sale of taxable item is “consummated.”
2. 34 TAC § 3.334(a)(18), (b)(5), and (c) contravene specific statutory language set forth 2222.2.222222222222222222222222222222222.222222..
in Texas Tax Code sections 321.002(a)(3)(A), 321.203, and 323.203. ininininnniniiiiinininininiiiiinnniiinnniiinnnnnnninnninniiiiniiinn TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTexexeexexexexeeexexeexexxxexexexxexxexeeexxxexxexeexxxxeeeexxeexeexxxxaaaaasasasasasasaaaaassassasaaasssasaaassasaaaasaaaaaaaaaaaa TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTaxaxaaaxaxaxaaxaxaxaxaaaaaxxaxaxxaxaxaxxaxxaxaaaaaaaxxaxaaxaaxxaaaaaxxxaxaaaxxxaaaaaxaxx
COCCCOCOCOCCCOCCCOCCCOOCOCCCCCOCOOOOOOOOOOCCCCCOCOOOOOOCOOCCCCCOCOOOCOOCOOOCCCOOOOOOOCOOOOOOONCNCNCNCCNCNCCCNCNCNCNNNCNNNNNNNCCCNCCCNCNCCNNNNNCCCNCCNCCCNCNCNNNNCNCCCCNNNNNCCCCNNNCNNNCCCCNNNNNNCCCCNCNNN LULLULLULULLLLLULLLUUUUUULULLLLLULUULLLLLLUULLLLLLLLL SION CONCLUSIONS OF LAW
Cause No. D-1-GN-21-003198 (Consolidated)
2846 *77 3. 34 TAC § 3.334(c) [(c)(1) and (c)(2) inclusive] contravenes the statutory schemes for determining where a sale is consummated, under Sections 321.203 and 323.203.
4. 34 TAC § 3.334(b)(1)(A), when read in conjunction with its (b)(1)(B), is a descriptive statement of those circumstances when a distribution center, manufacturing plant, storage yard,
warehouse, or similar facility “is a place of business of the seller” within the meaning of Texas Tax
Code section 321.002(a)(3)(A). (cid:36)(cid:86)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75) , 34 TAC § 3.334(b)(1)(A) is a statement of qualification by
which such a location may be considered a place of business of the seller under Section
321.002(a)(3)(A).
5. The Comptroller did not substantially comply with the notice requirements under the Administrative Procedure Act (APA).
6. The Comptroller did not substantially comply with the “reasoned justification” requirement under the APA.
7. 34 TAC § 3.334 or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the Coppell Plaintiffs.
8. 34 TAC § 3.334 or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the Round Rock Plaintiff.
Signed on t (cid:75)(cid:72)(cid:3)(cid:22)(cid:19)(cid:87)(cid:75)(cid:3) day of December 2024 (cid:17)
____________________________________ ___________________________________________________________________________________________________________________________________ ________________________________________________________ _________________________________________________ _ KARIN CRUMP KKAKKKKKKKKKKKKKK RIN NNNNNN CRCRCRCRCRCRCRCRCRCRCRCCRCRRRRCRCRCRCRCRCRCCRCRRRRRRRRRRRRRRRRRRRRRRRUMUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUUU Judge Presiding, 250th District Court 03/03/03/03//3/26/26/26/26/26/26/26/26 2022022022022022022022225 05 05 05 05 05 055 05 1:01:01:01:01:01:01:01:001:41:41:41:41:411:477777
CONCLUSIONS OF LAW
Cause No. D-1-GN-21-003198 (Consolidated)
2847
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§ 321.002. Definitions, TX TAX § 321.002
Vernon's Texas Statutes and Codes Annotated
Tax Code (Refs & Annos)
Title 3. Local Taxation
Subtitle C. Local Sales and Use Taxes
Chapter 321. Municipal Sales and Use Tax Act (Refs & Annos)
Subchapter A. General Provisions
V.T.C.A., Tax Code § 321.002
§ 321.002. Definitions
Currentness (a) In this chapter:
(1) “Additional municipal sales and use tax” means only the additional tax authorized by Section 321.101(b).
(2) “Municipality” includes any incorporated city, town, or village.
(3)(A) “Place of business of the retailer” means an established outlet, office, or location operated by the retailer or the retailer's
agent or employee for the purpose of receiving orders for taxable items and includes any location at which three or more
orders are received by the retailer during a calendar year. A warehouse, storage yard, or manufacturing plant is not a “place
of business of the retailer” unless at least three orders are received by the retailer during the calendar year at the warehouse,
storage yard, or manufacturing plant.
(B) An outlet, office, facility, or any location that contracts with a retail or commercial business to process for that business
invoices, purchase orders, bills of lading, or other equivalent records onto which sales tax is added, including an office
operated for the purpose of buying and selling taxable goods to be used or consumed by the retail or commercial business,
is not a “place of business of the retailer” if the comptroller determines that the outlet, office, facility, or location functions
or exists to avoid the tax legally due under this chapter or exists solely to rebate a portion of the tax imposed by this chapter
to the contracting business. An outlet, office, facility, or location does not exist to avoid the tax legally due under this
chapter or solely to rebate a portion of the tax imposed by this chapter if the outlet, office, facility, or location provides
significant business services, beyond processing invoices, to the contracting business, including logistics management,
purchasing, inventory control, or other vital business services.
(C) Notwithstanding any other provision of this subdivision, a kiosk is not a “place of business of the retailer.” In this
subdivision, “kiosk” means a small stand-alone area or structure that:
(i) is used solely to display merchandise or to submit orders for taxable items from a data entry device, or both; (ii) is located entirely within a location that is a place of business of another retailer, such as a department store or shopping mall; and
1 © 2025 Thomson Reuters. No claim to original U.S. Government Works.
§ 321.002. Definitions, TX TAX § 321.002
(iii) at which taxable items are not available for immediate delivery to a customer. (b) Words used in this chapter and defined by Chapter 151 have the meanings assigned by Chapter 151.
Credits
Added by Acts 1987, 70th Leg., ch. 191, § 1, eff. Sept. 1, 1987. Amended by Acts 2003, 78th Leg., ch. 1155, § 1, eff. Sept. 1,
2003; Acts 2009, 81st Leg., ch. 1360, § 4, eff. Sept. 1, 2009; Acts 2011, 82nd Leg., ch. 942 (H.B. 590), § 1, eff. Sept. 1, 2011;
Acts 2013, 83rd Leg., ch. 1361 (S.B. 1533), § 1, eff. Sept. 1, 2013.
V. T. C. A., Tax Code § 321.002, TX TAX § 321.002
Current through the end of the 2025 Regular, First Called and Chapters 2 through 4 of the Second Called Sessions of the 89th
Legislature.
© 2025 Thomson Reuters. No claim to original U.S. Government Works. End of Document
2 © 2025 Thomson Reuters. No claim to original U.S. Government Works.
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§ 321.203. Consummation of Sale, TX TAX § 321.203
Vernon's Texas Statutes and Codes Annotated
Tax Code (Refs & Annos)
Title 3. Local Taxation
Subtitle C. Local Sales and Use Taxes
Chapter 321. Municipal Sales and Use Tax Act (Refs & Annos)
Subchapter C. Computation of Taxes
V.T.C.A., Tax Code § 321.203 § 321.203. Consummation of Sale
Currentness (a) A sale of a taxable item occurs within the municipality in which the sale is consummated. A sale is consummated as provided
by this section regardless of the place where transfer of title or possession occurs.
(b) If a retailer has only one place of business in this state, all of the retailer's retail sales of taxable items are consummated at
that place of business except as provided by Subsection (e).
(c) If a retailer has more than one place of business in this state, each sale of each taxable item by the retailer is consummated
at the place of business of the retailer in this state where the retailer first receives the order, provided that the order is placed
in person by the purchaser or lessee of the taxable item at the place of business of the retailer in this state where the retailer
first receives the order.
(c-1) If the retailer has more than one place of business in this state and Subsection (c) does not apply, the sale is consummated
at the place of business of the retailer in this state:
(1) from which the retailer ships or delivers the item, if the retailer ships or delivers the item to a point designated by the
purchaser or lessee; or
(2) where the purchaser or lessee takes possession of and removes the item, if the purchaser or lessee takes possession of and
removes the item from a place of business of the retailer. (c-2) Expired.
(c-3) Expired.
(c-4) Expired.
(c-5) Expired.
1 © 2025 Thomson Reuters. No claim to original U.S. Government Works.
§ 321.203. Consummation of Sale, TX TAX § 321.203
(d) If the retailer has more than one place of business in this state and Subsections (c) and (c-1) do not apply, the sale is
consummated at:
(1) the place of business of the retailer in this state where the order is received; or
(2) if the order is not received at a place of business of the retailer, the place of business from which the retailer's agent or
employee who took the order operates. (e) A sale of a taxable item is consummated at the location in this state to which the item is shipped or delivered or at which
possession is taken by the customer if transfer of possession of the item occurs at, or shipment or delivery of the item originates
from, a location in this state other than a place of business of the retailer and if:
(1) the retailer is an itinerant vendor who has no place of business in this state;
(2) the retailer's place of business where the purchase order is initially received or from which the retailer's agent or employee
who took the order operates is outside this state; or
(3) the purchaser places the order directly with the retailer's supplier and the item is shipped or delivered directly to the
purchaser by the supplier. (e-1) Except as otherwise provided by Subsection (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k), (m), or (n), a sale of a taxable item
made by a marketplace seller through a marketplace as provided by Section 151.0242 is consummated at the location in this
state to which the item is shipped or delivered or at which possession is taken by the purchaser.
(f) The sale of natural gas and electricity is consummated at the point of delivery to the consumer.
(g) The sale of mobile telecommunications services is consummated in accordance with Section 151.061.
(g-1) The sale of telecommunications services sold based on a price that is measured by individual calls is consummated at
the location where the call originates and terminates or the location where the call either originates or terminates and at which
the service address is also located.
(g-2) Except as provided by Subsection (g-3), the sale of telecommunications services sold on a basis other than on a call-by-
call basis is consummated at the location of the customer's place of primary use.
(g-3) A sale of post-paid calling services is consummated at the location of the origination point of the telecommunications
signal as first identified by the seller's telecommunications system or by information received by the seller from the seller's
service provider if the system used to transport the signal is not that of the seller.
2 © 2025 Thomson Reuters. No claim to original U.S. Government Works.
§ 321.203. Consummation of Sale, TX TAX § 321.203
(h) The sale of an amusement service is consummated in the municipality in which the performance or other delivery of the
service takes place.
(i) If a purchaser who has given a resale certificate makes any use of a taxable item that subjects the taxable item to the sales
tax under the provisions of Section 151.154, the use or other consumption of the taxable item that subjected the taxable item to
the tax is consummated at the place where the taxable item is stored or kept at the time of or just before the use or consumption.
(j) The sale of services delivered through a cable system is consummated at the point of delivery to the consumer.
(k) The sale of garbage or other solid waste collection or removal service is consummated at the location at which the garbage
or other solid waste is located when its collection or removal begins.
(l) Repealed by Acts 2007, 80th Leg., ch. 1266, § 15(4).
(m) If there is no place of business of the retailer because the comptroller determines that an outlet, office, facility, or location
contracts with a retail or commercial business to process for that business invoices or bills of lading and that the outlet, office,
facility, or location functions or exists to avoid the tax imposed by this chapter or to rebate a portion of the tax imposed by this
chapter to the contracting business, a sale is consummated at the place of business of the retailer from whom the outlet, office,
facility, or location purchased the taxable item for resale to the contracting business.
(n) A sale of a service described by Section 151.0047 to remodel, repair, or restore nonresidential real property is consummated
at the location of the job site.
Credits
Added by Acts 1987, 70th Leg., ch. 191, § 1, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 2, § 14.22(a), eff. Aug.
28, 1989; Acts 1989, 71st Leg., ch. 810, § 1, eff. Oct. 1, 1989; Acts 1991, 72nd Leg., ch. 705, § 26, eff. Sept. 1, 1991; Acts
2001, 77th Leg., ch. 370, § 2, eff. Aug. 1, 2002; Acts 2003, 78th Leg., ch. 209, § 55, eff. Oct. 1, 2003; Acts 2003, 78th Leg.,
ch. 1155, §§ 2, 3, eff. Sept. 1, 2003; Acts 2003, 78th Leg., ch. 1310, § 115, eff. July 1, 2004; Acts 2005, 79th Leg., ch. 728, §
23.001(83), eff. Sept. 1, 2005; Acts 2007, 80th Leg., ch. 1266, §§ 11, 15(4), eff. Sept. 1, 2007; Acts 2009, 81st Leg., ch. 1360,
§ 5, eff. June 19, 2009; Acts 2013, 83rd Leg., ch. 1342 (S.B. 997), § 1, eff. June 14, 2013; Acts 2019, 86th Leg., ch. 182 (H.B.
1525), § 3, eff. Oct. 1, 2019; Acts 2021, 87th Leg., ch. 569 (S.B. 477), § 6, eff. Oct. 1, 2021.
V. T. C. A., Tax Code § 321.203, TX TAX § 321.203
Current through the end of the 2025 Regular, First Called and Chapters 2 through 4 of the Second Called Sessions of the 89th
Legislature.
© 2025 Thomson Reuters. No claim to original U.S. Government Works. End of Document
3 © 2025 Thomson Reuters. No claim to original U.S. Government Works.
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Volume 45 Number 1 January 3, 2020 Pages 1 -
TRIAL EXHIBIT CP Ex-16 D-1-GN-21-003198 *87 a section of the
Office of the Secretary of State
P.O. Box 12887 Austin, Texas 78711
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The Texas Register is published under the Government Code, Title 10, Chapter 2002. Periodicals Postage Paid at Easton, MD and at additional mailing offices.
POSTMASTER: Send address changes to the Texas Register, 4810 Williamsburg Road, Unit 2, Hurlock, MD 21643. Editors
Secretary of State - Ruth R. Hughs Liz Cordell
Eddie Feng Director - Robert Sumners
Belinda Kirk Cecilia Mena Editor-in-Chief - Jill S. Ledbetter Joy L. Morgan
Breanna Mutschler Barbara Strickland *88 GOVERNOR 19 TAC §230.55.................................................................................65 19 TAC §230.104, §230.105..............................................................65
Appointments.......................................................................................7 Proclamation 41-3703..........................................................................8 TEXAS BOARD OF PROFESSIONAL ENGINEERS AND LAND SURVEYORS
ATTORNEY GENERAL LICENSING Requests Opinions........................................................................11 22 TAC §133.29.................................................................................66 Requests Opinions........................................................................11 TEXAS STATE BOARD OF PHARMACY EMERGENCY RULES ADMINISTRATIVE PRACTICE AND PROCEDURES TEXAS DEPARTMENT OF INSURANCE 22 TAC §281.7...................................................................................68 TRADE PRACTICES 22 TAC §281.9...................................................................................71 28 TAC §§21.4901 - 21.4904 ............................................................13 22 TAC §281.66.................................................................................72 PROPOSED RULES 22 TAC §281.69.................................................................................73 OFFICE OF THE GOVERNOR 22 TAC §281.70.................................................................................74 CRIMINAL JUSTICE DIVISION PHARMACIES 1 TAC §§3.9000, 3.9005 - 3.9007, 3.9011, 3.9015, 3.9017, 3.9019, 22 TAC §291.1...................................................................................75 3.9021, 3.9025 ...................................................................................17 22 TAC §291.3...................................................................................76 1 TAC §3.9010, §3.9013....................................................................24 22 TAC §291.4...................................................................................79 TEXAS HEALTH AND HUMAN SERVICES 22 TAC §291.14.................................................................................80 COMMISSION 22 TAC §291.34.................................................................................81 REIMBURSEMENT RATES PHARMACISTS 1 TAC §355.8201...............................................................................25 22 TAC §295.9...................................................................................91
JOINT FINANCIAL REGULATORY AGENCIES 22 TAC §295.13.................................................................................93 PAYOFF STATEMENTS CONTROLLED SUBSTANCES 7 TAC §155.2.....................................................................................33 22 TAC §315.3...................................................................................95
TEXAS DEPARTMENT OF LICENSING AND REGULATION 22 TAC §315.16.................................................................................97
BARBERS COMPTROLLER OF PUBLIC ACCOUNTS 16 TAC §§82.10, 82.20 - 82.22, 82.28, 82.52, 82.70, 82.72, 82.74, TAX ADMINISTRATION 82.77, 82.80, 82.120 ..........................................................................35 34 TAC §3.334...................................................................................98 COSMETOLOGISTS TEXAS DEPARTMENT OF CRIMINAL JUSTICE 16 TAC §§83.10, 83.20 - 83.23, 83.25, 83.28, 83.52, 83.70, 83.72, COMMUNITY JUSTICE ASSISTANCE DIVISION 83.74, 83.77, 83.80, 83.120 ...............................................................42 ADMINISTRATION PODIATRIC MEDICINE PROGRAM 37 TAC §161.21...............................................................................115 16 TAC §§130.42, 130.44, 130.45.....................................................52 WITHDRAWN RULES 16 TAC §§130.53, 130.56, 130.58, 130.59........................................54 TEXAS DEPARTMENT OF AGRICULTURE
16 TAC §130.60.................................................................................57 HEMP PROGRAM 16 TAC §130.72.................................................................................57 4 TAC §§24.1 - 24.4 ........................................................................117 STATE BOARD FOR EDUCATOR CERTIFICATION 4 TAC §§24.5 - 24.7 ........................................................................117 PROFESSIONAL EDUCATOR PREPARATION AND 4 TAC §§24.8 - 24.19 ......................................................................117 CERTIFICATION 4 TAC §§24.20 - 24.23 ....................................................................117 TAC §230.21.................................................................................60 TAC §§24.24 - 24.29 ....................................................................117 TAC §230.33, §230.36..................................................................63
TABLE OF CONTENTS *89 REPORTING OPTION FOR CERTAIN OFFENSES; 4 TAC §24.30, §24.31......................................................................118 AMNESTY
4 TAC §§24.32 - 24.38 ....................................................................118 19 TAC §§3.1 - 3.20 ........................................................................150 4 TAC §§24.39 - 24.43 ....................................................................118 19 TAC §§3.11 - 3.15.......................................................................152 4 TAC §§24.44 - 24.48 ....................................................................118 TEXAS MEDICAL BOARD 4 TAC §24.49, §24.50......................................................................118 LICENSURE CREDIT UNION DEPARTMENT 22 TAC §163.13...............................................................................153 CHARTERING, OPERATIONS, MERGERS, LIQUIDATIONS USE OF EXPERTS
7 TAC §91.1003...............................................................................118 22 TAC §§182.1, 182.3, 182.5, 182.8..............................................153
ADOPTED RULES 22 TAC §§182.2, 182.4, 182.6, 182.7..............................................153 TEXAS DEPARTMENT OF INSURANCE
TEXAS DEPARTMENT OF AGRICULTURE GENERAL ADMINISTRATION QUARANTINES AND NOXIOUS AND INVASIVE PLANTS 28 TAC §1.414.................................................................................154 4 TAC §§19.400 - 19.408 ................................................................119 CORPORATE AND FINANCIAL REGULATION
RAILROAD COMMISSION OF TEXAS 28 TAC §7.1001...............................................................................159
OIL AND GAS DIVISION RULE REVIEW 16 TAC §3.70...................................................................................119 Proposed Rule Reviews
PIPELINE SAFETY REGULATIONS Office Governor .....................................................................161 16 TAC §8.1, §8.5............................................................................124 State Board Educator Certification.............................................161
16 TAC §§8.101, 8.110, 8.115, 8.125, 8.135 ...................................125 Texas State Board Pharmacy .......................................................161
16 TAC §§8.201, 8.205, 8.206, 8.209, 8.210, 8.225, 8.230, 8.235, Texas Department Criminal Justice.............................................162 8.240 ................................................................................................126 Adopted Rule Reviews 16 TAC §8.301, §8.315....................................................................126 Joint Financial Regulatory Agencies ...............................................162 LP-GAS SAFETY RULES TABLES AND GRAPHICS
16 TAC §§9.1 - 9.18, 9.21, 9.22, 9.26 - 9.28, 9.35 - 9.38, 9.41, 9.51, 9.52, 9.54 .........................................................................................131 .........................................................................................................163 16 TAC §§9.101 - 9.103, 9.107 - 9.110, 9.113 - 9.116, 9.126, 9.129 - IN ADDITION 9.132, 9.134 - 9.137, 9.140 - 9.143..................................................143 Texas State Affordable Housing Corporation 16 TAC §§9.201 - 9.204, 9.206, 9.208, 9.211, 9.212.......................144 Draft Annual Action Plan Available Public Comment ..............217 16 TAC §§9.301 - 9.304, 9.306 - 9.308, 9.311, 9.313 .....................144 Office Consumer Credit Commissioner 16 TAC §9.312.................................................................................145 Notice Rate Ceilings....................................................................217 TAC §9.401, §9.403....................................................................145 Credit Union Department
COAL MINING REGULATIONS Application Merger Consolidation......................................217 TAC §12.108...............................................................................146 Application Expand Field Membership...................................217 PUBLIC UTILITY COMMISSION OF TEXAS Notice Final Action Taken...........................................................217 PROCEDURAL RULES Commission Environmental Quality TAC §22.246...............................................................................147 Agreed Orders..................................................................................218 TEXAS HIGHER EDUCATION COORDINATING Amended Notice Application Public Hearing Air Quality BOARD Standard Permit Concrete Batch Plant With Enhanced Controls: RULES APPLYING TO ALL PUBLIC AND PRIVATE Proposed Air Quality Registration Number 159167........................222 OR INDEPENDENT INSTITUTIONS OF HIGHER Enforcement Orders .........................................................................222 EDUCATION IN TEXAS REGARDING ELECTRONIC TABLE OF CONTENTS *90 Notice Hearing Emergency Order ..........................................230
Enforcement Orders .........................................................................226 Notice Intent Implement Minor Rate Change Under TAC Notice Public Meeting New Municipal Solid Waste Facility: §26.171 ............................................................................................231 Registration Application No. 40305................................................229 Notice Water Quality Application ...............................................229 South Plains Association Governments Department State Health Services Llano Estacado Regional Water Planning Group - Region O Solicita- tion Nominations .........................................................................231
Designation Practice Serving Medically Underserved Popula- tion ...................................................................................................229 Notice Solicitation Nominations Persons Serve Llano Estacado Regional Water Planning Group - Region O..........232 Texas Department Insurance Texas Department Transportation Company Licensing .........................................................................230 Dallas District Notice Affording Opportunity Public Hear- Public Utility Commission ing ....................................................................................................232
Notice Application Adjust High Cost Support Under TAC §26.407(h)........................................................................................230 TABLE OF CONTENTS *92 Appointments Appointed to OneStar National Service Commission, for a term to expire March 15, 2022, Michael H. "Mike" Morath of Austin, Texas Appointments for December 2, 2019 (Commissioner Morath is being reappointed). Appointed to Judicial Compensation Commission, for a term to ex- Appointed to OneStar National Service Commission, for a term to pire February 1, 2023, Linda W. Kinney of Comfort, Texas (replacing expire March 15, 2022, Girien R. Salazar of Houston, Texas (replacing Frederick C. "Fred" Tate of Colleyville, who resigned). Kathryn R. Timmerman of Austin, whose term expired). Appointed as Commissioner of Department of Family Protec- Appointed to OneStar National Service Commission, for a term to tive Services, for a term to expire August 31, 2021, Jaime D. Masters expire March 15, 2022, Eugene J. "Gene" Seaman of Corpus Christi, of Round Rock, Texas (replacing Henry L. "Hank" Whitman, Jr. of Texas (Representative Seaman is being reappointed). Floresville, who resigned). Appointed to OneStar National Service Commission, for a term Appointed to Product Development Small Business Incubator to expire March 15, 2022, Kathrine J. "Kate" Williamson of Midland, Board, for a term to expire February 1, 2021, Kimberly M. Gramm of Texas (Ms. Williamson is being reappointed). Lubbock, Texas (replacing Kellilynn M. "Kelli" Frias, Ph.D. of Lub- bock, who resigned). Appointments for December 5, 2019 Appointed to Product Development Small Business Incubator Designated as presiding officer of Texas Council on Alzheimer's Board, for a term to expire February 1, 2025, Jack J. "Jody" Goehring, Disease Related Disorders, for a term to expire at pleasure of IV of Austin, Texas (Mr. Goehring is being reappointed). Governor, Marc I. Diamond, M.D. of Dallas (Dr. Diamond is replacing Rita Hortenstine of Dallas as presiding officer). Appointed to Product Development Small Business Incubator Board, for a term to expire February 1, 2025, David R. Margrave of Appointed to Texas Council on Alzheimer's Disease Related San Antonio, Texas (Mr. Margrave is being reappointed). Disorders, for a term to expire August 31, 2025, Laura Fink Defina, M.D. of Richardson, Texas (Dr. DeFina is being reappointed). Appointed to Product Development Small Business Incubator
Board, for a term to expire February 1, 2025, Hayden Padgett of Plano, Appointed to Texas Council on Alzheimer's Disease Related Texas (replacing Arun Agarwal of Dallas, whose term expired). Disorders, for a term to expire August 31, 2025, Angela Turner of Nor- mangee, Texas (replacing Rita Hortenstine of Dallas, whose term ex- Appointments for December 3, 2019 pired). Appointed to Crime Victims' Institute Advisory Council, for Appointed to Commission on State Emergency Communications, term to expire January 31, 2020, Matthew L. "Matt" Ferrara, Ph.D. for term to expire September 1, 2025, Clinton D. Sawyer of Amherst, of Austin, Texas (replacing Richard L. "Rick" Reynolds of Austin, Texas (Mayor Sawyer is being reappointed). whose term expired). Appointments for December 6, Appointed to Crime Victims' Institute Advisory Council, for term to expire January 31, 2021, Janis K. "Jan" Langbein of Dallas, Texas Designated as president Red River Authority Texas Board (replacing Ann Marie Matthews Jourdanton, whose term expired). Directors, for term to expire pleasure Governor. Todd W. Boykin Amarillo. Appointed to Texas Poet Laureate, State Musician State Artists Committee, for term to expire October 1, 2021, Leah Gamble Martin Appointed to Red River Authority Texas Board Directors, for Plano, Texas (replacing Carol A. Hollen Mineola, whose term term to expire August 11, 2023, Jerry Dan Davis Wellington, Texas expired). (replacing William W. "Wade" Porter Canyon, who resigned). Appointments for December 4, Appointed Red River Authority Texas Board Directors, for term expire August 11, 2025, Mary Lou Bradley Memphis, Texas Appointed North Texas Tollway Authority Board Directors, (replacing Penny C. Carpenter Silverton, whose term expired). for term expire August 31, 2021, Frankie "Lynn" Gravley Gunter, Texas (Mr. Gravley is being reappointed). Appointed Red River Authority Texas Board Directors, for term expire August 11, 2025, Zackary K. "Zack" Smith Canyon, Appointed OneStar National Service Commission, for term Texas (Mr. Smith is being reappointed). expire March 15, 2022, Daphne D. Brookins Forest Hill, Texas (Ms. Brookins being reappointed). Appointed Red River Authority Texas Board Directors, term expire August 11, 2025, Stephen A. Thornhill Denison, Appointed OneStar National Service Commission, term Texas (Mr. Thornhill being reappointed). expire March 15, 2022, Annette G. Juba Austin, Texas (Ms. Juba being reappointed). Designated presiding officer Texas Commission Law En- forcement, term expire pleasure Governor, Kim- GOVERNOR January 3, berley A. "Kim" Lemaux Arlington (Chief Lemaux replacing Joel Appointed Texas Workforce Investment Council, term W. Richardson Canyon presiding officer). expire September 1, 2025, Mark A. Dunn Lufkin, Texas (Mr. Dunn being reappointed). Appointed Texas Commission Law Enforcement, term expire August Patricia Garza Burruss Dallas, Texas (Ms. Appointed Workforce Investment Council, term *93 Burruss is being reappointed). expire September 1, 2025, Thomas C. "Tom" Halbouty of Southlake, Texas (Mr. Halbouty is being reappointed). Appointed to Texas Commission on Law Enforcement, for a term to expire August 30, 2025, Michael W. "Mike" Griffis of Odessa, Texas Appointed to Texas Workforce Investment Council, for a term to (replacing Joel W. Richardson of Canyon, whose term expired). expire September 1, 2025, Richard M. Rhodes, Ph.D. of Austin, Texas (Dr. Rhodes is being reappointed). Appointed to Texas Commission Law Enforcement, for a term to expire August 30, 2025, Jason D. Hester of Lago Vista, Texas (Major Appointed to Texas Workforce Investment Council, for a term to Hester is being reappointed). expire September 1, 2025, Brandon R. Willis of Beaumont, Texas (re- placing Mark Barberena of Fort Worth, whose term expired). Appointments for December 10, 2019 Appointments for December 16, Appointed to Trinity River Authority Board of Directors, for a term to expire March 15, 2023, Lisa A. Hembry of Dallas, Texas (replacing Appointed to Executive Council of Physical Therapy Occu- Christina Melton Crain of Dallas, who resigned). pational Therapy Examiners, for term to expire February 1, 2021, Manoranjan "Mano" Mahadeva of Plano, Texas (replacing Arthur Appointed to Trinity River Authority Board of Directors, for term "Roger" Matson of Georgetown, whose term expired). to expire March 15, 2025, Henry Borbolla, III of Fort Worth, Texas (Mr. Borbolla is being reappointed). Greg Abbott, Governor TRD-201904921 Appointed to Trinity River Authority Board of Directors, for term
to expire March 15, 2025, Cary "Cole" Camp of Arlington, Texas (re- ♦ ♦ ♦ placing Ana Laura Saucedo of Mesquite, whose term expired). Proclamation 41-3703 Appointed to Trinity River Authority Board of Directors, for term to expire March 15, 2025, Tommy G. "Tom" Fordyce of Huntsville, TO ALL TO WHOM THESE PRESENTS SHALL COME: Texas (Mr. Fordyce being reappointed). I, GREG ABBOTT, Governor of State of Texas, do hereby certify Appointed to Trinity River Authority Board of Directors, for term exceptional drought conditions pose threat of imminent disaster to expire March 15, 2025, David Blake Leonard of Liberty, Texas (Mr. Bandera, Blanco, Burnet, Concho, Karnes, Kendall, Kinney, Llano, Leonard being reappointed). Maverick, Medina, Real, Uvalde, Val Verde, Zapata, Zavala coun- ties. Appointed to Trinity River Authority Board of Directors, for term to expire March 15, 2025, Lewis H. McMahan of Dallas, Texas (replac- WHEREAS, significantly low rainfall prolonged dry conditions ing James Wyatt Neale of Dallas, whose term expired). continue to increase threat of wildfire across these portions of state; Appointed to Trinity River Authority Board of Directors, for term to expire March 15, 2025, Amirali "Amir" Rupani of Dallas, Texas (Mr. WHEREAS, these drought conditions pose imminent threat pub- Rupani being reappointed). lic health, property, economy; Appointed Trinity River Authority Board Directors, for term THEREFORE, accordance with authority vested me Sec- expire March 15, 2025, Carl "Dwayne" Somerville Mexia, Texas tion 418.014 Texas Government I do hereby declare state (Mr. Somerville being reappointed). disaster previously listed counties based existence such threat. Appointed Trinity River Authority Board Directors, for term expire March 15, 2025, Brenda K. Walker Palestine, Texas (re- Pursuant Section 418.017 code, I authorize use all avail- placing Dudley K. Skyrme Palestine, whose term expired). able resources state government political subdivisions reasonably necessary cope with this disaster. Appointments for December 11, Pursuant Section 418.016 code, any regulatory statute pre- Appointed Texas Workforce Investment Council, term scribing procedures conduct state business any order or expire September 1, 2023, Jesse C. Gatewood Corpus Christi, Texas rule state agency would any way prevent, hinder, delay (replacing Mervin "Paul" Jones Austin, whose term expired). necessary action coping with this disaster shall be suspended upon Appointed Texas Workforce Investment Council, term written approval Office Governor. However, ex- expire September 1, 2023, Eliu M. "Michael" Hinojosa, Ed.D. Dal- tent enforcement any state statute administrative rule re- las, Texas (replacing Carmen Olivas Graham El Paso, whose term garding contracting procurement would impede any state agency's expired). emergency response necessary protect life property threat- ened this declared disaster, I hereby authorize suspension such Appointed Texas Workforce Investment Council, term statutes rules duration this declared disaster. expire September 1, 2023, John L. Martin San Antonio, Texas (re- placing Robert Hawkins Bellmead, whose term expired). In accordance statutory requirements, copies this proclama- tion shall filed applicable authorities. Appointed Texas Workforce Investment Council, term expire September 2023, Richard C. "Rick" Rhodes Austin, Texas IN TESTIMONY WHEREOF, I have hereunto signed my name (replacing Sharla E. Hotchkiss Midland, whose term expired). have officially caused Seal State affixed my office City Austin, Texas, 12th day December, 2019. Greg Abbott, Governor January Register ♦ ♦ ♦ TRD-201904914 *94 GOVERNOR January *96 Requests Opinions Requestor:
RQ-0318-KP The Honorable Heather Stebbins
Requestor: Kerr County Attorney
The Honorable Larry Taylor 700 Main Street Suite BA-103 Chair, Committee on Education Kerrville, Texas 78028
Texas State Senate Re: Whether hearing an application court-ordered mental health services conducted pursuant section 574.031 Health Post Office Box 12068 Safety Code must recorded by official court reporter Austin, Texas 78711-2068 (RQ-0321-KP)
Re: Matters related Texas Windstorm Insurance Association Briefs requested by January 15, 2020 its compliance House Bill 1900 Senate Bill 615 (RQ-0318- RQ-0322-KP KP) Requestor:
Briefs requested by January 10, 2020 Mr. Mike Novak RQ-0319-KP Executive Director Requestor: Texas Facilities Commission Honorable Lilli A. Hensley Post Office Box 13047 Sterling County Attorney Austin, Texas 78711-3047 Post Office Box 88 Re: Authority Texas Facilities Commission State Preser- Sterling City, Texas 76951 vation Board relation Bill Rights monument authorized by Re: Whether county may call bond election fund construction, House Concurrent Resolution 111, adopted by Eightieth Legisla- repair, improvement, maintenance city roads (RQ-0319-KP) ture (RQ-0322-KP) Briefs requested by January 10, 2020 Briefs requested January 15, 2020 RQ-0320-KP For further information, please access website at www.texasattor- neygeneral.gov call Opinion Committee at (512) 463-2110. Requestor: TRD-201904852 Mr. Steven C. McCraw Ryan L. Bangert
Director Deputy Attorney General Legal Counsel Office Attorney General Texas Department Public Safety Filed: December 17, 2019 Post Office Box 4087 ♦ ♦ ♦ Austin, Texas 78773-0001 Requests Opinions Re: Whether over-the-road buses traveling interstate highways RQ-0323-KP Texas subject tandem axle weight limitations established Transportation Code section 621.101(a)(2) (RQ ‑ 0320 ‑ KP) Requestor: Briefs requested January 15, 2020 Honorable Roberto Serna
RQ-0321-KP ATTORNEY GENERAL January 3, 2020 45 11 District Attorney For further information, please access website www.texasattor- neygeneral.gov call Opinion Committee (512) 463-2110. 293 rd Judicial District TRD-201904882 458 Madison Street Ryan L. Bangert Eagle Pass, Texas Deputy Attorney General Legal Counsel Office Attorney General Re: Application article III, section Constitution Filed: December invoices submitted county under amended service contract
services performed prior amendment (RQ ‑ ‑ KP) ♦ ♦ ♦ Briefs requested January *97 12 January 3, 2020 Texas Register comptroller distinguishes orders through computer mobile Allison Vordenbaumen Benz, R.Ph., M.S. device seller because use Internet sellers Executive Director purchasers place orders has resulted confusion as State Board Pharmacy whether an order placed person over Internet. For Earliest possible date adoption: February example, sellers use Internet place orders items
For further information, please call: (512) 305-8010 are store. However, mobile devices have made it ♦ ♦ ♦ possible purchasers place online orders at any location, including within location seller. Subsequent paragraphs TITLE 34. PUBLIC FINANCE are renumbered. PART 1. COMPTROLLER OF PUBLIC The comptroller adds definition "marketplace provider" new subsection (a)(15) as defined §3.286 title. ACCOUNTS comptroller adds definition "order placed person" CHAPTER 3. TAX ADMINISTRATION new subsection (a)(16). Orders placed person are those orders placed seller while purchaser physically SUBCHAPTER O. STATE AND LOCAL SALES present seller's location using seller's system, com- AND USE TAXES puter, other device. As seller may use Internet, phone, catalog make order, definition clarifies an or- TAC §3.334 der still placed person regardless whether seller uses Internet, phone, catalog make order. Similarly, Comptroller Public Accounts proposes amendments purchaser may use personal mobile device make §3.334, concerning use taxes. In wake order while physically present seller's location, defini- South Dakota v. Wayfair, Inc., S. Ct. (June 2018), tion excludes Internet orders, defined placed *98 the amendments provide that remote sellers that are required to a purchaser's device. Subsequent paragraphs are renumbered. collect Texas use tax under §3.286 of this title (relating to Seller's and Purchaser's Responsibilities) should collect local use tax The comptroller amends the definition of "place of business of based on the destination location. The amendments also im- the seller - general definition" in renumbered subsection (a)(17) plement the requirement that a seller located in Texas collects to specify that a website, software application, or other method local use tax when the seller ships or delivers a taxable item into used to place an Internet order is not a place of business of the a local jurisdiction where those use taxes exceed the local sales seller. Tax Code, §321.002(a)(3)(A) defines "place of business of tax where the sale is consummated. The comptroller also imple- the retailer" as "an established outlet, office, or location operated ments House Bill 1525 House Bill 86th Legislature, by the retailer or the retailer's agent or employee for the purpose 2019. House Bill establishes sales use tax collec- of receiving orders taxable items includes any location at tion responsibilities on marketplace providers. House Bill which three or more orders are received by the retailer during a establishes a single use tax rate that remote sellers may calendar year." A website, software application, or other method elect to use. The amendments also clarify provisions concern- used to place an Internet order is not an established outlet, office, ing fulfillment, temporary places of business of the seller, places or location operated by the seller is therefore, excluded of business of the seller receiving more than three orders, trav- the definition. The comptroller reflects these changes throughout eling salespersons, orders over the Internet, orders placed the section. in person. The comptroller also amends the definition to delete repetitive Throughout the section, the comptroller adds or amends rule ti- language an example that provides that a home office at tles. The comptroller also amends cross-references accordingly. three or more items are sold through an online auction The comptroller does not intend to make substantive changes website is a place of business of the seller. The comptroller through these additions of amendments to rule titles deletes a reference to "administrative offices" because the comp- through the amendments to cross-references. The comptroller troller determines that an administrative office does not meet the also reorganizes this section clarity readability. definition of a place of business of the seller. The comptroller amends the definition of "Comptroller's website" The comptroller also adds to the definition of "place of business in subsection (a)(4) to provide the correct website address. of the seller - general definition" that an outlet, office, facility, or any similar location that contracts with a business to process The comptroller amends the definition of "engaged in business" certain orders or invoices is not a place of business of the seller if in subsection (a)(7) conform the reference §3.286 of this comptroller determines that these certain locations are the title. sole purpose avoid due or rebate tax contracting The comptroller amends subsection (a)(9) identify activities location. This change is made pursuant definition "place that are not included in definition of term "fulfill". of business of retailer" in Tax Code, §321.002(a)(3)(B).
The comptroller adds a definition "Internet order" in new The comptroller adds a definition "remote seller" in new sub- subsection (a)(10) distinguish between order placed section (a)(19) as defined in §3.286 of title. Subsequent through Internet as opposed order placed in person paragraphs are renumbered. at a seller's location as contemplated in Tax Code, §321.203(c) The comptroller amends definition of "temporary place of §323.203(c). The comptroller has determined that orders business seller" in renumbered subsection (a)(23) clarify placed a website, through a software application, or other that a temporary place business seller includes a sale method using Internet constitute orders over Internet. outside walls a distribution center, manufacturing plant, Orders placed by phone call using Voice over Internet Protocol storage yard, warehouse, or similar facility seller in a park- or a mobile device are not considered Internet orders. The ing lot similar space sharing same physical address as January Texas Register The comptroller explicitly provides in new subparagraph (A) that facility. Sellers may hold sales public outside walls orders taken by traveling salespersons are not placed per- their facilities temporary basis. The comptroller clarifies that son at seller's place business Texas. Traveling sales- these constitute temporary places business seller. persons typically take orders at customer's location The comptroller makes these changes throughout section. customer's location not place business "operated by Subsequent paragraphs are renumbered. seller" as required by Tax Code, §321.002(a)(3)(A). See Comp- The comptroller adds new subsection (b), restating provision troller's Decision No. 48,843 (2009) ("According plain former subsection (e) concerning place business - special meaning statutory definition, site must "operated by definitions. The new subsection (b) substantially same retailer" before it can considered retailer's place former subsection (e) but changes more closely reflect business."). definition "place business retailer" Tax Code, The comptroller adds new subparagraph (B) include pro- §321.002(a)(3)(A). seller does not receive orders at adminis- vision former subsection (h)(3)(B) concerning orders received trative offices solely serve base operations at place business seller fulfilled at lo- traveling salesperson provide administrative support cation not place business seller changes. traveling salesperson. Moreover, mere fact salesper- son assigned work from, work at, distribution center, In new clause (i), comptroller does not incorporate
manufacturing plant, storage yard, warehouse, similar facility phrase "through Internet" found former subsection operated by seller does not mean seller receives orders (h)(3)(B). Clause (i) does not apply orders over Internet at these locations. Therefore, these locations by themselves do because Internet orders are not received at place business meet definition place business retailer under seller Texas. The comptroller also includes language Tax §321.002(a)(3)(A). comptroller amends sec- concerning traveling salespersons new clause (i). tion reflect these changes throughout. Therefore, comp- In new clause (ii), comptroller addresses where orders taken troller no longer includes administrative offices supporting travel- by traveling salesperson are considered received. comp- ing salespersons distribution centers, manufacturing plants, troller clarifies orders taken traveling salespersons are storage yards, warehouses, similar facilities operated received seller purchaser's location because seller salespersons assigned work defini- purchaser's location place business seller. tion "place business seller." *99 See Comptroller's Decision No. 48,843 (2009). In new paragraph (1)(A), the comptroller clarifies that locations The comptroller adds new subparagraph (C) to restate the pro- operated a seller must receive three or more orders in a calen- vision in former subsection (h)(3)(C) concerning orders fulfilled dar year from persons other than employees, independent con- at a place of business of the seller in Texas. The language is tractors and natural persons affiliated with the seller to consid- the same except for new language addressing traveling sales- ered a place of business of the seller in Texas. In new paragraph persons. (3) the comptroller restates the provisions from former subsec- tion (e) relating to purchasing offices with minor changes for ease The comptroller adds new subparagraph (D) restating the pro- of readability. vision in former subsection (h)(3)(D) concerning orders fulfilled within the state at a location that is not a place business of the The comptroller adds new subsection (c) to include the existing seller. The language is the same as it appeared in former sub- provisions former subsection (h) concerning local sales tax. section (h)(3)(D), except for new language addressing traveling The new subsection (c) is similar to former subsection (h) but salespersons. with some changes. New paragraph (1) provides the general sales tax rules as applied to specific situations and combines The comptroller adds new subparagraph (E) and includes the the provisions related to the consummation sale rule, as that provision in former subsection (h)(3)(E) concerning orders re- language appeared in former subsections (h)(1) and (h)(3). ceived outside the state and fulfilled outside the state with changes addressing traveling salespersons operating from lo- New subparagraph (A) restates the deleted language in former cation outside Texas and remote sellers. subsection (h)(3)(A) relating to the consummation sale rule for orders placed in person at seller's place business in Texas. In subparagraph (E) and throughout the section, the comptroller The comptroller includes in subparagraph (A) orders placed at amends the language to implement the Wayfair decision. The temporary place business the seller. The comptroller does Wayfair decision clarified the substantial nexus requirement es- not add the provisions found in former subsection (h)(6)(C) be- tablished in the United States Supreme Court analysis the Due cause it repeats the general consummation sale provisions Process Commerce Clauses the United States Constitu- applicable to temporary places business. tion. The Court stated that "{substantial} nexus is established when taxpayer {or collector} 'avails itself the substantial priv- Additionally, throughout new paragraph (1), the comptroller in- ilege carrying on business' in that jurisdiction." Wayfair, 138 S. corporates language found in former subsection (h)(4) con- Ct. at (quoting Polar Tankers, Inc. v. City Valdez, 557 cerning traveling salespersons. Tax Code, §321.002(a)(3)(A) U.S. 1, (2009)). The Court also reiterated that "States may does not support treating administrative offices or other locations not impose undue burdens on interstate commerce." that are not places business seller that merely serve as location which traveling salesperson operates place In light Wayfair decision, comptroller provides in sub- business seller. The comptroller makes this change paragraph (E) that remote seller that is required to collect Texas to conform consummation sales made traveling sales- use tax under §3.286(b)(2) must also collect local use tax based persons Tax Code, §321.203 §323.203. The comptroller location which item is shipped or delivered or at does not incorporate examples found in former subsection which purchaser item takes possession unless re- (h)(4) because examples merely restate consummation mote seller elects collect single local use tax rate enacted sale rules. in House Bill 2153. See Tax Code, §321.205(c) §323.205(c). PROPOSED RULES January 3, seller is engaged in business. See Tax Code, §§321.205, The comptroller adds new subparagraph (F) restating pro- vision in former subsection (h)(3)(F) concerning an exception 322.105, 323.205. for qualifying economic development agreements entered into When sale is consummated in Texas, seller is engaged in before January 2009, pursuant Tax Code, §321.203(c-4) - business in this state through presence property em- (c-5) §323.203(c-4) - (c-5) . ployees in state. See Tax §§151.107, 321.203, The comptroller adds new paragraph (2) includes lan- 323.203. Therefore, language seller engaged in guage in former subsection (h)(1) concerning local taxes business in local jurisdiction sales consummated in Texas due local use taxes due without any changes. The comptrol- is superfluous. Moreover, an engaged in business standard ler restates language in former subsection (h)(2) concerning local use tax does not give effect Tax Code's require- multiple special purpose district taxes multiple transit author- ment seller collect local use tax is due creates ity taxes in paragraph (3) without changes language. opportunity sellers avoid collecting local use tax due. See Tax Code §§151.103, 321.003, 321.205, 322.108, 323.003, The comptroller adds new paragraph (4) include language 323.205. Therefore, comptroller deletes "engaged found former subsection (h)(5) concerning drop shipments, business" requirement local use tax throughout section. but does incorporate examples found former subsec- In new paragraph (2), comptroller implements Wayfair tion (h)(5)(A). The comptroller adds new subparagraph (B) re- stating language found former subsection (h)(5)(B) without decision clarifying seller responsible collecting changes. local use tax due sale based upon location state order shipped delivered The comptroller adds new paragraph (5) add language purchaser item takes possession. found former subsection (h)(6) concerning itinerant vendors vending machines without changes language. In new subparagraphs (B) (C), comptroller also explic- itly states location seller does affect comptroller adds new paragraph (6) address consum- determination whether seller required collect addi- mation sale Internet orders. This subsection becomes ef- tional use due. In new clauses (i) (ii), comptrol- fective April 2020. ler provides two examples illustrate when seller required collect additional use taxes. In new subparagraph (A), comptroller provides general rule, certain exceptions, Internet orders received comptroller adds new subsection (e) include provi- place business seller Texas. website, software sions former subsection (b), relating effects other law, application, other method used place Internet order minor non-substantive changes provisions they ap- *100 excluded from the definition of place of business of the seller. peared in former subsection (b). Therefore, orders placed over the Internet not received at a place business of the seller in Texas. The comptroller adds new subsection (f), to include the pro- visions former subsection (c), relating to tax rates without In new subparagraph (B), the comptroller addresses orders changing the provisions as they appeared in former subsection placed using at the seller's device. (c). In new subparagraph (C), the comptroller addresses Internet or- The comptroller adds new subsection (g) to include the provi- ders fulfilled from a place business the seller in Texas. sions former subsection (d), relating to jurisdictional bound- aries, combined areas, city tax imposed through strategic In new subparagraph (D), the comptroller addresses Internet or- partnership agreements, with non-substantive changes made to ders fulfilled from a location in Texas that is not a place busi- the language on combined areas for ease readability. ness the seller in Texas. The comptroller adds new subsection (h) to include the provi-
In new subparagraph (E), the comptroller addresses Internet or- sions in former subsection (f) concerning places business ders fulfilled from a location outside the state. job sites crossed local taxing jurisdiction boundaries with a In new subparagraph (F), the comptroller provides a temporary change to the title the subsection to read places business exception the provisions regarding Internet orders for eco- the seller. No other changes were made to those provisions. nomic development agreements pursuant to Local Government The comptroller adds new subsection (i). Throughout new sub- Chapters entered into before Septem- section (i), the comptroller implements the Wayfair decision for ber 2019. local use tax to address sales consummated in Texas sales The comptroller adds new subsection (d) to include the provi- consummated outside Texas, including sales remote sell- sions in former subsection (i), relating to use tax. The comp- ers. troller adds new paragraph (1), which includes the language in In new paragraph (1), the comptroller adds the language found in former subsection (i)(1) concerning general local use tax rules former subsection (g)(1) with changes. The comptroller explicitly with non-substantive changes for ease readability. states in paragraph (1) that the location the seller in Texas The comptroller adds new paragraph (2) to include the provisions does not affect the determination whether the seller is required in former subsection (i)(2) concerning general use tax rules ap- to collect additional local use tax due. plied to specific situations with changes. In new paragraph (2), the comptroller includes the language in In light Wayfair decision, comptroller gives effect to the former subsection (g)(2) with changes. The comptroller makes Tax Code's requirement that sellers engaged in business in a cross-reference to new subsection (i)(3) amendment, state collect local use tax for sales consummated in Texas which implements House Bill 2153. The comptroller also clarifies for sales consummated outside Texas based on local tax- that new subsection (i)(2) applies to sales consummated in ing jurisdictions in which taxable item is first used, stored, or Texas. The amendment provides that local use tax is based upon consumed, regardless specific local jurisdiction in which January Texas Register In new paragraph (4), comptroller restates language in location in this state to which item is shipped delivered deleted subsection (g)(4) concerning purchasers responsible for at which purchaser takes possession. accruing remitting local taxes if seller fails to collect with- In new paragraph (3), amendment addresses local use tax out any changes. for remote sellers implements single local use tax rate In new paragraph (5), comptroller restates language remote sellers enacted House Bill 2153. deleted subsection (g)(5) concerning local tax due on sales New subparagraph (A)(i) provides that remote seller is required price taxable item without any changes. to collect remit using combined rate all applicable local The comptroller adds new paragraph (6) to relieve purchaser use taxes based on location to item is shipped liability additional use tax if purchaser pays local use delivered purchaser takes possession. New tax using single local use tax rate to eligible remote seller subparagraph (A)(ii) provides that remote seller's election, electing use single local use tax rate. Paragraph (6) also remote seller may elect use single local use tax rate published Texas Register. requires purchaser verify on comptroller's website remote seller has elected use single local use tax rate. New subparagraph (B) addresses single local use tax rate Moreover, paragraph (6) provides if remote seller is when remote seller stores tangible personal property listed on comptroller's website, purchaser will liable sold on marketplace. The comptroller recognizes additional use tax due. remote seller selling tangible personal property on marketplace The comptroller deletes existing subsection (b), relating may have control where their tangible personal property effect other law, as this information contained new sub- stored. Therefore, ease burden on remote seller, this section (e) with minor, non-substantive changes. provision allows remote seller elect single local use tax rate. The comptroller deletes existing subsection (c) relating tax rates, as information contained new subsection (f) with- New subparagraph (C) addresses notice requirements remote out change. seller sends comptroller its election revocation election use single local use tax rate. New clause (i) pro- comptroller deletes existing subsection (d) relating ju- vides remote seller must notify comptroller its elec- risdictional boundaries, combined areas, city tax imposed tion use single local use tax rate on form prescribed through strategic partnership agreements, this information comptroller may notify comptroller election its contained new subsection (g) non-substantive changes use tax permit application form before being able use sin- made provisions combined areas ease readabil- gle local use tax rate. New clause (i) also requires remote ity. seller use single use rate all its taxable comptroller deletes existing subsection (e) relating place items until remote seller revokes election writing business - special definitions, information contained comptroller. New clause (ii) addresses requirements new subsection (b) changes. remote seller revoke its election collect single use *101 tax rate by filing a form prescribed by the comptroller by October The comptroller deletes existing subsection (f) concerning 1 of the calendar year. places of business and job sites crossed by local taxing juris- diction boundaries, as this information is contained in to new New subparagraph (D)(i) provides the initial single local use tax subsection (h) with a change only to the title the subsection rate 1.75%, which is in effect for the period beginning October to read places business the seller. 1, 2019, and ending December 31, 2019. Subparagraph (D)(ii) provides the initial single local use tax rate 1.75%, which is The comptroller deletes subsection (g) concerning sellers' and in effect for the period beginning January 1, 2020, and ending purchasers' responsibilities for collecting or accruing local taxes, December 31, 2020. as those provisions, except for subsection (g)(3), which was deleted in its entirety, are contained in new subsection (i) with New subparagraph (E) provides that before the beginning a changes. calendar year, the comptroller will publish notice the single local use tax rate that will be in effect for that calendar year in The comptroller deletes existing subsection (h) concerning local the Texas Register. sales tax, as this information is contained in new subsection (c) with changes. New subparagraph (F) provides the calculation for the single lo- cal use tax rate. The comptroller deletes existing subsection (i) concerning use tax, as this information is contained in new subsection (d) New subparagraph (G) provides that a purchaser may request changes. a refund based on local use taxes paid in a calendar year. The refund is difference between single local use tax rate The comptroller adds new subsection (k)(5) to implement House paid by purchaser and amount purchaser would have Bill 1525, to address sales taxable items through marketplace paid based on combined tax rate all applicable local use providers. Subsequent paragraphs are renumbered. taxes. Non-permitted purchasers may request a refund directly from comptroller on an annual basis without having to meet The provisions related to remote sellers, single local use tax rate, requirements in §3.325(a)(1) this title (relating to Refunds and marketplace providers take effect October 1, 2019. and Payments Under Protest) and statute limitation under Tom Currah, Chief Revenue Estimator, has determined that dur- Tax Code, §111.104. ing first five years that proposed amendment is in effect, New subparagraph (H) addresses marketplace providers to pro- amendment: will not create or eliminate a government pro- vide that a marketplace provider may only use combined tax gram; will not require creation or elimination employee rate all applicable local use taxes when computing amount positions; will not require an increase or decrease in future leg- use tax collect and remit. islative appropriations to agency; will not require an increase PROPOSED RULES January 3, 101 and use tax authorized under Tax Code, §324.021, county landfill or decrease in fees paid agency; will not increase or de- and criminal detention center sales and use tax authorized under Tax crease number individuals subject rules' applicabil- Code, §325.021, or crime control and prevention district sales and ity; and will not positively or adversely affect this state's economy. use authorized under Tax Code, §323.105. Mr. Currah also has determined each year first (6) Drop shipment--A transaction in which an order is re- five years rule is effect, proposed amendments would ceived by a seller one location, but item purchased is shipped by benefit public by conforming rule current statutes. This seller from another location, or shipped by seller's third-party rule proposed under Tax Code, Title 2, does not require supplier, directly a location designated by purchaser. a statement fiscal implications small businesses or rural communities. The proposed amendments would have no signif- (7) Engaged business--This term has meaning given icant fiscal impact on state government, units govern- §3.286 this title (relating Seller's Purchaser's Responsibil- ment, or individuals. There would be no anticipated significant ities[, including Nexus, Permits, Returns Reporting Periods, economic cost public. Collection Exemption Rules]). Comments proposal may submitted Teresa G. (8) Extraterritorial jurisdiction--An unincorporated area Bostick, Director, Tax Policy Division, P.O. Box Austin, contiguous corporate boundaries a city defined Texas 78711-3528. Comments must received no later than Local Government Code, §42.021 days from date publication proposal Texas Register. (9) Fulfill--To complete an order by transferring taxable item directly purchaser Texas location, or ship or deliver The comptroller proposes this amendment under Tax Code, taxable item location designated by purchaser. The §111.002 (Comptroller's Rules; Compliance; Forfeiture), term does not include tracking an order, determining shipping costs, provides comptroller authority amend rules managing inventory, or other activities do not involve transfer, reflect changes constitution or laws United States shipment, or delivery taxable item purchaser or location judicial interpretations thereof. designated purchaser. amendments implement Tax §§151.0595 (Single Lo- (10) Internet order--An order placed website, software cal Tax Rate Remote Sellers), 321.203 (Consummation application, other method using Internet purchaser using Sale), 323.203 (Consummation Sale), South Dakota computer mobile device does belong seller. Internet v. Wayfair, Inc., S. Ct. (June 2018). order does include an order placed phone call using Voice over Internet Protocol mobile device. §3.334. Local Sales Use Taxes. (11) [(10)] Itinerant vendor--A person who travels vari- (a) Definitions. following words terms, when used ous locations purpose receiving orders making this section, shall have following meanings, unless context taxable items who does operate place business. For exam- clearly indicates otherwise. ple, person who sells rugs back truck person (1) Cable system--The system through cable ser- drives different location each day an itinerant vendor. A person vice provider delivers cable television bundled cable service, who sells items through vending machines also itinerant vendor. those terms defined §3.313 title (relating Cable Televi- salesperson operates out office, place business, other sion Service Bundled Cable Service). *102 location that provides administrative support to the salesperson is not an itinerant vendor. (2) City--An incorporated city, municipality, town, or vil- lage. (12) [(11)] Kiosk--A small stand-alone area or structure: (3) City sales and use tax--The tax authorized under Tax (A) that is used solely to display merchandise or to sub- Code, §321.101(a), including the additional municipal sales and use mit orders for taxable items a data entry device, or both; tax authorized under Tax Code, §321.101(b), the municipal sales and (B) that is located entirely within a location that is a use tax for street maintenance authorized under Tax Code, §327.003, place of business of another seller, such as a department store or shop- Type A Development Corporation sales and use tax authorized un- ping mall; and der Local Government Code, §504.251, Type B Development Cor- poration sales and use tax authorized under Local Government Code, (C) at which taxable items are not available for imme- §505.251, a sports and community venue project sales and use tax diate delivery to a purchaser. adopted by a city under Local Government Code, §334.081, and a mu- nicipal development corporation sales and use tax adopted by a city un- (13) [(12)] Local taxes--Sales and use taxes imposed by der Local Government Code, §379A.081. The term does not include any local taxing jurisdiction. fire control, prevention, and emergency medical services district (14) [(13)] Local taxing jurisdiction--Any of following: sales and use tax authorized under Tax Code, §321.106, or munic- ipal crime control and prevention district sales and use tax authorized (A) a city that imposes sales and use tax as provided under Tax Code, §321.108. under paragraph (3) of this subsection; (4) Comptroller's website--The agency's website concern- (B) a county that imposes sales and use tax as provided
ing local taxes located at: https://comptroller.texas.gov/taxes/sales/ under paragraph (5) of this subsection; [http://comptroller.texas.gov/taxinfo/local/]. (C) a special purpose district created under Special (5) County sales and use tax--The tax authorized under District Local Laws Code or other provisions of Texas law is autho- Tax Code, §323.101, including a sports and community venue project rized to impose sales and use tax by Tax Code or other provisions sales and use tax adopted by a county under Local Government Code, of Texas law and as governed by provisions of Tax Code, Chapters §334.081. term does not include county health services sales or 323 and other provisions of Texas law; or January 3, Texas Register (20) [(16)] Seller--This term has meaning given (D) a transit authority imposes sales and use tax as §3.286 of this title and also refers any agent or employee of authorized by Transportation Code, Chapters, 451, 452, 453, 457, or seller. and governed by provisions of Tax Code, Chapter, 322. (21) [(17)] Special purpose district--A local governmental (15) Marketplace provider--This term has meaning entity authorized by Texas legislature for a specific purpose, such given §3.286 of this title. as crime control, a local library, emergency services, county health ser- (16) Order placed person--An order placed by a pur- vices, or a county landfill and criminal detention center. chaser with seller while physically present at seller's place of (22) [(18)] Storage--This term has meaning given business system, computer, or other device of seller, regard- §3.346 of this title (relating Use Tax). less of whether seller uses Internet, a phone, or a catalog make order. term does not include Internet orders. (23) [(19)] Temporary place business seller--A lo- cation operated by a seller for a limited period time for purpose (17) [(14)] Place business seller - general defini- selling receiving orders for taxable items and where seller tion--An established outlet, office, or location operated by a seller for has inventory available for immediate delivery a purchaser. For ex- purpose selling taxable items those other than employees, in- ample, a person who rents a booth at a weekend craft fair or art show dependent contractors, natural persons affiliated seller sell take orders for jewelry, or a person who maintains a facil- receives three or more orders for taxable items during calen- ity at a job site rent tools equipment a contractor during dar year. Places business seller include, but are not limited construction real property, has established a temporary place busi- to, call centers, showrooms, clearance centers. [The term also in- ness. A temporary place business seller includes a sale outside cludes any location operated by a seller which seller receives distribution center, manufacturing plant, storage yard, warehouse, three or more orders for taxable items during calendar year. For ex- or similar facility seller parking lot or similar space sharing ample, home office three or more items are sold through an same physical address as facility but not within walls online auction website is place business.] website, software ap- facility. plication, or other method used place an Internet order not place business seller. Additional criteria for determining when (24) [(20)] Transit authority--A metropolitan rapid transit location place business seller provided subsection authority (MTA), advanced transportation district (ATD), regional or (b)[(e)] this section [administrative offices;] distribution centers, subregional transportation authority (RTA), city transit department manufacturing plants, storage yards, warehouses similar facilities; (CTD), county transit authority (CTA), regional mobility authority kiosks; purchasing offices. An outlet, office, facility, or any loca- (RMA) or coordinated county transportation authority created under tion contracts retail or commercial business process Transportation Chapters 452, 453, 457, or 460. business invoices, purchase orders, bills lading, or other equiva- (25) [(21)] Traveling salesperson--A seller, or agent or lent records onto sales tax added, including office operated employee seller, who visits potential purchasers person solicit purpose buying selling taxable goods used or con- sales, who does not carry inventory ready immediate sale, but sumed by retail or commercial business, "place business who may carry samples or perform demonstrations items sale. retailer" if comptroller determines outlet, office, fa- cility, location functions or exists avoid tax legally due under (26) [(22)] Two percent cap--A reference general this chapter exists solely rebate portion tax imposed rule that, except otherwise provided law explained this chapter contracting business. An outlet, office, facility, lo- this section, seller cannot collect, purchaser obligated cation does exist avoid tax legally due under this chapter pay, more than 2.0% sales price taxable item total solely rebate portion imposed chapter if out- use taxes all taxing jurisdictions let, office, facility, location provides significant business services, *103 (27) [(23)] Use--This term has the meaning given in §3.346 beyond processing invoices, to the contracting business, including lo- of this title. gistics management, purchasing, inventory control, or other vital busi- ness services. (28) [(24)] Use tax--A tax imposed on the storage, use or other consumption of a taxable item in this state. (18) [(15)] Purchasing office--An outlet, office, facility, or any location that contracts with a retail or commercial business to (b) Place of business of the seller - special definitions. In addi- process for that business invoices, purchase orders, bills of lading, or tion to the general definition of the term "place of business of the seller" other equivalent records onto which sales tax is added, including an in subsection (a)(17) of this section, the following rules apply. office operated for the purpose of buying selling taxable goods to be used or consumed by the retail or commercial business. (1) Distribution centers, manufacturing plants, storage yards, warehouses, similar facilities. (19) Remote Seller--As defined in §3.286 of this title, re- mote seller is a seller engaged in business in this state whose only ac- (A) A distribution center, manufacturing plant, storage tivity in the state is: yard, warehouse, or similar facility operated by a seller at which the seller receives three or more orders of taxable items during a calendar (A) engaging in regular or systematic solicitation of year from persons other than employees, independent contractors, sales of taxable items in this state by the distribution of catalogs, natural persons affiliated with the seller. periodicals, advertising flyers, or other advertising, by means of print, radio, or television media, or by mail, telegraphy, telephone, computer (B) If a location that is a place of business of the seller, data base, cable, optic, microwave, or other communication system such as a sales office, is in the same building as a distribution center, the purpose of effecting sales of taxable items; or manufacturing plant, storage yard, warehouse, or similar facility op- erated by a seller, then the entire facility is a place of business of the (B) soliciting orders taxable items by mail or seller. through other media including the Internet or other media that may be developed in the future. (2) Kiosks. A kiosk is not a place of business of the seller the purpose of determining where a sale is consummated local PROPOSED RULES January 2020 45 103 (B) Order received at a place of business of the seller in tax purposes. A seller who owns or operates a kiosk in Texas is, how- Texas, fulfilled at a location that is not a place of business of the seller. ever, engaged in business in this state as provided in §3.286 of this title. (i) Except as provided in paragraph (6) of this sub- (3) Purchasing offices. section, when an order that is placed over the telephone, by any means (A) A purchasing office is not a place of business of the other than in person, or through a traveling salesperson is received by seller if the purchasing office exists solely rebate a portion of the the seller at a place of business of the seller in Texas, the seller ful- local sales use tax imposed by Tax Code, Chapter or fills the order at a location that is not a place of business of the seller in a business with which it contracts; or if the purchasing office func- Texas, such as a warehouse or distribution center, the sale is consum- tions or exists avoid the tax legally due under Tax Code, Chapter mated at the place of business of the seller at which the order the or 323. purchasing office does not exist solely rebate a por- taxable item is received. tion of the local sales use tax or avoid the tax legally due under (ii) Orders taken by traveling salespersons operating Tax Chapter or if the purchasing office provides signif- out of a place of business of the seller in Texas are received by the icant business services the contracting business beyond processing seller at the place of business of the seller in Texas from which the invoices, including logistics management, purchasing, inventory con- traveling salesperson operates. Orders taken by traveling salespersons trol, or other vital business services. that are not operating out of a place of business of the seller in Texas are (B) In making a determination under subparagraph (A) not received by the seller at a place of business of the seller in Texas. of this paragraph, as whether a purchasing office provides signif- Orders taken by traveling salespersons are not received by the seller at icant business services the contracting business beyond processing the purchaser's location. invoices, the comptroller will compare the total value of the other busi- (C) Order fulfilled at a place of business of the seller in ness services value of processing invoices. If the total value of Texas. When an order is placed in person at a location that is not a other business services, including logistics management, purchas- place of business of seller in this state, such a kiosk, when an ing, inventory control, or other vital business services, is less than order is placed through a traveling salesperson, or when an order is value of service process invoices, then purchasing office will placed over telephone, through Internet, or by any means other be presumed not be a place of business of seller. than in person, seller fulfills order at a location is a (C) If comptroller determines a purchasing of- place business seller Texas, sale is consummated at fice is not a place business seller, sale any taxable item place business seller where order is fulfilled. is deemed be consummated at place business seller from (D) Order fulfilled within state at a location is whom purchasing office purchased taxable item resale not a place business seller. When order is received by a local sales use taxes are due according following rules. seller at any location other than place business seller this (i) When taxable items are purchased from Texas state or by traveling salesperson does operate out place seller, local sales taxes are due based location seller's place business seller Texas, seller fulfills order at business where sale is deemed consummated, determined location Texas is place business seller, then sale accordance with subsection (c) this section. is consummated at location Texas which order is shipped or delivered, or at which purchaser item takes possession. (ii) When sale taxable item is deemed consummated at location outside this state, local use tax is due (E) Order received outside state, fulfilled outside based location where items first stored, used consumed state. When order is received by seller at location outside entity contracted purchasing office accordance Texas, including orders received traveling salesperson operating subsection (d) this section. from location outside remote seller, order shipped delivered into local taxing jurisdiction location (c) Local sales tax. Determining taxing jurisdictions outside state, sale consummated location Texas. which sales tax due; consummation sale. However, use tax due based upon location state (1) General rules applied specific situations. item shipped delivered purchaser *104 Except for the special rules applicable to remotes sellers in subsection the item takes possession as provided in subsection (d) of this section. (i)(3) of this section, direct payment permit purchases in subsection (j) Except as provided in subsection (i)(3) of this section, a remote seller of this section, and certain taxable items, including taxable items sold required to collect state use tax under §3.286(b)(2) of this title must also by a marketplace provider, as provided in subsection (k) of this section, collect local use tax based on the location to which the item is shipped each sale of a taxable item is consummated at the location indicated by or delivered or at which the purchaser of the item takes possession. the provisions of this subsection. following rules, taken from Tax (F) Exception for qualifying economic development Code, §321.203 and §323.203, apply to all sellers engaged in business agreements entered into before January 1, 2009, pursuant to Tax Code, in this state, regardless of whether they have no place of business in §321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This subparagraph is Texas, a single place of business in Texas, or multiple places of busi- effective until September 1, 2024. If applicable, the local sales tax due ness in the state. on the sale of a taxable item is based on the location of the qualifying (A) Order placed in person at a seller's place of business warehouse, which is a place of business of the seller, from which the in Texas. Except as described in subparagraph (F) of this paragraph item is shipped or delivered or at which the purchaser of the item takes and paragraph (6) of this subsection, for an order placed in person by possession. a purchaser for a taxable item at a seller's place of business in Texas, (2) Local sales taxes are due to each local taxing jurisdic- including at a temporary place of business of the seller, the sale of that tion in effect at the location where the sale is consummated. Local use item is consummated at that place of business of the seller, regardless tax may also be due if the total amount of local sales taxes due does not of the location where the order is fulfilled. Orders taken by traveling reach two percent cap, and the item purchased is shipped or deliv- salespersons are not placed in person at seller's place of business in ered to a location in one or more different local taxing jurisdictions, as Texas. provided in subsection (d) of this section. January 3, Register (E) Internet order fulfilled from a location outside of (3) Multiple special purpose district taxes, multiple transit state. When an Internet order is shipped or delivered into a local taxing authority sales taxes, or a combination of two may apply a single
jurisdiction from a location outside of Texas, sale is not consum- transaction. If sale of a taxable item is consummated at a location mated at a location in Texas. However, local use tax is due based upon within boundaries of multiple special purpose districts or transit location in this state which item is shipped or delivered or at authorities, local sales tax is owed each of jurisdictions in effect purchaser of item takes possession as provided in sub- at that location. For example, a place of business of seller located in section (d) of this section. city San Antonio is within boundaries both San Antonio Advanced Transportation District San Antonio Metropolitan (F) Exception for certain economic development agree- Transit Authority, seller is required collect sales tax for both ments. Subparagraphs (A) - (E) this paragraph do not apply sales transit authorities. Similarly, a place business seller in Flower taxable items for Internet orders made by a seller who has entered Mound is located within boundaries two special purpose districts, into an economic development agreement pursuant Local Govern- Flower Mound Crime Control District Flower Mound Fire ment Chapters a local taxing jurisdiction before Control District, seller is responsible for collecting sales tax for September 2019. This subparagraph is effective until December 31, both special purpose districts. 2022. (4) Drop shipments. (d) Local use tax. provisions addressing imposition state use tax in §3.346 this title also apply imposition (A) When an order for a taxable item is received at a local use tax. For example, consistent §3.346(e) this title, all seller's place business Texas, or by a traveling salesperson operat- taxable items are shipped or delivered a location this state that ing out a place business this state, item is drop-shipped is within boundaries a local taxing jurisdiction are presumed directly purchaser from a third-party supplier, sale is con- have been purchased for use local taxing jurisdiction as well as summated at, local sales tax is due based upon, location presumed have been purchased for use state. place business seller where order is received. (1) General rules. (B) When an order for a taxable item is received by seller at location outside Texas, or traveling salesperson oper- (A) When local use taxes are due addition local ating from location outside this state, item is drop-shipped sales taxes provided subsection (c) this section, all applicable directly purchaser from third-party supplier, item is subject use taxes must be collected or accrued following order until use tax. See subsection (d) this section concerning use tax. two percent cap is reached: city, county, special purpose district, transit authority. If more than one special purpose district use tax is due, (5) Itinerant vendors; vending machines. all such taxes are be collected or accrued before any transit authority (A) Itinerant vendors. Sales made itinerant vendors use tax is collected or accrued. See subparagraphs (D) (E) this are consummated at, itinerant vendors must collect sales tax based paragraph. upon, location where item is delivered or at purchaser (B) If local use tax cannot collected or accrued at item takes possession. Itinerant vendors do not have any respon- its full rate without exceeding two percent cap, seller cannot sibility collect use tax. collect it, or any portion it, purchaser responsible (B) Vending machines. Sales taxable items made accruing it. vending machine are consummated location vend- (C) If seller collects sales tax on an item, or ing machine. See §3.293 this title (relating Food; Food Prod- purchaser accrues sales tax on an item, use tax same ucts; Meals; Food Service) more information about vending ma- type jurisdiction due on same item. For example, after chine sales. city sales tax has been collected or accrued an item, no use tax (6) Internet orders. Subparagraphs (A) - (E) this para- due same or different city on item, but use tax may due graph become effective April 2020. county, special purpose district, transit authority. Similarly, if one more special purpose district sales taxes have been collected (A) General rule. Except provided paragraph, accrued item, no special purpose district use tax due Internet orders received place business seller item, if one more transit authority taxes have been collected Texas. accrued item, no transit authority use due item. (B) Orders placed using seller's device. When pur- *105 (D) Collection or accrual of use tax for multiple special chaser places an order for a taxable item with a seller using the Internet purpose districts. If more than one special purpose district use tax is in on a computer or device of the seller at the seller's place of business in effect at the location where use of an item occurs, the special purpose Texas, the sale is consummated at the place of business where the order district taxes are due in the order of their effective dates, beginning is placed, regardless of where the order is fulfilled. with the earliest effective date, until the two percent cap is met. The (C) Internet order fulfilled from a place of business of effective dates of all special purpose district taxes are available on the the seller in Texas. When a seller fulfills an Internet order at a location comptroller's website. However, if the collection or accrual of use tax that is a place of business of the seller in Texas, the sale is consummated for the district with the earliest effective date would exceed the two at the place of business of the seller where the order is fulfilled. percent cap, the tax for that district is not due and the seller or purchaser should determine, following the criteria in subparagraphs (A) - (C) of (D) Internet order fulfilled from a location in Texas that this paragraph, whether use tax is due for the district that next became is not a place of business of the seller in Texas. When a seller fulfills effective. an Internet order at a location in Texas that is not a place of business of the seller in Texas, the sale is consummated at the location in Texas (i) If the competing special purpose district taxes be- to which the order is shipped or delivered, or at which the purchaser of came effective on the same date, the special purpose district taxes are the item takes possession. due in the order of the earliest date for which the election in which the PROPOSED RULES January 3, local use taxes due, the purchaser is responsible for accruing such taxes district residents authorized the imposition of sales and use tax by the and remitting them directly to the comptroller. district was held. (C) Sale consummated in any local taxing jurisdictions (ii) If the elections to impose the local taxes were imposing less than 2.0% in total local taxes - local sales taxes and use held on the same date, the special purpose district taxes are due in the taxes due. If a sale is consummated at a location in Texas where the order of the earliest date for which the enabling legislation under which total local sales tax rate imposed by the taxing jurisdictions in effect at each district was created became effective. that location does not equal 2.0% according to the provisions of sub- (E) Collection or accrual of use tax for multiple transit section (c) of this section, and the item is shipped or delivered to the authorities. If more than one transit authority use tax is in effect at purchaser at location in this state is inside the boundaries of the location where use of an item occurs, and the two percent cap has different local taxing jurisdiction, additional local use tax may due not been met, the transit authority taxes are due in the order of their based on the location to which the order is shipped or delivered or at effective dates, beginning with the earliest effective date, until the two which the purchaser of the item takes possession, subject to the two percent cap is met. The effective dates of all transit authority taxes percent cap. The seller is responsible for collecting any additional lo- are available on the comptroller's website. However, if the collection cal use taxes due on the sale, regardless of the location of the seller in or accrual use tax for the authority the earliest effective date Texas. See subsection (i) this section. If the seller fails to collect the would exceed the two percent cap, the tax for authority is not due additional local use taxes due, the purchaser is responsible for accruing and the seller or purchaser should determine, following the criteria in such taxes and remitting them directly the comptroller. subparagraphs (A) - (D) this paragraph, whether use tax is due for (i) Example one - if an order is received in person at the authority next became effective. place business the seller, such the sale is consummated at (i) If the competing transit authorities became effec- the location where the order is received as provided under subsection tive on the same date, the transit authority taxes are due in the order (c)(1)(A) this section, and the local sales tax due on the sale does the earliest date for which the election in which the authority residents not meet the two percent cap, additional local use taxes are due based authorized the imposition sales and use tax by the authority was held. on the location which the order is shipped or delivered or at which purchaser the item takes possession, subject the provisions in (ii) If elections impose local taxes were held paragraph (1) this subsection. on same date, transit authority use taxes are due in order earliest date which enabling legislation under which each (ii) Example two - if seller receives an order authority was created became effective. taxable item at seller's place business Texas, and seller ships or delivers item from an out-of-state location location this (2) General use tax rules applied specific situations. state as designated by purchaser, local sales tax is due based upon following fact patterns explain how local use tax is collected or location place business seller where order is accrued remitted comptroller based on, subject to, received. If local tax due on item does meet two general rules paragraph (1) this subsection. percent cap, use taxes, subject provisions paragraph (1) this (A) Sale consummated outside state, item delivered subsection, due based upon location where items are shipped from outside state or from location is operated by or delivered or at which purchaser item takes possession. seller - local use tax due. Except as provided subsection (i)(3) (e) Effect other law. this section, if sale is consummated outside this state according provisions subsection (c) this section, item purchased (1) Tax Code, Title Subtitles (General Provisions) is either shipped or delivered location this state designated B (Enforcement Collection), Tax Code, Chapter (Multistate by purchaser from location outside state, or if order Tax Compact) Tax Code, Chapter (Limited Sales, Excise, is drop shipped directly purchaser from third-party supplier, Use Tax) apply transactions involving local taxes. Related sections local use tax is owed based upon location this state which this title comptroller rulings shall also apply respect local order is shipped or delivered or at which purchaser item taxes. This includes authorities such court cases federal law takes possession. seller is responsible collecting local use affect whether item is taxable is excluded exempt from tax due sale. If seller does collect local use taxes due taxation. sale, purchaser responsible accruing such taxes (2) Permits, exemption certificates, resale certificates remitting them directly comptroller according provisions required Tax Chapter shall also satisfy requirements paragraph (1) this subsection. For example, if order taxable collecting remitting taxes, unless otherwise indicated item received seller location outside Texas, order this section other sections this title. For example, see subsection shipped purchaser location outside state, (n) section concerning prior contract exemptions. use due based upon location order shipped delivered purchaser item takes possession. *106 (3) Any provisions in this section or other sections of this title related to a seller's responsibilities for collecting and remitting lo- (B) Sale consummated in Texas outside a local taxing cal taxes to the comptroller shall also apply to a purchaser if the seller jurisdiction, item delivered into one or more local taxing jurisdictions - does not collect local taxes that are due. The comptroller may proceed local use tax due. If a sale is consummated at a location in Texas that is against the seller or purchaser the local tax owed by either. outside of the boundaries of any local taxing jurisdiction according to the provisions of subsection (c) of this section, and the order is shipped (f) Tax rates. Except as otherwise provided by law, no local or delivered to the purchaser at a location in this state that is within the governmental entity may adopt or increase a sales and use tax if, as a boundaries of one or more local taxing jurisdictions, local use tax is result of the adoption or increase of the tax, the combined rate of all due based on the location to which the items are shipped or delivered sales and use taxes imposed by local taxing jurisdictions having terri- or at which the purchaser of the item takes possession. The seller is tory in the local governmental entity would exceed 2.0% at any location responsible collecting the local use taxes due on the sale, regardless within the boundaries of the local governmental entity's jurisdiction. of the location of the seller in Texas. If the seller fails to collect any The following are the local tax rates that may be adopted. January 3, Register are within the boundaries of the city purposes of city sales and use (1) Cities. Cities may impose sales and use tax at a rate of tax. up to 2.0%. (B) Counties, transit authorities, and special purpose (2) Counties. Counties may impose sales and use tax at districts may enter into strategic partnership agreements. Sales rates ranging from 0.5% to 1.5%. and use taxes imposed by those taxing jurisdictions do apply in (3) Special purpose districts. Special purpose districts may the limited-purpose annexed area as part of a strategic partnership
impose sales and use tax at rates ranging from 0.125% to 2.0%. agreement between a city and an authorized district. However, a county, special purpose district, or transit authority sales and use tax, or (4) Transit authorities. Transit authorities may impose any combination of these three types of taxes, may apply at locations sales and use tax at rates ranging 0.25% to 1.0%. included in a strategic partnership agreement between a city and an (g) Jurisdictional boundaries, combined areas, and city tax im- authorized district if the tax is imposed in that area by the applicable posed through strategic partnership agreements. jurisdiction as allowed under its own controlling authorities. (1) Jurisdictional boundaries. (C) Prior September 1, 2011, the term "district" was defined in Local Government Code, §43.0751 as a municipal utility (A) City boundaries. City taxing jurisdictional bound- district or water control and improvement district. definition aries cannot overlap one another and city cannot impose sales and was amended effective September mean conservation and use tax in an area that is already within the jurisdiction of another city. reclamation district operating under Water Code, Chapter 49. (B) County boundaries. County tax applies all loca- (h) Places of business of the seller and job sites crossed by tions within county. local taxing jurisdiction boundaries. (C) Special purpose district and transit authority bound- (1) Places business of the seller crossed by local taxing aries. Special purpose districts and transit authorities may cross or jurisdiction boundaries. If place business seller is crossed by share boundaries other local taxing jurisdictions and may encom- one or more local taxing jurisdiction boundaries so portion pass, in whole or in part, other local taxing jurisdictions, including place business seller is located within taxing jurisdiction and cities and counties. A geographic location or address in this state may remainder place business seller lies outside lie within boundaries more than one special purpose district or taxing jurisdiction, tax is due local taxing jurisdictions in which more than one transit authority. sales office located. If there is no sales office, sales tax is due (D) Extraterritorial jurisdictions. Except as otherwise local taxing jurisdictions in any cash registers are located. provided by paragraph (3) this subsection concerning strategic part- (2) Job sites. nership agreements and subsection (l)(5) this section concerning City El Paso Fort Bliss, city sales use tax does apply (A) Residential repair remodeling; new construc- taxable sales are consummated outside boundaries city, tion an improvement realty. When contractor improving real including sales made in city's extraterritorial jurisdiction. However, property under separated contract, job site crossed by an extraterritorial jurisdiction may lie within boundaries spe- boundaries one or more local taxing jurisdictions, local taxes due cial purpose district, transit authority, county, or any combination on any separately stated charges taxable items incorporated into three, sales use taxes those jurisdictions would ap- real property must allocated local taxing jurisdictions based on ply those sales. total square footage real property improvement located within each jurisdiction, including square footage any standalone struc- (2) Combined areas. combined area area where tures are part construction, repair, or remodeling project. boundaries city overlap boundaries one or more other local For more information about tax due on materials used residential taxing jurisdictions as result annexation additional territory new construction job sites, refer §3.291 this title (relating by city, where, as result imposition city tax Contractors). area addition local taxes imposed existing tax- ing jurisdictions, combined local tax rate would exceed 2.0%. (B) Nonresidential real property repair improve- comptroller shall make accommodations maintain 2.0% rate any ment. When taxable services are performed repair, remodel, or combined area distributing 2.0% tax revenue generated these restore nonresidential real property, including pipeline, transmission combined areas local taxing jurisdictions located combined line, or parking lot, crossed boundaries one or more areas provided Tax §321.102 or Health Safety Code, local taxing jurisdictions, local taxes due on taxable services, §775.0754. Combined areas are identified on comptroller's web- including materials any other charges connected services site. Sellers engaged transactions local use taxes performed, must allocated among taxing jurisdictions due combined area, persons who must self-accrue re- based upon total mileage square footage, appropriate, mit tax directly comptroller, must use combined area repair, remodeling, restoration project located each jurisdiction. code when reporting tax rather than codes individual For more information about due materials used nonresidential city, county, special purpose districts, transit authorities make real property repair remodeling job sites, refer §3.357 up combined area. title (relating Nonresidential Real Property Repair, Remodeling, *107 and Restoration; Real Property Maintenance). (3) City tax imposed through strategic partnership agree- ments. (i) Sellers' and purchasers' responsibilities for collecting or ac- cruing local taxes. (A) The governing bodies of a district, as defined in Local Government Code, §43.0751, and a city may enter into a lim- (1) Sale consummated in Texas; seller responsible for col- ited-purpose annexation agreement known as a strategic partnership lecting local sales taxes and applicable local use taxes. When a sale agreement. Under this agreement, the city may impose sales and use of a taxable item is consummated at a location in Texas as provided by tax within all or part of the boundaries of a district. Areas within a dis- subsection (c) of this section, the seller must collect each local sales tax trict that are annexed for this limited purpose are treated as though they in effect at the location. If the total rate of local sales tax due on the sale PROPOSED RULES January 3, 107 does not reach the two percent cap, and the seller ships or delivers the tice of the single local use tax rate in the Texas Register will be in item into another local taxing jurisdiction, then the seller is required to effect for calendar year. collect additional local use taxes due, if any, based on the location (F) Calculating the single local use tax rate. The single which the item is shipped or delivered or at which the purchaser of the local use tax rate effective in a calendar year is equal the estimated item takes possession, regardless of the location of the seller in Texas. average rate of local sales and use taxes imposed in this state during the For more information regarding local use taxes, refer subsection (d) preceding state fiscal year. As soon as practicable after the end of a state of this section. fiscal year, the comptroller must determine the estimated average rate (2) Out-of-state sale; seller engaged in business in Texas. of local sales and use taxes imposed in this state during the preceding Except as provided in paragraph (3) of this subsection, when a sale is state fiscal year by: not consummated in Texas, a seller who is engaged in business in this (i) dividing the total amount of net local sales and state is required collect and remit local use taxes due, if any, on orders use taxes remitted the comptroller during the state fiscal year by the taxable items shipped or delivered at the direction of the purchaser total amount net state sales and use tax remitted the comptroller into a local taxing jurisdiction in this state based upon the location in during the state fiscal year; this state which the item is shipped or delivered or at which the purchaser the item takes possession as provided in subsection (d) (ii) multiplying the amount computed under clause this section. (i) this subparagraph by the rate provided in Tax Code, §151.051; (3) Local use tax rate for remote sellers. (iii) rounding the amount computed under clause (ii) (A) A remote seller required collect remit one or this subparagraph the nearest .0025. more local use taxes in connection a sale a taxable item must compute the amount using: (G) Direct refund. A purchaser may request a refund based on local use taxes paid in a calendar year for the difference be- (i) the combined tax rate all applicable local use tween the single local use tax rate paid by the purchaser the amount taxes based on the location which the item is shipped or delivered or the purchaser would have paid based on the combined tax rate for all at which the purchaser the item takes possession; or applicable local use taxes. Notwithstanding the refund requirements (ii) remote seller's election, the single local use under §3.325(a)(1) this title (relating Refunds Payments Un- tax rate published in Texas Register. der Protest), non-permitted purchaser may request a refund directly from comptroller for tax paid in previous calendar year, no (B) A remote seller is storing tangible personal earlier than January following calendar year within statute property in Texas be used for fulfillment facility market- limitation under Tax Code, 111.104 (Refunds). place provider has certified it will assume rights duties seller respect tangible personal property, as provided (H) Marketplace providers. Notwithstanding subpara- for in §3.286 this title, may elect single local use tax rate under graph (A) this paragraph, marketplace providers may not use subparagraph (A)(ii) this paragraph. single local use tax rate must compute amount local use tax collect remit using combined tax rate all applicable local (C) Notice comptroller election revocation use taxes. election. (4) Purchaser responsible for accruing remitting local (i) Before using single local use tax rate, re- taxes if seller fails collect. mote seller must notify comptroller its election using form pre- scribed by comptroller. A remote seller may also notify comp- (A) If seller does collect state sales tax, any troller election on its use tax permit application form. The remote applicable local sales taxes, both, on sale taxable item seller must use single local use tax rate all its sales taxable is consummated in Texas, then purchaser is responsible for filing items until election is revoked as provided in clause (ii) this sub- return paying tax. The local sales taxes due are based on paragraph. location this state where sale is consummated provided subsection (c) this section. (ii) A remote seller may revoke its election by filing form prescribed by comptroller. If comptroller receives (B) A purchaser who buys item use notice October 1, revocation will be effective January seller who does collect state use tax, any applicable local use following year. If comptroller receives notice after October 1, taxes, both, is responsible filing return paying tax. revocation will be effective January year after follow- local use taxes due based on location where item is first ing year. For example, remote seller must notify comptroller stored, used, consumed purchaser. October 1, 2020, revocation effective January 1, 2021. If (C) For more information about how report pay comptroller receives revocation November 1, 2020, re- use tax directly comptroller, see §3.286 title. vocation will effective January 1, 2022. (5) Local tax due price taxable item, (D) Single local use tax rate. defined Tax §151.007, report period taxable (i) single local use tax rate effect pe- item purchased period taxable item first stored, riod beginning October ending December 31, 2019, used, otherwise consumed taxing jurisdiction. 1.75%. (6) purchaser liable additional use if *108 (ii) The single local use tax rate in effect for the pe- the purchaser pays local use tax using the rate elected by an eligible re- riod beginning January 1, 2020, and ending December 31, 2020, is mote seller according to paragraph (3) of this subsection. The remote 1.75%. seller must be identified on the comptroller's website as electing to use the single local use tax rate. A purchaser must verify that the remote (E) Annual publication of single local use tax rate. Be- seller is listed on the comptroller's website. If the remote seller is not fore the beginning of a calendar year, the comptroller will publish no- January 3, Register listed on comptroller's website, purchaser will liable for ad- an extraterritorial jurisdiction may lie within boundaries of a spe-
ditional use tax due in accordance to paragraph (4) of this subsection. cial purpose district, transit authority, county, or any combination of three, and sales and use taxes for those jurisdictions would ap- [(b) Effect of other law.] ply to those sales.] [(1) Tax Code, Title 2, Subtitles A (General Provisions) [(2) Combined areas. A combined area is an area where and B (Enforcement and Collection), Tax Code, Chapter (Multi- boundaries of a city overlap boundaries of one or more other local state Tax Compact) and Tax Code, Chapter (Limited Sales, Excise, taxing jurisdictions as a result an annexation additional territory and Use Tax) apply transactions involving local taxes. Related sec- by city, and where, as result imposition city tax tions this title and comptroller rulings shall also apply respect in area in addition local taxes imposed by existing tax- local taxes. This includes authorities such as court cases and federal ing jurisdictions, combined local tax rate would exceed 2.0%. The law that affect whether an item taxable or excluded or exempt from comptroller shall make accommodations maintain a 2.0% rate in any taxation.] combined area. Sellers engaged in transactions local sales or [(2) Permits, exemption certificates, and resale certificates use taxes are due in a combined area, or persons who must self-accrue required by Tax Code, Chapter 151, shall also satisfy requirements and remit tax directly comptroller, must use combined area for collecting and remitting local taxes, unless otherwise indicated by local code when reporting tax rather than codes for indi- this section or other sections this title. For example, see subsection vidual city, county, special purpose districts, or transit authorities that (n) this section concerning prior contract exemptions.] make up combined area. The comptroller shall distribute tax revenue generated in these combined areas local taxing jurisdic- [(3) Any provisions in this section or other sections this tions located in combined areas as provided in Tax Code, §321.102 title related a seller's responsibilities collecting and remitting lo- or Health and Safety Code, §775.0754. Combined areas are identified cal taxes comptroller shall also apply a purchaser if seller comptroller's website.] does not collect local taxes that are due. The comptroller may proceed against seller or purchaser local tax owed by either.] [(3) City tax imposed through strategic partnership agree- ments.] [(c) Tax rates. Except as otherwise provided by law, no local governmental entity may adopt or increase a sales and use tax if, as a re- [(A) The governing bodies a district, as defined in sult adoption or increase tax, combined rate all sales Local Government Code, §43.0751, and a city may enter into a lim- and use taxes imposed by local taxing jurisdictions having territory in ited-purpose annexation agreement known as a strategic partnership local governmental entity would exceed 2.0% at any location within agreement. Under this agreement, city may impose sales and use boundaries local governmental entity's jurisdiction. fol- tax within all or part boundaries a district. Areas within a dis- lowing are local tax rates may adopted.] trict that are annexed this limited purpose are treated as though they within boundaries city purposes city sales and use [(1) Cities. Cities may impose sales and use tax at a rate tax.] up 2.0%.] [(B) Counties, transit authorities, and special purpose [(2) Counties. Counties may impose sales and use tax at districts may enter into strategic partnership agreements. Sales and rates ranging from 0.5% 1.5%.] use taxes imposed by those taxing jurisdictions do apply lim- ited-purpose annexed area as part strategic partnership agreement [(3) Special purpose districts. Special purpose districts between city and an authorized district. However, county, special may impose sales and use tax at rates ranging from 0.125% 2.0%.] purpose district, or transit authority sales and use tax, or any combina- [(4) Transit authorities. Transit authorities may impose tion these three types taxes, may apply at locations included sales and use tax rates ranging 0.25% 1.0%.] strategic partnership agreement between city and authorized dis- trict if tax imposed area by applicable jurisdiction as [(d) Jurisdictional boundaries, combined areas, city tax allowed under its own controlling authorities.] imposed through strategic partnership agreements.] [(C) Prior September 1, 2011, term "district" was [(1) Jurisdictional boundaries.] defined Local Government Code, §43.0751 as municipal utility [(A) City boundaries. City taxing jurisdictional bound- district or water control improvement district. definition aries cannot overlap one another city cannot impose sales was amended effective September mean conservation use tax area already within jurisdiction another city.] reclamation district operating under Water Chapter 49.] [(B) County boundaries. County tax applies all loca- [(e) Place business - special definitions. In addition tions within county.] general definition term "place business" subsection (a)(14) this section, following rules apply.] [(C) Special purpose district transit authority boundaries. Special purpose districts transit authorities may [(1) Administrative offices supporting traveling salesper- cross or share boundaries other taxing jurisdictions sons. Any outlet, office, or location operated seller serves may encompass, whole or part, other taxing jurisdictions, base operations traveling salesperson provides ad- including cities counties. A geographic location address this ministrative support traveling salesperson place business.] state may lie within boundaries more than one special purpose [(2) Distribution centers, manufacturing plants, storage district more than one transit authority.] yards, warehouses, similar facilities.] [(D) Extraterritorial jurisdictions. Except otherwise [(A) distribution center, manufacturing plant, storage provided paragraph (3) this subsection concerning strategic part- yard, warehouse, similar facility operated seller nership agreements subsection (l)(5) section concerning seller receives three more orders taxable items during calen- City El Paso Fort Bliss, city use does apply *109 dar year is a place of business.] taxable sales that are consummated outside the boundaries of the city, including sales made in a city's extraterritorial jurisdiction. However, PROPOSED RULES January 2020 45 109 sales office, sales tax is due to the local taxing jurisdictions in which [(B) If a salesperson who receives three or more orders any cash registers are located.] for taxable items within a calendar year is assigned to work from, or to work at, a distribution center, manufacturing plant, storage yard, [(2) Job sites.] warehouse, or similar facility operated by a seller, then the facility is a [(A) Residential repair and remodeling; new construc- place of business.] tion of improvement to realty. When a contractor is improving real [(C) If a location that is a place of business of the seller, property under a separated contract, and the job site is crossed by the such as a sales office, is in the same building as a distribution center, boundaries of one or more local taxing jurisdictions, the local taxes due manufacturing plant, storage yard, warehouse, or similar facility op- on any separately stated charges for taxable items incorporated into the erated by a seller, then the entire facility is a place of business of the real property must be allocated to the local taxing jurisdictions based on seller.] the total square footage of the real property improvement located within each jurisdiction, including the square footage of any standalone struc- [(3) Kiosks. A kiosk is not a place of business for the pur- tures are part of the construction, repair, or remodeling project. pose of determining where a sale is consummated for local tax pur- For more information about tax due on materials used at residential poses. A seller who owns or operates a kiosk in Texas is, however, and new construction job sites, refer to §3.291 of this title (relating to engaged in business in this state as provided in §3.286 of this title.] Contractors).] [(4) Purchasing offices.] [(B) Nonresidential real property repair and improve- [(A) A purchasing office is not a place of business if ment. When taxable services are performed to repair, remodel, or re- the purchasing office exists solely to rebate a portion of the local sales store nonresidential real property, including a pipeline, transmission and use tax imposed by Tax Code, Chapter or to a business line, or parking lot, is crossed by the boundaries of one or more with which it contracts; or if the purchasing office functions or exists local taxing jurisdictions, the local taxes due on the taxable services, to avoid the tax legally due under Tax Code, Chapter or 323. A including materials and any other charges connected to the services per- purchasing office does not exist solely to rebate a portion of the local formed, must be allocated among the local taxing jurisdictions based sales and use tax or to avoid the tax legally due under Tax Chap- upon the total mileage or square footage, as appropriate, of the repair, ter or if the purchasing office provides significant business remodeling, or restoration project located in each jurisdiction. For services, beyond processing invoices, to the contracting business, in- more information about tax due on materials used at nonresidential cluding logistics management, purchasing, inventory control, or other real property repair remodeling job sites, refer to §3.357 of this ti- vital business services.] tle (relating Nonresidential Real Property Repair, Remodeling, Restoration; Real Property Maintenance).] [(B) When the comptroller determines a purchasing office is not a place of business, the sale of any taxable item is deemed [(g) Sellers' purchasers' responsibilities collecting or be consummated at place business of seller from whom accruing local taxes.] purchasing office purchased taxable item resale local sales [(1) Sale consummated in Texas; seller responsible col- use taxes are due according following rules.] lecting local sales taxes applicable local use taxes. When a sale [(i) When taxable items are purchased a Texas taxable item is consummated at location in as provided by seller, local sales taxes are due based on location seller's place subsection (h) this section, seller must collect each local sales business where sale is deemed be consummated, as determined tax in effect at location except as provided in paragraph (3) this in accordance with subsection (h) this section.] subsection. If total rate local sales tax due on sale does reach two percent cap, seller ships or delivers item into [(ii) When sale taxable item is deemed another local taxing jurisdiction in which seller is engaged in busi- be consummated location outside this state, local use tax is due ness, then seller is required collect additional local use taxes due, based on location where items are first stored, used or consumed if any, based on location which item is shipped or delivered. by entity contracted purchasing office in accordance For more information regarding local use taxes, refer subsection (i) subsection (i) this section.] this section.] [(C) In making determination under subparagraph (A) [(2) Out-of-state sale; seller engaged in business in Texas. this paragraph, whether purchasing office provides significant A seller who is engaged in business in this state is required collect business services contracting business, comptroller will look remit local use taxes due, if any, on orders taxable items shipped books records purchasing office determine whether or delivered direction purchaser into local taxing juris- total value business services provided contracting busi- diction this state which seller is engaged business.] ness equals exceeds total value processing invoices. If total value business services provided, including logistics manage- [(3) seller is only required collect local sales use ment, purchasing, inventory control, other vital business services, taxes local taxing jurisdiction seller is engaged is less than total value service process invoices, then business.] purchasing office will presumed place business [(4) Purchaser responsible accruing remitting local seller.] taxes if seller fails collect.] [(f) Places business job sites crossed local taxing [(A) If seller does collect state sales tax, any jurisdiction boundaries.] applicable local sales taxes, both sale taxable item [(1) Places business crossed local taxing jurisdiction is consummated Texas, then purchaser is responsible filing boundaries. If place business is crossed one more local tax- return paying tax. sales taxes due based ing jurisdiction boundaries so portion place business location this state where sale consummated provided located within taxing jurisdiction remainder place subsection (h) section.] business lies outside taxing jurisdiction, due taxing jurisdictions office located. If there no *110 TexReg January 3, 2020 Texas Register other than in person, and the seller fulfills the order at a location that [(B) purchaser who buys an item for use in Texas is a place of business in Texas, the sale is consummated at the place of from a seller who does not collect the state use tax, any applicable local business where the order is fulfilled.] use taxes, or both, is responsible for filing a return and paying the tax. local use taxes due are based on the location where the item is first [(D) Order fulfilled within the state at a location that is stored, used, or consumed by the purchaser.] not a place of business. When an order is received by a seller at any location other than a place of business of the seller in this state, and [(C) For more information about how report and pay the seller fulfills the order at a location in Texas that is not a place of use tax directly the comptroller, see §3.286 of this title.] business of the seller, then the sale is consummated at the location in [(5) Local tax is due on the sales price of a taxable item, as Texas which the order is shipped or delivered, or the location where defined in Tax Code, §151.007, in the report period in which the taxable it is transferred the purchaser.] item is purchased or the period in which the taxable item is first stored, [(E) Order received outside of the state, fulfilled outside
used, or otherwise consumed in a local taxing jurisdiction.] of the state. When an order is received by a seller at a location outside [(h) Local sales tax. Determining the local taxing jurisdictions of Texas, and the order is shipped or delivered into a local taxing juris- which sales tax is due; consummation of sale.] diction from a location outside of the state, the sale is not consummated at a location in Texas. However, local use tax is due based upon the lo- [(1) General rule. Except for the special rules applicable cation in this state which the item is shipped or delivered or at which direct payment permit purchases and certain taxable items as provided possession of the item is taken by the purchaser as provided in subsec- in subsections (j) and (k) of this section, each sale of a taxable item is tion (i) of this section.] consummated at the location indicated by the provisions of this subsec- tion. Local sales taxes are due each local taxing jurisdiction in effect [(F) Exception for qualifying economic development at the location where the sale is consummated. Local use tax may also agreements entered into before January 1, 2009, pursuant Tax Code, due if the total amount of local sales taxes due does not reach the §321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This subparagraph is two percent cap, and the item purchased is shipped or delivered a effective until September 2024. If applicable, the local sales tax due location in one or more different local taxing jurisdictions, as provided the sale of a taxable item is based on the location of the qualifying in subsection (i) of this section.] warehouse, which is a place of business of the seller, from which the item is shipped or delivered or at which the purchaser takes possession [(2) Multiple special purpose district taxes, multiple tran- of the item.] sit authority sales taxes, or a combination of the two may apply a single transaction. If the sale of a taxable item is consummated at a [(4) Orders received by traveling salespersons. Orders location within the boundaries of multiple special purpose districts or taken by traveling salespersons are received by the seller at the transit authorities, local sales tax is owed each of the jurisdictions in administrative office or other place of business from which the trav- effect at that location. For example, a place of business located in the eling salesperson operates, such sales consummated at the city of San Antonio is within the boundaries of both the San Antonio location indicated in paragraph (3) of this subsection. For example, Advanced Transportation District the San Antonio Metropolitan if a traveling salesperson who operates out of a place of business of Transit Authority, the seller is required collect sales tax for both a seller in Texas takes an order for a taxable item, the order is transit authorities. Similarly, a place of business in Flower Mound is lo- fulfilled at a location that is not a place of business of the seller in this cated within boundaries of two special purpose districts, Flower state, sale is consummated at place of business from which Mound Crime Control District Flower Mound Fire Control Dis- salesperson operates, in accordance paragraph (3)(B) of this trict, seller is responsible for collecting sales tax for both special subsection. Similarly, if a traveling salesperson takes an order a purpose districts.] taxable item, order is fulfilled at a place of business of seller in this state, sale is consummated at location of place [(3) Consummation of sale. following rules, taken business where order is fulfilled, in accordance paragraph from Tax §321.203 §323.203, apply all sellers engaged (3)(C) this subsection.] in business in this state, regardless whether they have a place business in or multiple places business in state.] [(5) Drop shipments.] [(A) Order placed in person at a seller's place busi- [(A) When an order a taxable item is received at a ness in Texas. When a purchaser places an order a taxable item in seller's place business in Texas, or by a traveling salesperson operat- person at a seller's place business in Texas, sale item is ing out a place business in this state, item is drop-shipped consummated at place business, regardless location where directly purchaser from a third-party supplier, sale is consum- order is fulfilled, except in limited circumstances described in mated at, local sales tax is due based upon, location place subparagraph (F) this paragraph, concerning qualifying economic business where order is received. When an order a taxable development agreements.] item is received by a seller at one location, but shipped by seller purchaser from a different location, sale is consummated at, [(B) Order received at place business in Texas, ful- local sales tax is due based upon, location designated paragraph filled at location is place business. When an order is (3) this subsection. If taxes due based location placed over telephone, through Internet, or by any means other seller's place business at which sale is consummated equal than person is received by seller at place business Texas, less than 2.0%, additional use may due based upon lo- seller fulfills order at location is place busi- cation this state which purchased item is shipped or delivered ness seller Texas, such as warehouse distribution center, at possession item is taken by purchaser provided sale is consummated at place business at order subsection (i) this section.] taxable item is received.] [(B) When an order taxable item received [(C) Order fulfilled at place business Texas. seller location outside Texas, traveling salesperson When order placed person location place operating from location outside this state, item drop- business seller state, such kiosk, when order shipped directly purchaser third-party supplier, item placed over telephone, through Internet, any means PROPOSED RULES January
CP Ex-16-0026 of 0030 to a county, special purpose district, or transit authority. Similarly, if is subject to use tax. See subsection (i) of this section concerning use one or more special purpose district sales taxes have been collected or tax.] accrued for an item, no special purpose district use tax is due on that [(6) Itinerant vendors; vending machines; temporary item, and if one or more transit authority sales taxes have been collected places of business.] or accrued for an item, no transit authority use tax is due on that item.] [(A) Itinerant vendors. Sales made by itinerant vendors [(D) Collection or accrual of use tax for multiple special are consummated at, and itinerant vendors must collect sales tax based purpose districts. If more than one special purpose district use tax is in upon, the location where the item is delivered or where the purchaser effect at the location where use of an item occurs, the special purpose takes possession of the item. Itinerant vendors do not have any respon- district taxes are due in the order of their effective dates, beginning sibility to collect use tax.] with the earliest effective date, until the two percent cap is met. The effective dates of all special purpose district taxes are available on the [(B) Vending machines. Sales of taxable items made comptroller's website. However, if the collection or accrual of use tax from a vending machine are consummated at the location of the vend- for the district with the earliest effective date would exceed the two ing machine. See §3.293 of this title (relating to Food; Food Prod- percent cap, the tax for that district is not due and the seller or purchaser ucts; Meals; Food Service) for more information about vending ma- should determine, following the criteria in subparagraphs (A) - (C) of chine sales.] this paragraph, whether use tax is due for the district that next became [(C) Temporary places of business.] effective.] [(i) Item transferred to purchaser at time of sale. [(i) If the competing special purpose districts be- When a seller operates a temporary place of business, and items came effective on the same date, the special purpose district taxes are purchased are transferred the purchasers at the time of sale, the due in the order of the earliest date for which the election in which the sales are consummated at, and local sales tax is due based upon, the district residents authorized the imposition of sales and use tax by the location of the temporary place of business.] district was held.] [(ii) Order accepted at temporary place of business [(ii) If the elections impose the local taxes were prior June 19, 2009. If a seller received an order at a temporary place held on the same date, the special purpose district taxes are due in the of business prior June 19, 2009, and the order was fulfilled at another order the earliest date for which the enabling legislation under which place business the seller in this state, the sale was consummated each district was created became effective.] at, local sales taxes are due based upon, the location the place [(E) Collection or accrual use tax for multiple transit business where the order was fulfilled not the temporary location authorities. If more than one transit authority use tax is in effect at where the order was received.] the location where use an item occurs, the two percent cap has [(iii) Order accepted at temporary place business not been met, the transit authority taxes are due in the order their on or after June 2009. When a seller receives an order in person effective dates, beginning with the earliest effective date, until the two temporary place business the order is fulfilled at another percent cap is met. The effective dates all transit authority taxes location, sale is consummated at, local sales taxes are due based are available on comptroller's website. However, if collection upon, location temporary place business where order or accrual use tax for authority earliest effective date was received.] would exceed two percent cap, tax for that authority is not due seller or purchaser should determine, following criteria in [(i) Use tax. provisions addressing imposition state subparagraphs (A) - (D) this paragraph, whether use tax is due for use tax in §3.346 this title also apply imposition local use authority that next became effective.] tax. For example, consistent §3.346(e) this title, all taxable items are shipped or delivered location in this state is [(i) If competing transit authorities became ef- within boundaries local taxing jurisdiction are presumed fective on same date, transit authority taxes are due in order have been purchased for use in local taxing jurisdiction as well as earliest date which election which authority res- presumed have been purchased use state.] idents authorized imposition sales use tax by authority was held.] [(1) General rules.] [(ii) If elections impose local taxes were held [(A) When local use taxes are due addition local on same date, transit authority use taxes are due order sales taxes provided subsection (h) this section, all applicable earliest date enabling legislation under which each use taxes must be collected or accrued following order until authority was created became effective.] two percent cap is reached: city, county, special purpose district, transit authority. If more than one special purpose district use tax is due, [(2) General use tax rules applied specific situations. all such taxes be collected or accrued before any transit authority following fact patterns explain how local use tax is be collected use tax is collected or accrued. See subparagraphs (D) (E) this or accrued remitted comptroller based on, subject to, paragraph.] general rules paragraph (1) this subsection.] [(B) If local use tax cannot collected or accrued [(A) Sale consummated outside state, item deliv- its full rate without exceeding two percent cap, seller cannot ered from outside state or from location Texas is oper- collect it, or any portion it, purchaser is responsible ated seller - local use tax due. If sale is consummated outside accruing it.] this state according provisions subsection (h) this sec- tion, item purchased is either shipped or delivered location [(C) If seller collects local sales tax on an item, this state designated purchaser from location outside purchaser accrues sales tax on item, use tax same state, if order is drop shipped directly purchaser type jurisdiction due same item. For example, once third-party supplier, use tax owed based upon location city tax has been collected accrued item, no use tax state order shipped delivered. If seller en- due same different city item, but use may due January Register *112 where the taxable items are first used or otherwise consumed by the gaged in business in the local taxing jurisdiction into which the order permit holder. is shipped or delivered, the seller is responsible for collecting the lo- cal use tax due on the sale. If the seller does not collect the local use (2) If, in a local taxing jurisdiction, storage facilities con- taxes due on the sale, the purchaser is responsible for accruing such tain taxable items purchased under a direct payment exemption certifi- taxes and remitting them directly to the comptroller according to the cate and at the time of storage it is not known whether the taxable items provisions in paragraph (1) of this subsection. For example, if an order will be used in Texas, then the taxpayer may elect to report the use tax for a taxable item is received by a seller at a location outside of Texas, either when the taxable items are first stored in Texas or are first re- and the order is shipped to the purchaser from a location outside of the moved from inventory for use in Texas, as long as use tax is reported state, local use tax is due based upon the location to which the order is in a consistent manner. See also §3.288(i) of this title (relating to Direct shipped or delivered.] Payment Procedures and Qualifications) and §3.346(g) of this title. [(B) Sale consummated in Texas outside a local taxing (3) If local use tax is paid on stored items that are subse- jurisdiction, item delivered into one or more local taxing jurisdictions - quently removed from Texas before they are used, the tax may be re- local use tax due. If a sale is consummated at a location in Texas that is covered in accordance the refund and credit provisions of §3.325 outside of the boundaries of any local taxing jurisdiction according to of this title [(relating to Refunds and Payments Under Protest)] and the provisions of subsection (h) of this section, and the order is shipped §3.338 of this title (relating to Multistate Tax Credits and Allowance or delivered to the purchaser at a location in this state that is within the of Credit for Tax Paid to Suppliers). boundaries of one or more local taxing jurisdictions, local use tax is due (k) Special rules for certain taxable goods services. Sales based on the location to which the items are shipped or delivered. If the of the following taxable goods services are consummated at, seller is engaged in business in the local taxing jurisdiction where the local tax is due based upon, the location indicated in this subsection. items are shipped or delivered, the seller is responsible for collecting the local use taxes due. If the seller fails to collect any local use taxes (1) Amusement services. Local tax is due based upon the due, the purchaser is responsible accruing such taxes remitting location where the performance or event occurs. For more information them directly to the comptroller. For example, if a seller uses its own on amusement services, refer to §3.298 of this title (relating to Amuse- delivery vehicle to transport a taxable item from a place of business ment Services). is outside the boundaries of a local taxing jurisdiction to a delivery (2) Cable services. When a service provider uses a cable location designated by a purchaser is inside the boundaries of a system to provide cable television or bundled cable services to cus- local taxing jurisdiction, the seller is responsible collecting the local tomers, local tax is due as provided in §3.313 this title. When use taxes due based on the location to which the items are delivered.] a service provider uses a satellite system provide cable services to [(C) Sale consummated in any local taxing jurisdictions customers, no local tax is due on the service in accordance the imposing less than 2.0% in total local taxes - local sales taxes, Telecommunications Act §602. possibly use taxes, due. If sale is consummated at location in Texas (3) Florists. Local sales tax is due on all taxable items sold where the total local sales tax rate imposed by the taxing jurisdictions by florist based upon the location where the order is received, regard- in effect at location does not equal or exceed 2.0% according less where or whom delivery is made. Local use tax is not due on the provisions subsection (h) this section, the item is shipped deliveries taxable items sold florists. For example, if the place or delivered the purchaser at location in this state is inside the business the florist where an order is taken is not within the bound- boundaries different local taxing jurisdiction, additional local use aries any local taxing jurisdiction, no local sales tax is due on the tax may be due based on the location which the order is shipped or item no local use tax is due regardless the location delivery. delivered, subject two percent cap. If seller is engaged in If florist delivers an order in local taxing jurisdiction at business local taxing jurisdiction into which order is shipped instruction an unrelated florist, if unrelated florist did not or delivered, seller is responsible collecting any additional local take order within boundaries local taxing jurisdiction, local use taxes due. See subsection (g) this section. If seller fails use tax is not due on delivery. For more information about florists' collect additional local use taxes due, purchaser is responsible sales use tax obligations, refer §3.307 this title (relating accruing such taxes remitting them directly comptroller. Florists). For example, if an order is received person at place business seller, such sale is consummated at location where (4) Landline telecommunications services. Local taxes due order is received as provided under subsection (h)(3)(A) this section, on landline telecommunications services are based upon location local sales tax due on sale does meet two percent device from which call or other transmission originates. If cap, additional local use taxes may due based on location seller cannot determine where call or transmission originates, local which order is shipped delivered, subject provisions taxes due are based on address which service is billed. For paragraph (1) this subsection. Or, if purchaser places order more information, refer §3.344 this title (relating Telecommu- taxable item seller's place business Texas, seller nications Services). ships delivers item out-of-state location location (5) Marketplace provider sales. Local taxes are due on this state as designated purchaser, local sales tax is due based sales taxable items through marketplace provider based on lo- upon location place business where order received. cation this state item shipped delivered If local tax due item does meet two percent cap, purchaser takes possession. For more information, refer §3.286 use tax, subject provisions paragraph (1) this subsection, this title. due based upon location where items are shipped delivered.] (6) [(5)] Mobile telecommunications services. Local taxes (j) Items purchased under direct payment permit. due mobile telecommunications services are based upon location (1) When taxable items are purchased under direct pay- customer's place primary use defined §3.344(a)(8) this ment permit, local use tax due based upon location where title, taxes are collected indicated §3.344(h) permit holder first stores taxable items, except if taxable title. items stored, then use due based upon location PROPOSED RULES January *113 special purpose districts that impose tax on residential use of natural (7) [(6)] Motor vehicle parking and storage. Local taxes gas and electricity and those districts eligible to impose the tax that do are due based on the location of the space or facility where the vehicle not currently do so is available on the comptroller's website. is parked. For more information, refer to §3.315 of this title (relating to Motor Vehicle Parking and Storage). (2) Telecommunication services. Telecommunications ser- vices are exempt from all local sales taxes unless the governing body (8) [(7)] Natural gas and electricity. Any local city and spe- of a city, county, transit authority, or special purpose district votes cial purpose taxes due are based upon the location where the natural to impose sales tax on these services. However, since 1999, under gas or electricity is delivered to the purchaser. As explained in subsec- Tax Code, §322.109(d), transit authorities created under Transporta- tion (l)(1) of this section, residential use of natural gas and electricity tion Code, Chapter 451 cannot repeal the exemption unless the repeal is exempt from all county sales and use taxes and all transit authority is first approved by the governing body of each city that created the sales and use taxes, most special purpose district sales and use taxes, local taxing jurisdiction. The local sales tax is limited to telecommuni- and many city sales and use taxes. A list of the cities and special pur- cations services occurring between locations within Texas. See §3.344 pose districts that do impose, and those that are eligible to impose, lo- of this title. The comptroller's website provides a list of local taxing cal sales and use tax on residential use of natural gas and electricity jurisdictions that impose tax on telecommunications services. is available on the comptroller's website. For more information, also refer to §3.295 of this title (relating to Natural Gas and Electricity). (3) Emergency services districts. (9) [(8)] Nonresidential real property repair and remodel- (A) Authority to exclude territory from imposition of ing services. Local taxes are due on services to remodel, repair, or emergency services district sales and use tax. Pursuant to the provi- restore nonresidential real property based on the location of the job site sions of Health and Safety Code, §775.0751(c-1), emergency ser- where the remodeling, repair, or restoration is performed. See also sub- vices district wishing to enact a sales and use tax may exclude from the section (h)(2)(B) [(f)(2)(B)] of this section and §3.357 of this title. election called to authorize the tax any territory in the district where the sales and use tax is then at 2.0%. The tax, if authorized by voters (10) [(9)] Residential real property repair and remodeling eligible vote on enactment tax, then applies only in and new construction a real property improvement performed under portions district included in election. The tax does apply a separated contract. When a contractor constructs a new improvement sales made in excluded territories in district and sellers in realty pursuant separated contract or improves residential real excluded territories should continue collect local sales and use taxes property pursuant separated contract, sale is consummated at local taxing jurisdictions in effect at time election un- job site at which contractor incorporates taxable items into der which district sales and use tax was authorized as applicable. customer's real property. See also subsection (h)(2)(A) [(f)(2)(A)] this section and §3.291 this title. (B) Consolidation districts resulting in sales tax sub-districts. Pursuant provisions Health and Safety Code, (11) [(10)] Waste collection services. Local taxes are due §775.018(f), if territory district proposed under Health and on garbage or other solid waste collection or removal services based Safety Code, Chapter 775 overlaps with boundaries another on location at waste is collected or from which waste district created under that chapter, commissioners court each removed. For more information, refer §3.356 this title (relating county and boards counties in districts are located may Real Property Service). choose create consolidated district overlapping territory. If (l) Special exemptions and provisions applicable individual two districts that want consolidate under Health and Safety Code, jurisdictions. §775.024 have different sales and use tax rates, territory former districts located within consolidated area will designated (1) Residential use natural gas and electricity. as sub-districts and sales tax rate within each sub-district will (A) Mandatory exemptions from local sales and use tax. continue imposed rate tax was imposed by former Residential use natural gas and electricity exempt from most lo- district that each sub-district was part prior consolidation. cal sales and use taxes. Counties, transit authorities, and most special (4) East Aldine Management District. purpose districts are authorized impose sales and use tax on residential use natural gas and electricity. Pursuant Tax Code, (A) Special sales and use tax zones within district; §321.105, any city that adopted local sales and use tax effective Oc- separate sales and use tax rate. As set out Special District Local tober 1, 1979, or later prohibited from imposing tax on residential Laws Code, §3817.154(e) and (f), East Aldine Management use natural gas and electricity. See §3.295 this title. District board may create special sales and use tax zones within boundaries District and, voter approval, enact special (B) Imposition tax allowed certain cities. Cities sales use tax rate each zone that different from sales and that adopted sales tax prior October 1, 1979, may, accor- use tax rate imposed rest district. dance provisions Tax Code, §321.105, choose repeal exemption residential use natural gas electricity. The comp- (B) Exemptions from special zone sales use tax. troller's website provides list cities impose tax on residen- sale, production, distribution, lease, or rental of; use, stor- tial use natural gas electricity, as well as list those cities age, other consumption within special sales use tax zone of; do currently impose tax, but are eligible do so. taxable item sold, leased, rented by entities identified clauses (i) - (vi) subparagraph exempt special zone sales (C) Effective January 2010, fire control, preven- use tax. State all other applicable taxes apply unless oth- tion, emergency medical services district organized under Local erwise exempted law. special zone sales use tax exemption Government Code, Chapter imposes sales tax under Tax Code, applies to: §321.106, crime control prevention district organized under Local Government Code, Chapter imposes tax under Tax (i) retail electric provider as defined Utilities Code, §321.108, located all part municipality im- Code, §31.002; poses tax residential use natural gas electricity pro- (ii) electric utility power generation company vided under Tax Code, §321.105 may impose residential use defined Utilities §31.002; natural gas electricity locations within district. list January Register *114 (iii) a gas utility as defined by Utilities Code, (4) Three-year statute of limitations. §101.003 or §121.001, or a person who owns pipelines used for (A) The exemption in paragraph (1) of this subsection transportation or sale of oil or gas or a product or constituent of oil or and the partial exemption paragraph (3) of this subsection have no gas; effect after three years the date the adoption or increase of the tax (iv) person who owns pipelines used for the trans- takes effect the local taxing jurisdiction. portation or sale of carbon dioxide; (B) The provisions of §3.319 of this title apply to this (v) telecommunications provider as defined by subsection to extent they are consistent. Utilities Code, §51.002; or (C) Leases. Any renewal or exercise of an option to (vi) cable service provider or video service extend time of lease or rental contract under exemptions pro- provider as defined by Utilities Code, §66.002. vided by this subsection shall be deemed to be new contract and no exemption will apply. (5) Imposition of city sales tax and transit tax on certain
military installations; El Paso and Fort Bliss. Pursuant to Tax Code, (5) Records. Persons claiming exemption provided §321.1045 (Imposition of Sales and Use Tax Certain Federal Military this subsection must maintain records which can be verified Installations), for purposes of local sales and use tax imposed under comptroller or exemption will be lost. Tax Code, Chapter 321, city of El Paso includes area within (6) Exemption certificate. An identification number re- boundaries of Fort Bliss to extent it city's extraterritorial quired on prior contract exemption certificates furnished to sellers. jurisdiction. However, El Paso transit authority does not include The identification number should be person's 11-digit Texas tax- Fort Bliss. See Transportation Code, §453.051 concerning Creation payer number or federal employer's identification (FEI) number. of Transit Departments. The agency certifies legal counsel has reviewed pro- (m) Restrictions on local sales tax rebates and other economic posal found it to be within state agency's legal authority incentives. Pursuant to Local Government Code, §501.161, Section 4A adopt. 4B development corporations may not offer provide economic incentives, such as local sales tax rebates authorized under Local Gov- Filed Office of Secretary of State on December 18, ernment Chapters 380 or 381, persons whose business consists primarily purchasing taxable items using resale certificates then 2019. reselling those same items related party. related party means TRD-201904910 person or entity owns at least 80% business enterprise William Hamner sales use taxes would be rebated as part an economic in- Special Counsel for Tax Administration centive. Comptroller Public Accounts (n) Prior contract exemptions. The provisions §3.319 this Earliest possible date adoption: February title (relating Prior Contracts) concerning definitions exclusions For further information, please call: (512) 475-2220 apply prior contract exemptions. ♦ ♦ ♦ (1) Certain contracts bids exempt. No local taxes are TITLE 37. PUBLIC SAFETY AND CORREC- due sale, use, storage, or other consumption this state tax- able items used: TIONS (A) for performance written contract executed PART 6. TEXAS DEPARTMENT OF prior effective date any local tax if contract may not be modified because tax; or CRIMINAL JUSTICE (B) pursuant obligation bid or bids submitted CHAPTER 161. COMMUNITY JUSTICE prior effective date any local tax if bid or bids contract entered into pursuant thereto are fixed price not subject ASSISTANCE DIVISION ADMINISTRATION withdrawal, change, or modification because tax. TAC §161.21 (2) Annexations. Any annexation territory into exist- ing local taxing jurisdiction also basis claiming exemption The Texas Board Criminal Justice proposes amendments provided this subsection. §161.21, concerning Role Judicial Advisory Council. The amendments are proposed conjunction proposed (3) Local taxing jurisdiction rate increase; partial exemp- rule review §161.21 published another section tion certain contracts bids. When existing taxing ju- Texas Register. proposed amendments specify func- risdiction raises its use tax rate, additional amount tax tions Judicial Advisory Council include reviewing proposed would be due result rate increase not due sale, changes Texas Department Criminal Justice (TDCJ) Com- use, storage, or other consumption state taxable items used: munity Justice Assistance Division (CJAD) standards mak- (A) performance written contract executed ing recommendations TDCJ CJAD director. proposed prior effective date tax rate increase if contract may amendments also make minor grammatical updates. modified because tax; or Jerry McGinty, Chief Financial Officer Department (B) pursuant obligation bid or bids submitted Criminal Justice, has determined each year first prior effective date rate increase if bid bids five years rule will effect, enforcing administering contract entered into pursuant thereto fixed price subject rule will have foreseeable implications related costs withdrawal, change, modification because tax. revenues state government. PROPOSED RULES January
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Volume 45 Number 21 May 22, 2020 Pages 3389 - 3
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Eddie Feng Director - Robert Sumners
Belinda Kirk Cecilia Mena Editor-in-Chief - Jill S. Ledbetter Joy L. Morgan
Breanna Mutschler Barbara Strickland GOVERNOR CONTROL OF AIR POLLUTION FROM VISIBLE *118 EMISSIONS AND PARTICULATE MATTER
Appointments.................................................................................3395 30 TAC §111.209 ...........................................................................3425 Proclamation 41-3732....................................................................3395 COMPTROLLER OF PUBLIC ACCOUNTS Proclamation 41-3733....................................................................3396 STATEWIDE PROCUREMENT AND SUPPORT Proclamation 41-3734....................................................................3397 SERVICES Proclamation 41-3735....................................................................3397 34 TAC §20.25...............................................................................3429 ATTORNEY GENERAL 34 TAC §20.81...............................................................................3433 Requests Opinions....................................................................3399 WITHDRAWN RULES Opinions.........................................................................................3399 TEXAS HISTORICAL COMMISSION EMERGENCY RULES HISTORIC SITES DEPARTMENT OF STATE HEALTH SERVICES 13 TAC §16.3.................................................................................3435 STANDARD OF CARE TEXAS MEDICAL BOARD 25 TAC §448.911 ...........................................................................3403 MEDICAL RECORDS PROPOSED RULES 22 TAC §165.7...............................................................................3435 CREDIT UNION DEPARTMENT STANDING DELEGATION ORDERS CHARTERING, OPERATIONS, MERGERS, 22 TAC §§193.5, 193.13, 193.17, 193.21......................................3435 LIQUIDATIONS TEXAS DEPARTMENT OF INSURANCE 7 TAC §91.708...............................................................................3405 PROPERTY AND CASUALTY INSURANCE STATE PRESERVATION BOARD 28 TAC §5.9502.............................................................................3435 RULES AND REGULATIONS OF THE BOARD TEXAS COMMISSION ON ENVIRONMENTAL 13 TAC §111.13 .............................................................................3406 QUALITY TEXAS DEPARTMENT OF LICENSING AND COAL COMBUSTION RESIDUALS WASTE REGULATION MANAGEMENT MOTOR FUEL METERING AND QUALITY 30 TAC §352.291...........................................................................3435 16 TAC §§97.1 - 97.3 ....................................................................3412 30 TAC §352.1401.........................................................................3436 16 TAC §§97.20 - 97.28 ................................................................3414 ADOPTED RULES 16 TAC §§97.40 - 97.43 ................................................................3415 CREDIT UNION DEPARTMENT 16 TAC §§97.50 - 97.60 ................................................................3416 CHARTERING, OPERATIONS, MERGERS, 16 TAC §§97.70 - 97.74 ................................................................3417 LIQUIDATIONS 16 TAC §97.80...............................................................................3418 7 TAC §91.1003.............................................................................3437 TEXAS EDUCATION AGENCY 7 TAC §91.6001.............................................................................3437
PLANNING AND ACCOUNTABILITY 7 TAC §91.6003.............................................................................3437 19 TAC §97.1005...........................................................................3418 7 TAC §91.6004.............................................................................3438
BUDGETING, ACCOUNTING, AND AUDITING 7 TAC §91.6006.............................................................................3438 19 TAC §109.23.............................................................................3422 7 TAC §91.6010.............................................................................3438
TEXAS BOARD OF ARCHITECTURAL EXAMINERS 7 TAC §91.6014.............................................................................3438
REGISTERED INTERIOR DESIGNERS TEXAS EDUCATION AGENCY TAC §5.183...............................................................................3423 STATE ADOPTION AND DISTRIBUTION OF INSTRUCTIONAL MATERIALS TEXAS COMMISSION ON ENVIRONMENTAL
QUALITY TAC §66.1403...........................................................................3439
TABLE OF CONTENTS ASSESSMENT COMPTROLLER OF PUBLIC ACCOUNTS TAC §101.1003.........................................................................3439 TAX ADMINISTRATION
STUDENT ATTENDANCE 34 TAC §3.334...............................................................................3499 19 TAC §129.1049.........................................................................3440 PROPERTY TAX ADMINISTRATION
TEXAS COMMISSION ON ENVIRONMENTAL 34 TAC §9.103...............................................................................3518 QUALITY 34 TAC §9.103...............................................................................3518
PUBLIC NOTICE RULE REVIEW 30 TAC §39.651.............................................................................3441 Proposed Rule Reviews GENERAL AIR QUALITY RULES Department Information Resources...........................................3523 30 TAC §101.601...........................................................................3442 Texas Board Physical Therapy Examiners ................................3523
APPLICATIONS PROCESSING Adopted Rule Reviews 30 TAC §281.19.............................................................................3445 Department Information Resources...........................................3523
WATER RIGHTS, PROCEDURAL Credit Union Department...............................................................3524 30 TAC §295.158...........................................................................3448 IN ADDITION WATER RIGHTS, SUBSTANTIVE Department Aging Disability Services
30 TAC §297.1...............................................................................3456 Correction Error.........................................................................3525 30 TAC §§297.41 - 297.43 ............................................................3457 Office Attorney General UNDERGROUND INJECTION CONTROL Texas Health Safety Code Texas Water Code Settlement No- 30 TAC §§331.2, 331.7, 331.9.......................................................3461 tice..................................................................................................3525 30 TAC §331.131...........................................................................3461 State Bar Texas
30 TAC §§331.262 - 331.267 ........................................................3461 Committee on Disciplinary Rules Referenda Proposed Rule Changes: Rule 13.05, Texas Rules Disciplinary Procedure ......3525 UNDERGROUND INJECTION CONTROL Office Consumer Credit Commissioner
30 TAC §331.19.............................................................................3462 Notice Rate Ceilings..................................................................3528 COAL COMBUSTION RESIDUALS WASTE MANAGEMENT Court Criminal Appeals 30 TAC §§352.1 - 352.6 ................................................................3492 Availability Grant Funds ...........................................................3528
30 TAC §§352.101, 352.111, 352.121, 352.131, 352.141 .............3493 Texas Education Agency 30 TAC §§352.201, 352.211, 352.221, 352.231, 352.241, 352.251, Correction Error.........................................................................3529 352.261, 352.271, 352.281, 352.301, 352.311...............................3493 Notice Correction: Request Applications (RFA) Concerning 30 TAC §§352.401, 352.411, 352.421, 352.431, 352.441, 352.451, 2020-2021 School Action Fund - Implementation Grant Program 3529 352.461, 352.471, 352.481 ............................................................3494 Notice Correction: Request Applications (RFA) Concerning 30 TAC §§352.601, 352.611, 352.621, 352.631, 352.641 .............3494 2020-2021 School Action Fund - Planning Grant Program...........3529
30 TAC §§352.701, 352.711, 352.721, 352.731, 352.741 .............3495 Commission on Environmental Quality
30 TAC §§352.801, 352.811, 352.821, 352.831, 352.841, Agreed Orders................................................................................3529 352.851 ..........................................................................................3495 Amended Notice Application Public Hearing an Air Quality 30 TAC §§352.901, 352.902, 352.911, 352.931, 352.941, 352.951, Standard Permit Concrete Batch Plant With Enhanced Controls: 352.961, 352.971, 352.981, 352.991 .............................................3496 Proposed Air Quality Registration Number 159751......................3532 30 TAC §352.1101, §352.1111 ......................................................3497 Amended Notice Application Public Hearing Air Quality Standard Permit Concrete Batch Plant With Enhanced Controls: 30 TAC §§352.1200, 352.1201, 352.1211, 352.1221, 352.1231, Proposed Air Quality Registration Number 159968......................3533
352.1241 ........................................................................................3497 Correction Error.........................................................................3534 TAC §§352.1301, 352.1311, 352.1321 .....................................3498 Notice Opportunity Comment on Shutdown/Default Order TAC §352.1421, §352.1431......................................................3499 Administrative Enforcement Action ..............................................3534 TABLE OF CONTENTS List Late Filers ..........................................................................3540
Notice Opportunity Comment on Agreed Orders Administra- tive Enforcement Actions ..............................................................3535 General Land Office Notice Opportunity Comment Default Orders Administra- Notice Opportunity Comment Coastal Management Pro- tive Enforcement Actions ..............................................................3536 gram Section Assessment Strategies Draft Report...........3540 *120 Notice Opportunity Comment on Settlement Environmental Texas Department Housing Community Affairs Claims under Texas Health Safety Code...........................3536 Notice Confirmation Virtual Public Hearings on Draft 2021 Notice Public Hearing on Assessment Administrative Penalties Low Income Home Energy Assistance Program State Plan ..........3541 Requiring Certain Actions SHRISHUBH, LLC Dba Super Food Mart: SOAH Docket No. 582-20-3433; TCEQ Docket No. 2017- Texas State Library Archives Commission 0898-PST-E ...................................................................................3537 Correction Error.........................................................................3542 Notice Public Hearing Assessment Administrative Penalties Panhandle Regional Planning Commission Requiring Certain Actions Star Container Company Inc.: SOAH Docket No. 582-20-3374; TCEQ Docket No. 2019-0679-IHW-E 3538 Legal Notice...................................................................................3542 Notice Public Hearing Proposed Revisions TAC Chapter Texas Water Development Board State Implementation Plan......................................3538 Applications April 2020.................................................................3543 Notice Water Quality Application .............................................3539 Workforce Solutions Heart Texas
Second Amended Notice Hearing (to Change Hearing Date Lo- cation) Lealco, Inc.: SOAH Docket No. 582-20-2399; TCEQ Docket Request Proposal (RFP #13200102) Operation Management No. 2018-1759-MSW; Proposed Permit No. .......................3539 Heart Texas Workforce Center System................................3543 Ethics Commission TABLE OF CONTENTS *121 ♦ ♦ ♦ Appointments
Appointments for May 11, 2020 Proclamation 41-3732 Appointed to the Crime Victims' Institute Advisory Council, for a term TO ALL TO WHOM THESE PRESENTS SHALL COME: to expire January 31, 2021, James M. Mosley of Borger, Texas (replac- WHEREAS, I, Greg Abbott, Governor of Texas, issued a disaster ing Anahid E. "Ana" Estevez of Amarillo, whose term expired). proclamation on March 13, 2020, certifying under Section 418.014 of Appointed to the Crime Victims' Institute Advisory Council, for a the Texas Government Code that the novel coronavirus (COVID-19) term to expire January 31, 2022, Matthew L. "Matt" Ferrara, Ph.D. of poses an imminent threat of disaster for all counties the State of Austin, Texas (Dr. Ferrara is being reappointed). Texas; and
Appointed to the Crime Victims' Institute Advisory Council, for a term WHEREAS, on April 12, 2020, I issued a proclamation renewing the to expire January 31, 2022, Michael S. "Shawn" Kennington of Pitts- disaster declaration for all counties Texas; and burg, Texas (Mr. Kennington is being reappointed). WHEREAS, the Commissioner of the Texas Department of State Appointed to the Crime Victims' Institute Advisory Council, for a term Health Services (DSHS), Dr. John Hellerstedt, has determined that to expire January 31, 2022, Lindsay M. Kinzie of Fort Worth, Texas COVID-19 represents a public health disaster within the meaning of (replacing Jeffrey L. "Jeff" Oldham of Austin, whose term expired). Chapter 81 of the Texas Health and Safety Code, and renewed that determination on April 17, 2020; and Appointed to the Crime Victims' Institute Advisory Council, for a term to expire January 31, 2022, Eugene P. "Gene" Pack of Houston, Texas WHEREAS, the Governor has issued executive orders and suspensions (Mr. Pack is being reappointed). of Texas laws response to COVID-19, aimed protecting the health and safety of Texans and ensuring an effective response to this disaster; Appointed to the Crime Victims' Institute Advisory Council, for a term and to expire January 31, 2022, Jeffery D. "JD" Robertson of Wimberley, Texas (Major Robertson is being reappointed). WHEREAS, Section 41.001(a)(2) of the Texas Election Code provides that a general special election this state shall be held on a uniform Appointed to Crime Victims' Institute Advisory Council, for a election date, and next uniform election date is occurring on May term to expire January 31, 2022, Andrea Sparks of Austin, Texas (Ms. 2, 2020; and Sparks is being reappointed). WHEREAS, on March 18, 2020, Governor suspended Sections Appointed to Crime Victims' Institute Advisory Council, for a term 41.0052(a) and (b) of Texas Election Code and Section 49.103 of to expire January 31, 2022, Hector L. Villarreal Alice, Texas (Mr. Texas Water Code to extent necessary to allow political subdi- Villarreal is being reappointed). visions that would otherwise hold elections on May 2, 2020, to move Appointed to Governing Board Texas Indigent Defense their general and special elections for only to next uniform Commission, for a term to expire February 1, 2022, Valerie Covey election date, occurring on November 3, 2020; and Georgetown, Texas (Ms. Covey being reappointed). WHEREAS, on March 20, 2020, Governor issued a proclamation Appointed to Governing Board Texas Indigent Defense Com- postponing runoff primary election date July 14, 2020, re- mission, for a term expire February 1, 2022, Richard A. Evans sponse COVID-19 disaster, and early voting personal appear- Bandera, Texas (Mr. Evans being reappointed). ance for runoff primary election begins on July 6, 2020, accor- dance Section 85.001(b) Texas Election Code; and Appointed Governing Board Texas Indigent Defense Commission, for a term expire February 1, 2022, Mary K. "Missy" WHEREAS, Section 41.007(d) Texas Election Code provides Medary Corpus Christi, Texas (Ms. Medary being reappointed). that no other election may held on date a primary election; and Appointed as presiding officer Hidalgo County Regional Mobil- ity Authority, for term expire February 1, 2022, Samuel D. "David" WHEREAS, Section 41.008 Texas Election Code provides that
Deanda, Jr. Mission, Texas (Mr. Deanda being reappointed). an election held on date permitted void; Appointed State Board for Educator Certification, for term WHEREAS, Section 85.001(a) Texas Election Code provides expire February 1, 2025, Julia F. Moore Pflugerville, Texas (replac- that period for early voting personal appearance begins on ing Laurie Kuper Bricker Houston, whose term expired). 17th day before election day continues through fourth day be- fore election day; Appointed State Board Educator Certification, term expire February 1, 2025, Wanda H. "Jean" Streepey Dallas, Texas WHEREAS, Texas law provides Midland County Hospital Dis- (replacing Jill H. Druesedow Haskell, whose term expired). trict may hold an election on question whether adopt, change rate of, abolish program sustain district on uniform Greg Abbott, Governor TRD-202001867
GOVERNOR May 22, TO ALL TO WHOM THESE PRESENTS SHALL COME: election date as authorized Section 41.001(a) Texas Election Code; WHEREAS, I, Greg Abbott, Governor Texas, issued disaster proclamation on March 13, 2020, certifying under Section 418.014 WHEREAS, Midland County Hospital District ordered special Texas Government Code novel coronavirus (COVID-19) election on question whether adopt program sustain poses an imminent threat disaster all counties State district, such election was scheduled May 2, 2020; Texas; WHEREAS, Section 41.0011 Texas Election Code provides WHEREAS, on April 2020, I issued proclamation renewing special election may held an emergency election before ap- disaster declaration all counties Texas; propriate uniform election date if political subdivision asks Gov- ernor permission do so Governor determines emer- WHEREAS, Commissioner Texas Department State gency exists; Health Services (DSHS), Dr. John Hellerstedt, has determined COVID-19 represents public health disaster within meaning WHEREAS, Midland County Hospital District desires order Chapter Texas Health Safety renewed special election emergency election question whether determination April 2020; adopt program sustain district pursuant Section 41.0011 Election Code because holding election later date *123 WHEREAS, I have issued executive orders, proclamations, and sus- would result in dire consequences for the community, including threat- pensions of Texas laws in response to the COVID-19 disaster, aimed ening the district's ability to provide adequate health care to patients in at protecting the health and safety of Texans and ensuring an effective response to the COVID-19 disaster; and response to this disaster; and WHEREAS, the Midland County Hospital District has asked the Gov- WHEREAS, I issued a proclamation on March 16, 2020, ordering a ernor for permission to hold an election on the question of whether to special election on July 14, 2020, to fill the vacancy in Texas State adopt program to sustain the district prior to November 3, 2020; and Senate District No. 14; and WHEREAS, emergency exists under Section 41.0011 of the Texas WHEREAS, on March 20, 2020, I issued proclamation postponing Election Code due to the circumstances presented by the COVID-19 the runoff primary election date May 26, 2020, to July 14, 2020; disaster and because the Midland County Hospital District able and to wait until November 3, 2020, to hold special election to adopt program to sustain the district; and WHEREAS, I also issued proclamation suspending Sections 41.0052(a) and (b) of the Texas Election Code and Section 49.103 WHEREAS, pursuant to Section 418.016 of the Texas Government of the Texas Water Code to the extent necessary to allow political Code, the Governor has the express authority to suspend the provi- subdivisions that would otherwise hold elections on May 2, 2020, to sions of any regulatory statute prescribing the procedures for conduct move their general and special elections for 2020 only to the next of state business or the orders or rules of state agency if strict com- uniform election date, occurring on November 3, 2020; and pliance with the provisions, orders, or rules would in any way prevent, hinder, or delay necessary action in coping with disaster. WHEREAS, I subsequently issued proclamations on April 2, April 6, April 8, and May 8, 2020, authorizing certain political subdivisions to NOW, THEREFORE, I, Greg Abbott, Governor of Texas, under the au- call emergency special elections on July 14, 2020; and thority vested in me by the Constitution and laws of the State of Texas, do hereby suspend Sections 41.007(d) and 41.008 of the Texas Elec- WHEREAS, Texas law provides that eligible voters have right to cast tion Code to the extent necessary to allow the Midland County Hospi- vote in person; and tal District to order its special election to occur on July 14, 2020, as WHEREAS, counties across Texas prepare for the upcoming elec- emergency election on the question of whether to adopt program to tions on July 14, 2020, and establish procedures for eligible voters to sustain the district pursuant to Section 41.0011(b) the Texas Election exercise their right to vote in person, it necessary that election of- Code. I further suspend Section 85.001(a) the Texas Election Code ficials implement health protocols to conduct elections safely and to to extent necessary to allow early voting by personal appearance for protect election workers and voters; and special election to begin earlier than Monday, July 6, 2020, and to run concurrently with early voting period for runoff primary WHEREAS, in order to ensure that elections proceed efficiently and election. safely when Texans go polls cast vote in person during early voting or on election day, it necessary increase number days authority ordering election under Section 3.004 Texas in polling locations will be open during early voting period, Election Code authority authorized make decision post- such that election officials can implement appropriate social distancing pone its election in accordance with this proclamation. safe hygiene practices; and Early voting by personal appearance shall begin on Monday, July 6, WHEREAS, Section 85.001(a) Texas Election Code provides 2020, in accordance with Section 85.001(d) Texas Election Code that period for early voting by personal appearance begins days so that it runs concurrently with early voting period for runoff before election day; primary election. WHEREAS, Section 85.001(b) Texas Election Code provides IN TESTIMONY WHEREOF, I have hereto signed my name have that period for early voting for runoff primary election begins officially caused Seal State be affixed my office in City days before election day; Austin, Texas, this 8th day May, 2020. WHEREAS, in consultation with Texas Secretary State, it has Greg Abbott, Governor become apparent strict compliance with statutory requirements TRD-202001872 relating duration early voting contained Sections 85.001(a) 85.001(b) Texas Election Code would prevent, hinder, or ♦ ♦ ♦ delay necessary action coping with COVID-19 disaster;
Proclamation 41-3733 May 22, Texas Register
WHEREAS, pursuant Section 418.016 Texas Government Pursuant Section 418.016, any regulatory statute prescribing pro- Governor has express authority suspend provi- cedures conduct state business or any order or rule state sions any regulatory statute prescribing procedures conduct agency would any way prevent, hinder, or delay necessary action state business or orders or rules state agency if strict com- coping with this disaster shall be suspended upon written approval pliance with provisions, orders, or rules would any way prevent, Office Governor. However, extent enforce- hinder, delay necessary action coping with disaster. ment any state statute administrative rule regarding contracting procurement would impede any state agency's emergency response NOW, THEREFORE, I, Greg Abbott, Governor Texas, under au- necessary cope with this declared disaster, I hereby suspend thority vested me Constitution laws State Texas, such statutes rules duration this declared disaster do hereby suspend Sections 85.001(a) 85.001(b) Texas Elec- limited purpose. tion Code extent necessary require that, any election or- dered authorized occur on July 14, 2020, early voting personal In accordance statutory requirements, copies this proclama- appearance shall begin on Monday, June 29, 2020, shall continue tion shall be filed applicable authorities. through fourth day before election day, excluding any legal state IN TESTIMONY WHEREOF, I have hereunto signed my name federal holidays. I further amend proclamations issued on April have officially caused Seal State affixed my office 2, April 6, April 8, May 8, 2020, authorizing emergency special City Austin, Texas, 12th day May, 2020. elections, proclamation issued on March 16, 2020, ordering special election fill vacancy State Senate District No. Greg Abbott, Governor 14, so require each these elections held July TRD-202001897 early voting personal appearance shall begin Monday, *124 ♦ ♦ ♦ June 29, 2020, in accordance with above suspension. Secretary of State shall take notice of this proclamation and shall Proclamation 41-3735 transmit copy of this order immediately every County Judge of this TO ALL TO WHOM THESE PRESENTS SHALL COME: state and all appropriate writs will be issued and all proper proceedings will be followed end that said elections may be held and their WHEREAS, I, Greg Abbott, Governor of State of Texas, issued results proclaimed in accordance with law. disaster proclamation on August 23, 2017, certifying that Hurricane Harvey posed threat of imminent disaster for Aransas, Austin, Bee, IN TESTIMONY WHEREOF, I have hereto signed my name and have Brazoria, Calhoun, Chambers, Colorado, DeWitt, Fayette, Fort Bend, officially caused Seal of State be affixed at my office in City Galveston, Goliad, Gonzales, Harris, Jackson, Jefferson, Jim Wells, of Austin, Texas, this 11th day of May, 2020. Karnes, Kleberg, Lavaca, Liberty, Live Oak, Matagorda, Nueces, Greg Abbott, Governor Refugio, San Patricio, Victoria, Waller, Wharton, and Wilson counties; and TRD-202001882 WHEREAS, disaster proclamation of August 23, 2017, was subse- ♦ ♦ ♦ quently amended on August 26, August 27, August 28, and September Proclamation 41-3734 14 add following counties disaster proclamation: Angelina, Atascosa, Bastrop, Bexar, Brazos, Burleson, Caldwell, Cameron, Co- TO ALL TO WHOM THESE PRESENTS SHALL COME: mal, Grimes, Guadalupe, Hardin, Jasper, Kerr, Lee, Leon, Madison, Milam, Montgomery, Newton, Orange, Polk, Sabine, San Augustine, WHEREAS, I, Greg Abbott, Governor of Texas, issued disaster San Jacinto, Trinity, Tyler, Walker, Washington, and Willacy; and proclamation on March 13, 2020, certifying under Section 418.014 Texas Government Code that novel coronavirus (COVID-19) WHEREAS, September 20, 2017, and in each subsequent month poses imminent threat disaster for all counties in State effective through today, I issued proclamations renewing disaster Texas; declaration all counties listed above; WHEREAS, Commissioner Texas Department State WHEREAS, due catastrophic damage caused by Hurricane Har- Health Services, Dr. John Hellerstedt, has determined COVID-19 vey, state disaster continues exist in those same counties; represents public health disaster within meaning Chapter NOW, THEREFORE, accordance with authority vested in me Texas Health Safety Code; Section 418.014 Texas Government Code, I do hereby renew WHEREAS, I have issued executive orders suspensions Texas disaster proclamation counties listed above. laws response COVID-19, aimed protecting health Pursuant Section 418.017 code, I authorize use all avail- safety Texans ensuring effective response this disaster; able resources state government political subdivisions are reasonably necessary cope with this disaster. WHEREAS, April 2020, I issued proclamation renewing Pursuant Section 418.016 code, any regulatory statute pre- disaster declaration all Texas counties; scribing procedures conduct state business any order or WHEREAS, state disaster continues exist all counties due rule state agency would any way prevent, hinder, delay COVID-19; necessary action coping with this disaster shall be suspended upon written approval Office Governor. However, ex- NOW, THEREFORE, accordance with authority vested me tent enforcement any state statute administrative rule re- Section 418.014 Government I do hereby renew garding contracting procurement would impede any state agency's disaster proclamation all counties Texas. emergency response necessary protect life property threat- Pursuant Section 418.017, I authorize use all available re- ened this declared disaster, I hereby authorize suspension such sources state government political subdivisions rea- statutes rules duration this declared disaster. sonably necessary cope with this disaster. GOVERNOR May In accordance statutory requirements, copies this proclama- Greg Abbott, Governor tion shall filed applicable authorities. TRD-202001896
IN TESTIMONY WHEREOF, I have hereunto signed my name ♦ ♦ ♦ have officially caused Seal State affixed my office City Austin, Texas, 12th day May, 2020. *125 May 22, 2020 Register
Requests Opinions excess probable maximum loss must paid assessments Association's members. To extent Association purchased RQ-0353-KP reinsurance storm season prior June subsec- Requestor: tion 2210.453(d) would apply such purchases. Mr. Rakesh Pandey Section 2210.1052 Insurance Code requires Association's Board provide notice member insurers if an assessment may Montgomery County Auditor imposed due ultimate loss estimate occurrence deter- North Thompson, Suite mined chief financial officer chief actuary. If first oppor- *126 tunity the Board to provide the requisite notice to member insurers Conroe, Texas 77301 about an assessment is at a regularly-scheduled Board meeting, it is unlikely a court would require the Board to call an emergency meeting Re: Calculation of the minimum salary of a county court at law judge addition to the regularly-scheduled meeting order to provide the with twelve or more years of accrued service under section 25.0005(a) requisite notice. of the Government Code (RQ-0353-KP) A grant of authority to three or more persons a public body confers Briefs requested by June 5, 2020 the authority on a majority of the number of members fixed statute. For further information, please access website at www.texasattor- Vacancies on Board do impair Board's ability to take action, neygeneral.gov or call Opinion Committee at (512) 463-2110. so long Board satisfies quorum requirement. TRD-202001876 Opinion No. KP-0303 Lesley French The Honorable Clint T. Griffin General Counsel Office of Attorney General Schleicher County Attorney Filed: May 12, 2020 Post Office Box 506 ♦ ♦ ♦ Eldorado, Texas 76936 Opinions Re: Authority of a county sheriff to donate forfeiture funds under Code Opinion No. KP-0302 of Criminal Procedure article 59.06 to a nonprofit entity providing of- fice space mental health services, drug counseling services, ser- The Honorable Larry Taylor vices victims domestic abuse (RQ-0317-KP) Chair, Committee on Education S U M M A R Y Texas State Senate Article 59.06, subdivision (d-2) Code Criminal Procedure au- Post Office Box 12068 thorizes a county sheriff to donate a portion forfeiture funds to entity that assists provision services specified article. Austin, Texas 78711-2068 Pursuant to article III, subsection 52(a) Constitution, a donation Re: Matters related to Texas Windstorm Insurance Association other expenditure must satisfy a three-part test: (1) predominant its compliance with House Bill 1900 Senate Bill 615 (RQ-0318- purpose expenditure to serve a public purpose, (2) expen- KP) diture includes sufficient controls to ensure that public purpose carried out, (3) public entity receives return benefit. A court S U M M A R Y would likely find that sheriff Schleicher County may donate civil Section 2210.453 Insurance Code requires Association forfeiture funds a nonprofit entity providing office space to entities maintain total available loss funding amount less than providing one more services specified article 59.06, sub- probable maximum loss a catastrophe year with a probability one division (d-2) Code Criminal Procedure provided sheriff 100. Pursuant House Bill 1900, became effective June 10, determines that expenditure statutorily authorized comports any costs reinsurance alternative financing mechanisms
ATTORNEY GENERAL May 45 3399 with three-part test under article III, subsection 52(a) Texas Section 371.005 Finance Code provides Legislature has Constitution. exclusive authority regarding operation pawnshops. A local of- ficial lacks authority rewrite state law Legislature has ex- Opinion No. KP-0304 pressly removed from local control. court would likely find The Honorable Matthew A. Mills portions Dallas County's order purporting regulate pawnshops limiting fees those businesses can charge changing length Hood County Attorney time they must hold pledged goods invalid unenforceable. West Pearl Street After declaring a state disaster Texas due COVID-19, Gov- Granbury, Texas ernor issued Executive Order GA-21, "supersedes any conflict- ing order issued local officials response COVID-19 disaster, Re: Whether, when operating under a local disaster declaration, lo- but only extent such a local order restricts essential services cal governments may commandeer private property under Government reopened services allowed" under executive order. Operating a Code section 418.108 (RQ-0342-KP) pawnshop provides essential lending services. Thus, Executive Order S U M M A R Y GA-21 prohibits political subdivision issuing conflicting local order restricts operation pawnshops. Whether local order Section 418.108 Government Code authorizes presiding of- may limit number customers inside premises pawnshop ficer governing body political subdivision declare local fact question. However, extent pawnshop can operate un- state disaster grants local authorities certain powers respond der DSHS guidelines consistent CDC recommendations more disaster. Section 418.108 does authorize county judge, than one customer premises time, order purports mayor municipality, any other government official com- limit occupancy premises only one customer time, mandeer private property respond disaster. without regard size premises, conflicts Executive Or- Opinion No. KP-0305 der GA-21 and, therefore, superseded. Honorable Briscoe Cain Opinion No. KP-0307 Chair, House Select Committee Driver's License Issuance & Re- Honorable Mayes Middleton newal Co-Chair, Joint Interim Committee Study Coastal Barrier System Texas House Representatives House Representatives Post Office Box Post Office Box *127 Austin, Texas 78768-2910 Austin, Texas 78768-2910 Re: Extension of driver's license expiration dates due to COVID-19 Re: Procedures conducting appraisal review board hearings during its effect on firearms purchases (RQ-0346-KP) the COVID-19 disaster (RQ-0351-KP) S U M M A R Y S U M M A R Y In the context of the COVID-19 pandemic the declared state of Subsection 41.41(a) of Tax Code entitles a property owner to protest disaster in Texas, Governor suspended provisions of driver's determination of appraised value of owner's property, in license regulations regarding license expiration dates. Texas driver's addition to other adverse determinations made by a chief appraiser. license that on its face lists an expiration date March 13, 2020, Subsection 45.45(n) Tax Code gives property owners a right later not expired under Governor's suspension laws related to appear person at a protest hearing. Subsection 41.45(o) DPS guidance until 60 days after DPS provides further public notice Tax Code title 34, subsection 9.805(d) Texas Administrative
that normal Driver's License operations have resumed. Code do not allow appraisal review boards to require protest hearings Treating driver's license if it has no expiration date adding conducted by videoconference lieu in-person hearings when period 60 days to expiration date shown on face driver's requested by property owner. license not advisable solutions purposes ATF Form 4473 Subsection 41.461(a)(3) Tax Code requires chief appraiser to required transfer firearms. The federal Bureau Alcohol, To- deliver copy protest hearing procedures to property owners ini- bacco, Firearms, Explosives regulates enforces federal laws tiating protest. The appraisal district does not satisfy this requirement regarding such transfers, any guidance provided by office on by only posting protest procedures on appraisal district website. issue binding on ATF. We therefore leave it ATF determine appropriateness any entry on ATF Form 4473. Subsection 41.12(a) Tax Code requires an appraisal review board, among other things, approve appraisal records by July Opinion No. KP-0306 20. No later than date it does so, board must also deliver The Honorable Dan Flynn written notice property owner any change records ordered by board pursuant subsection 41.11(a) that will result Chair, House Committee on Defense & Veterans' Affairs an increase liability property owner. The board's Texas House Representatives failure deliver notice property owner required section 41.11 nullifies change records extent change applicable Post Office Box 2910 property owner. However, nullification limited that Austin, Texas 78768-2910 subsection does apply all failures give notice required Property Tax Code. Re: Authority county judge issue emergency orders regulating business pawnshops during declared disaster (RQ-0347-KP) Opinion No. KP-0308
S U M M A R Y Honorable Dade Phelan May 22, Texas Register Chair, Committee on State Affairs provision essential services. Executive Order GA-21 super- sedes any conflicting order issued local officials response Texas House Representatives COVID-19 disaster extent such local order restricts es- Post Office Box sential services, such obtaining residential housing. GA-21 there- fore prohibits local governmental entity, acting under authority Austin, Texas 78768-2910 its emergency powers, from issuing an order limits occupancy housing based on length occupancy's term. Re: Whether governmental entity under emergency declara- tion has authority prevent owner second home occu- For further information, please access website www.texasattor- pying property limiting occupancy housing based on length neygeneral.gov call Opinion Committee (512) 463-2110. occupancy's term (RQ-0352-KP) TRD-202001875 S U M M A R Y Lesley French Texas United States Constitutions prohibit government action General Counsel unlawfully discriminates basis residence. They also en- Office Attorney General sure citizens receive due process government does act Filed: May 12, arbitrarily. To extent ordinance restricting access lim- ♦ ♦ ♦
iting occupancy private property exceeds these boundaries, it un- constitutional. In addition, Governor declared state disaster due COVID-19 March issued executive orders related
*128 ATTORNEY GENERAL May 22, 2020 45 3401 (a) The commission adopts by reference Code Federal solid waste municipal hazardous waste adopt rules Regulations §257.107 (Publicly accessible Internet site requirements) consistent general intent purposes THSC; amended through April 17, 2015, issue Federal Register THSC, §361.090, allows commission adopt (80 FR 21301), subject additions modifications this sec- rules control collection, handling, storage, processing, tion. disposal industrial solid waste protect property others, public property rights-of-way, groundwater, (b) The website required by subsection (a) this section must other rights requiring protection. be publicly accessible website. The adopted new rules implement THSC, §§361.017, 361.024, (c) The owner or operator shall post on publicly accessible 361.090. website, upon submittal receipt executive director chief clerk active life coal combustion residuals unit The agency certifies legal counsel has reviewed adop- through completion post-closure care period: tion found it valid exercise agency's legal au- thority. (1) complete copy current issued effective registra- tion; Filed Office Secretary State on May 8, 2020. (2) complete copy all applications submitted under this TRD-202001826 chapter, including any revisions; Robert Martinez (3) copy public notice owner operator required Director, Environmental Law Division publish under this chapter; Commission Environmental Quality Effective date: May (4) copy draft registration prepared executive Proposal publication date: December
director; For further information, please call: (512) 239-6087 (5) copy compliance summary prepared ex-
♦ ♦ ♦ ecutive director;
TITLE 34. PUBLIC FINANCE
(6) copy any other document regarding and/or summa-
rizing executive director's review initial decision appli-
PART 1. COMPTROLLER OF PUBLIC cation submitted under chapter. ACCOUNTS (d) owner operator must notify United States Envi-
ronmental Protection Agency executive director, manner prescribed each agency, within days any changes URL CHAPTER 3. TAX ADMINISTRATION publicly accessible website. SUBCHAPTER O. STATE AND LOCAL SALES agency certifies legal counsel has reviewed adop-
AND USE TAXES tion found it valid exercise agency's legal au-
thority.
TAC §3.334
*129
The Comptroller of Public Accounts adopts amendments Filed with the Office of the Secretary of State on May 8, 2020. §3.334, concerning local sales and use taxes, changes TRD-202001825 the proposed text published the January 3, 2020, issue of Robert Martinez the
Texas Register
(45 TexReg 98). The rule will republished. Director, Environmental Law Division In the wake of
South Dakota v. Wayfair, Inc.,
nothing more than one of many tools for communicating infor- retailer" as "an established outlet, office, or location operated by mation, no different than the US Postal Service and telephone the retailer or the retailer's agent or employee for the purpose land lines. Mr. Kroll and Mr. Harris echoed these comments. of receiving orders for taxable items and includes any location Mr. Sheets proposed a revised Internet order definition. at which three or more orders are received by the retailer during a calendar year." The reference to the retailer's "agent or em- Both, Mr. Camareno and Mr. Kroll, commented that the amend- ployee" indicates that sales personnel must be at the site, and ment is unclear whether an Internet order can cease to be an this requirement has been added to the definition. Internet order. Mr. Camareno commented that there are times when an Internet order involves human interaction to fulfill an In addition, the amended definition clarifies that the term does order, and other times when it is automated. Additionally, Mr. not include a computer server, an Internet protocol address, a Kroll; Craig Morgan, on behalf of the City of Round Rock; Mr. domain name, a website, or a software application. Many sell- Camareno; Mr. Kennedy; Kyle Kasner; and Karen Hunt, on be- ers house their computer servers at a co-location facility or rent half of the City of Coppell, requested that the amendment be re- computer server space at a managed hosting site. But an ordi- vised to adequately address business-to-business transactions nary person would not consider the physical locations of these through the Internet because those orders are fundamentally dif- computer servers to be places of business of the seller. Simi- ferent from business-to-consumer transactions. Mr. Kroll stated larly, an ordinary person would not perceive an Internet protocol that the definition also causes issues when businesses lease address, a domain name, or a website as an "established outlet, computers from a seller because under the property tax rules, office, or location" so as to constitute a place of business. The the seller retains ownership of the leased computer. comptroller reflects these changes throughout the section. ADOPTED RULES May 22, 45 3501 Former subsection (e)(1) addressed administrative offices sup- The comptroller also deletes the reference to call centers, show- porting traveling salespersons, and former subsection (e)(2) ad- rooms, clearance centers because those facilities are places dressed distribution centers, manufacturing plants, other fa- of business of the seller only if sales personnel of the seller re- cilities. In new subsection (b), the comptroller no longer includes ceive three or more orders during a calendar year at those fa- administrative offices supporting a traveling salesperson, cilities. The amendment deletes the former example regarding distribution centers, manufacturing plants, storage yards, ware- a home office at items are sold through an online auction houses, or similar facilities operated by a seller at sales- website because the example addressed by new language re- persons are assigned to work in the determination of "place of garding orders received through a shopping website. The comp- business of seller." seller does not receive orders at ad- troller also amends definition to delete repetitive language. ministrative offices that solely serve as base of operations The comptroller deletes a reference to "administrative offices" a salesperson, or that provide administrative support to a because comptroller determines that an administrative office salesperson. Moreover, mere fact that a salesperson as- does not meet definition of a place of business of seller signed to work from, or work at, a distribution center, manufac- under Tax Code, §321.002(a)(3)(A). turing plant, storage yard, warehouse, or similar facility oper- The comptroller also adds definition of "place of busi- ated a seller does not mean that a seller receives orders ness of seller - general definition" that outlet, office, fa- these locations. These locations themselves do meet cility, or any similar location that contracts with business definition of place of business of retailer under Tax Code, process certain orders or invoices place of business of §321.002(a)(3)(A). The comptroller amends section reflect seller if comptroller determines that these certain loca- these changes throughout. tions are sole purpose avoiding tax due of rebating Brady Olsen, Tom Hart, Andrew Fortune, on behalf tax contracting location. This change made pursuant City Grand Prairie, Mr. Voelker commented that their definition "place business retailer" Tax Code, cities anticipate losses sales revenues. Mr. Olsen, Mr. §321.002(a)(3)(B). Hart, Mr. Fortune commented amendment will nega- Paul Voelker, on behalf City Richardson; George Kele- tively impact their city's Local Government Code, Chapter men, on behalf Retailers Association; Mr. Har- agreements (Chapter agreements) due removing travel- ris expressed concerns with definition place business. ing salesperson from definition place business. Specifically, Mr. Harris stated that definition consistent with statute decision Combs v. City Webster, Mr. Kasner commented that business-to-business warehouses distribution centers often rely heavily traveling salesper- S.W.3d (Tex. App. Austin pet. denied). He also sons who are based those locations. Mr. Kasner requested stated that it contradicts statutory definition. Mr. Harris that comptroller define "sales office" contrast it Mr. Kelemen requested that comptroller revise definition "administrative office" supports traveling salespersons. Mr. restate statutory language. Mr. Voelker requested Kroll made similar request. no revisions be made current definition. Rudy Durham, behalf City Lewisville, commented place busi- The comptroller declines reinsert omitted provisions be- ness definition needs be updated keep up with changes cause subsection (b) gives effect Tax §321.002(a)(3)(A) technology. The comptroller declines make requested re- requires administrative offices offices indepen- visions because amended definition gives effect statu- dently meet statutory definition place business. How- tory language. ever, new paragraph (4), discussed below, will allow transition period these facilities until September 2021. comptroller adds definition "remote seller" new sub- section (a)(18) defined §3.286 title. Subsequent In new paragraph (1)(A), comptroller clarifies locations paragraphs renumbered. must operated seller purpose receiving orders receive three more orders calendar year from per- comptroller amends definition "temporary place sons other than employees, independent contractors, natu- business seller" renumbered subsection (a)(22) clarify ral persons affiliated seller considered place temporary place business seller includes sale business seller Texas. In new paragraph (3), comp- outside walls distribution center, manufacturing plant, troller restates provisions former subsection (e) relating storage yard, warehouse, similar facility seller park- purchasing offices minor changes ease readability. ing lot similar space sharing same physical address *132 facility. Sellers may hold sales to the public outside the walls of Mr. Kroll commented that the language "other than employees, their facilities on a temporary basis. The comptroller clarifies that independent contractors, and natural persons affiliated with the these sales constitute temporary places of business of the seller. seller" contradicts the language in Senate Bill 1533, 83rd Leg- The comptroller makes these changes throughout the section. islature, 2013, as that statute did not impose a related persons Subsequent paragraphs are renumbered. test and that bill does not support the new language regarding purchasing offices in paragraph (3). Ms. May requested clarity The comptroller deletes the definition of "traveling salesperson" related to a traveling salesperson working on a campus (group of in subsection (a)(21) because the comptroller will treat traveling business buildings that house sales persons, call centers, fulfill- salespersons as seller's agents or employees as referenced ment warehouses, and administrative offices) but not in the same in Tax Code, §321.002(a)(3)(A). Subsequent paragraphs are building as a place of business. She recommended changing renumbered. the word "building" to "campus" to avoid confusion. The comp- The comptroller adds new subsection (b), determining the place troller declines to make these suggested changes because the of business of a seller. Subsection (b) revises and expands the clarification gives effect to the statute's definition of a place of provisions of former subsection (e) concerning place of business business. - special definitions. May 22, Texas Register Websites may use dynamic IP addresses that are assigned by The comptroller adds new paragraph (4) for orders received by the network upon connection and that change over time. The sales personnel who are not at a place of business of the seller, public IP address of a website may simply be routing orders to new paragraph (5) for orders not received by sales person- different, private IP addresses. Load balancers may change the nel. The comptroller makes these changes in response to com- IP addresses that communicate with customers. Conversely, menters' requests for guidance on how to treat orders received multiple web sites may be hosted at a single IP address. by telephone, including VoIP cellular phone, facsimile, email. The computer server receiving an order placed through a shopping website may belong to the seller or it may belong to a In the past, orders were typically received at fixed locations, such third party. The computer server may be situated on the seller's as orders received in person at the seller's facility, orders re- premises, it may be situated at a co-location facility operated ceived by mail order to the seller's facility, orders received by a third party, or it may be situated at a web hosting facility through landline telephone calls the seller's facility. Some or- operated by a third party. The computer server may be one ders were received by traveling salespersons, former para- of multiple servers that serve the same website from different graph (4) applied Tax Code, §321.203(d)(2) these orders so physical addresses as part of a cloud distribution network. The that the orders were consummated "at the place of business from computer server may route the order multiple other servers which the retailer's agent or employee who took the order oper- load balancing purposes. Conversely, a single computer ates," even though order may have been actually received by server may serve multiple websites. Also, seller may or may traveling salesperson at a different location. With expan- not know physical address of server receiving order. sion of modern telecommunication techniques, it has become The best way treat these orders consistently coherently more commonplace sales personnel who are not traveling is treat them uniformly as being received at locations that are salespersons receive orders when they are not at seller's not places of business of seller. place of business, such as orders received by cellular telephone by email. Accordingly, new paragraph (4) expands ap- Because former rule did not explicitly address orders not re- plication of Tax Code, §321.203(d)(2) these orders so that an ceived by sales personnel, comptroller is applying paragraph order received by salesperson who not at a place of business (5) prospectively orders received after September 2021. of seller in Texas will be treated as being received at loca- The comptroller adds new subsection (c) incorporate re- tion from salesperson operates. This treatment will re- organize many of provisions of former subsection (h) con- sult in more uniform application of consummation statutes cerning consummation of sale. It reorganizes general con- will facilitate ability taxpayers auditors deter- summation rules stated former paragraph (3) applies mine location where an order received. general consummation rules specific situations that were pre- Paragraph (4) clarifies that order will treated as being re- viously addressed other paragraphs former subsection (h). ceived at place business only if location out Subsection (c), like former paragraph (3) that it replaces, does salesperson operates independently meets requirement not differentiate based number places business being place business seller. In addition, transition seller state. Subsection (c) states that consumma- from former rule current rule, comptroller will tem- tion principles subsection apply all sellers, regardless porarily expand definition "place business seller" whether they have no place business, single place busi- these orders include an outlet, office, location operated ness, multiple places businesses state. seller that serves as base operations that provides administrative support salesperson, until September Mr. Sheets commented rule should include special pro- 2021. vision sellers with single place business based Tax Code, §321.203(b). comment stated "all taxable New paragraph (5) addresses orders received sales per- retailer are consummated one place busi- sonnel, such as orders received through shopping website ness." shopping software application. comptroller cannot apply consummation principals Tax Code, §321.203(d)(2) these Tax Code, §321.203(b) describes consummation principles
types orders because provision limited orders re- seller has only one place business state. But ceived "agent employee." those principles are consistent treatment other sellers do require special treatment rule. Instead, these orders will treated being received loca- tions places business seller. This treat- Tax §321.203 whole establishes hierarchy among ment consistent concept "place business" places business involved transaction. If order ful- requires presence personnel receive order. Com- filled place business seller Texas, sale puter servers, Internet protocol addresses, automated tele- *133 is consummated at that location even if the order is received at phone ordering systems would not ordinarily be called "places of another place of business in Texas (except for orders received business" of the seller. The comptroller has concluded that the in person). Conversely, an order is consummated at the place legislature could not have intended that the receipt of an order of business of the seller in Texas where it is received only if the by an automated mechanical device would make the device an order was not fulfilled from a place of business in Texas (except "established outlet, office or location operated by the retailer." for orders received in person). Adopted subsection (c) reflects this hierarchy. Also, this treatment of orders not received by sales personnel is required to promote uniformity and ease of administration for tax- The statutory provision in Tax Code, §321.203(b), for a seller payers and auditors. Website orders can be received at multiple with a single place of business in Texas, is a recognition that the physical addresses -- any locations that have Internet access. hierarchy is not required in that circumstance. The outcome will website order is sent to an Internet protocol ("IP") address. An be the same regardless of whether the order is received, fulfilled, IP address is the address of the device receiving the order, such received and fulfilled from that place of business, and regard- a computer server. An IP address is not a physical address. ADOPTED RULES May 22, 3503 The comptroller declines to make this revision because para- less of whether the order is placed at that location in person - the graph (3) merely restates the language in former subsection sale will be consummated at that place of business. (h)(3)(F), which was adopted in 2014. This subsection im- Tax Code, §321.203(b) cannot be interpreted mean that all plements Senate Bill 997, 83rd Legislature, (codified at sales are consummated at the seller's single place of business Tax Code, §321.203(c-4) and (c-5)). Moreover, Tax Code, in Texas, even if that place of business did not receive the order, §321.203(c-5) explicitly provides an expiration date of Septem- did not fulfill the order, and did not serve the location where ber 1, 2024. the order was delivered the customer. To consummate sale The comptroller deletes former subsection (h)(4) concerning impose local sales tax in jurisdiction that had nothing traveling salespersons. The place of business of traveling do with transaction would an absurd possibly unconsti- salesperson is determined under subsection (b)(4) - orders tutional reading of the statute. received by sales personnel who are not at place of business Mr. Harris commented that the proposed subsection (c)(1) was of seller when they receive order. inconsistent Chapter because Chapter explicitly The comptroller adds new paragraph (4) includes lan- ties consummation of sales place of business where or- guage in former subsection (h)(1) concerning local sales taxes ders are "received," not where they are "placed." He commented due local use taxes due without any changes. The comptrol- extent amendment relies on placement de- ler restates language in former subsection (h)(2) concerning termine where sale consummated, section contradicts multiple special purpose district taxes multiple transit author- Chapter 321. He requests any reference placement of ity taxes in paragraph (5) without changes language. orders, other than orders placed in person orders placed retailer's supplier, should deleted. The comptroller deletes language found in former subsec- tion (h)(5) concerning drop shipments because these provisions The comptroller agrees other than orders placed in person, redundant general consummation rules cover these consummation of sales tied place of business where types of orders. order received, if not fulfilled place of business of seller in Texas. The comptroller makes revisions clarify The comptroller adds new paragraph (6) add language clear up any confusion use of term "placed." found in former subsection (h)(6) concerning itinerant vendors vending machines without changes language. New paragraph (1) provides consummation of sale rules for orders received at place of business of seller in Texas. The proposed rule contained special provision in subsection (c)(6) for Internet orders. adopted rule deletes provi- New subparagraph (A) provides consummation of sale rules sion. However, comments regarding proposed rule for for orders placed in person, includes reference orders Internet orders may have some relevance subsection (b)(5), placed at temporary place business of seller, in lieu of discussed above, regarding orders not received per- provision found in former subparagraph (h)(6)(C) regarding sonnel. Accordingly, comptroller has considered these com- temporary places business. Subparagraph (B) provides ments summarizes them below. consummation sale rules orders placed person. comptroller received comments concerning Internet orders
New paragraph (2) provides consummation sale rules from Mr. Camareno; Board Directors Coppell orders received at place business seller Texas. Chamber Commerce; Mr. Edmonson; Steven Taplits, on New subparagraph (A) provides consummation rule an behalf Bed Bath & Beyond; Mr. Voelker; Mr. Kasner; Mr. order fulfilled place seller Texas. New subparagraph Olsen; Mr. Hart; Mr. Morgan; Mr. Sheets; Ms. Olson Bourland; (B) provides consummation rule order fulfilled Jerry Stratton; Jenna Armstrong, on behalf Lake Houston place business seller Texas. Area Chamber Commerce; Jack Roberts; G. Brint Ryan, In light Wayfair decision, comptroller provides clause on behalf Ryan LLC; Doug Duffie, Doug Duffie, LLC; Adina (ii) remote seller required collect use tax Christian, on behalf her client; Mr. Kelemen; Mr. Moseley; under §3.286(b)(2) must also collect use tax based on Ms. May; Jane Hughson, on behalf City San Marcos; location which item shipped delivered which David Howard; Linda Howard; Mr. Moore; Mr. Harris; Mr. Kroll; purchaser item takes possession unless remote seller Mr. Pannell; Dan Butcher, Clark Hill Strasburger; Ms. Hunt; Ja- elects collect single use rate enacted House son Ball, on behalf Round Rock Chamber Commerce; Bill 2153. See Tax Code, §321.205(c) (Use Tax: Municipality Michael Rollins, on behalf Austin Chamber Commerce; Use Occurs) §323.205(c) (Use Tax: County Chris Hillman, on behalf City Irving; Gary Thomas, Use Occurs). on behalf Dallas Area Rapid Transit; Honorable US Representative John Carter, on behalf Round Rock many New paragraph (3) restates provision former subsection other communities; Mr. Durham; Joshua Selleck, on behalf (h)(3)(F) concerning exception qualifying economic devel- City Kilgore; Kristi Carlson, behalf Best Buy Co., opment agreements entered into before January pur- Inc.; John Torigian, behalf HD Supply; TJ Gilmore suant Tax §321.203(c-4) - (c-5) §323.203(c-4) - (c-5) *134 David Erb, on behalf of the City of Lewisville; Michael Land, on (Consummation of Sale). behalf of the City of Coppell; Michael Meek, on behalf of the Jeffrey Moore, Brown & Hofmeister L.L.P, commented that para- Greater New Braunfels Chamber of Commerce; Mr. Kennedy; graph (3) runs afoul of Article I, Section 16 of the Constitution of John Christian, on behalf of Ryan LLC; Mr. Harris; Heather the State of Texas (Bills of Attainder; Ex Post Facto Retroac- Hurlbert, on behalf of the City of San Marcos; Mr. Scott; Jared tive Laws; Impairing Obligation of Contracts). Mr. Moore sug- Werner, on behalf of the City of New Braunfels; Mr. Fortune; gests that the comptroller revise the effective date of the provi- and Kenneth Welch. sion until the end of the existing term of the agreement. Mr. Kelemen; Ms. Hunt; Mr. Land; the Board of Directors the Coppell Chamber Commerce; Mr. Camareno; Representa- 45 3504 May 22, 2020 Texas Register Mr. Kroll, Mr. Scott, Ms. Hurlbert, and Representative Murphy tive Zwiener; Representative Talarico; Mr. Morgan; Mr. Sheets; commented that cities without Chapter 380 agreements will have
Ms. Olson Bourland; Mr. Voelker; Mr. Durham; Mr. Gilmore; Mr. to source sales from Internet orders immediately and feel the Ball; Mr. Olsen; Mr. Hart; Mr. Fortune; Ms. Hurlbert; Ms. Hugh- impact. However, cities with Chapter 380 agreements will benefit son; Ms. Armstrong; Mr. Hillman; Mr. Ryan; Ms. Christian; Mr. because the delayed implementation. Duffie; Mr. Howard; Ms. Howard; US Representative Carter; Mr. Scott; Ms. Carlson; Mr. Torigian; and Mr. Kasner stated Texas State Representative Drew Springer commented that rural that the proposed provision regarding Internet orders will have Texas is specifically hit hard because the cities are losing negative impact on city sales and use tax revenues which will tax revenue, which are hit harder as more cities execute Chapter force many the cities to increase property taxes, reduce core 380 agreements. He further commented that the definition services, and curtail economic development. Mr. Sheets, Mr. place business as it relates three more orders is too Fortune, Mr. Olsen, Mr. Hart, Mr. Morgan, Ms. Hunt, Mr. Harris, broad, can cause gamesmanship the context 380 and Mr. Durham commented that the amendment will cause agreements. Mr. Presley also does not think it is appropriate downgrade city bond ratings. that cities need support businesses other cities. Ms. Hurlbert stated that the proposed provisions related Inter- Representative Springer also commented that Chapter 380 net orders will narrow what qualifies rebates under Chapter agreements were established long before the proliferation 380 agreements. She is also concerned about the revenue loss Internet sales and the Wayfair decision and since these from businesses that do not have Chapter 380 agreements that changes, he thinks it necessary address Internet orders will grandfathered under amendment. amendment. At Ways and Means hearing, Ms. Hunt expressed concern In response comments, comptroller is delaying im- that under comptroller's definition many businesses plementation subsection (b)(5), regarding orders received City Coppell will no longer considered places business sales personnel until October 1, 2021, giving interested par- under amended provisions. ties an opportunity seek legislative change. Mr. Selleck commented that City Kilgore has large num- Additionally, Representative Springer commented that lack ber business-to-business transactions that are sourced detailed list all Chapter 380 agreements kept cen- city; but will, future, automate their ordering systems. He tral location creates challenge obtaining information on concerned that city will lose those revenues. agreements because lot agreements are very protected. Mr. Fortune, Mr. Olsen, and Mr. Hart commented that Commenters requested data and analysis determine proposed provisions related Internet orders will impact busi- impact amendment will have on their communities, and ness-to-business transactions. Mr. Gilmore commented that information on Chapter 380 agreements. commenters amendment will redistribute sales tax less prosperous com- were: Texas State Representative Sheryl Cole, Representative munities their more prosperous neighbors. Mr. Voelker com- Zweiner, Mr. Fortune, Mr. Olsen, Mr. Hart, Ms. May, Mr. Land, mented that City Richardson concerned about losing Ms. Hunt, Mr. Voelker, Mr. Scott, Mr. Hillman. Mr. Fortune sales tax because companies have sourced all their sales asked that House Ways Means committee request city it where their employee base, sales force, call additional analysis on amendment's provisions. center staff are located, it where their product orders are Mr. Voelker Mr. Scott requested that comptroller gather received processed. information across state regarding Chapter 380 Chap- Representative Talarico, Mr. Morgan, Mr. Sheets, Ms. Hurlbert, ter agreements fully understand how agreements Mr. Gilmore, Mr. Durham, Mr. Meek, Board Directors being used. Mr. Voelker also requested that comptroller per- Coppell Chamber Commerce, Mr. Ball, Ms. Armstrong, form impact analysis determine how changes will affect Mr. Rollins, Mr. Moseley, US Representative Carter, Ms. Carl- tax collections existing businesses. Mr. Scott son, Ms. Olson Bourland, Mr. Howard, Ms. Howard, Mr. Taplits, made similar requests. Mr. Torigian, Mr. Harris, Mr. Scott, Mr. Camareno made Mr. Ryan commented that he does believe amendment comments impact proposed provisions on Inter- complies Texas Government §2001.024 (Content net orders will have Chapter agreements. Notice), requires specific content notice pro- Commenters believe proposed grandfather provisions vio- posed rule, relating fiscal impact such amendment. Mr. late Constitution State Texas because they impair Ryan believes fiscal note detailing fiscal implication existing contracts. Specifically, Mr. Moore commented small business reprogramming software, shifting lo- proposed subparagraph (F) runs afoul Article I, Section cal among jurisdictions, upending pre-existing Chapter Constitution State Texas. State Represen- agreements, economic cost public tative Jim Murphy Ms. Olson Bourland made similar com- required. Mr. Christian Mr. Harris agreed. Mr. Harris, addi- ments. tionally, stated comptroller did give adequate notice when reversing policy required under federal case law. Mr. Mr. Moore suggests comptroller revise provision Morgan commented fiscal impact statement contradicts grandfather existing agreements entered into before September known impact City Round Rock. Mr. Sheets end their existing term. Mr. Roberts, Mr. Bai- Ms. Olson Bourland made similar comments. Ms. Hunt made ley, Mr. Taplits, Ms. Carlson, Mr. Durham, Mr. Kelemen, Mr. *135 similar comments relating to the City Coppell. Butcher, Mr. Torigian and Mr. Rollins made similar request. Mr. Roberts, Mr. Bailey, Mr. Duffie, Mr. Camareno, Mr. Scott, Mr. Morgan; Ms. Hunt; Mr. Land; Mr. Sheets; Representative Mr. Taplits, Mr. Torigian, and Mr. Butcher also support extending Talarico; Representative Zwiener; US Representative Carter; the grandfather clause from range five to 20 years. Mr. Voelker; Mr. Morgan; the Board Directors for the Coppell Chamber Commerce; Mr. Christian; Mr. Ryan; Ms. Christian; ADOPTED RULES May 22, 2020 45 3505 Mr. Kelemen, Mr. Morgan, Mr. Sheets, Ms. Olson Bourland, Mr. Mr. Scott; Mr. Camareno; Mr. Gilmore; Mr. Erb; Mr. Meek; the Ryan, Mr. Christian, Mr. Harris, Mr. Camareno, Mr. Pannell, Ms. Board Directors for the Round Rock Chamber Commerce; Carlson, and Mr. Kroll stated that the amendment conflicts with Mr. Kasner; Mr. Torigian; Mr. Kroll; Mr. Moore; and Mr. Harris the statute is not supported by law. Also, Mr. Morgan, Mr. requested that the comptroller solely implement the provisions in House Bills 1525 and 2153 and the Wayfair decision. Mr. Sheets, and Ms. Olson Bourland commented that the statute and the legislative intent require origin-based sourcing. Mr. Mor- Kroll and Mr. Harris provided draft amendments to accomplish gan commented that the legislature has always concluded that the objective. origin-based sourcing is the most effective method to allocate Ms. Hunt requested that the comptroller withdraw the amend- resources. ment as proposed and republish only the language required to Mr. Ryan, Mr. Christian, Mr. Harris, Mr. Kroll, Mr. Camareno, implement House Bill 1525 and House Bill 2153 based on the and Mr. Pannell commented that Chapter makes no distinc- staggering effects the COVID-19 pandemic on public health tion based the technology used by the customer to commu- and the economy. Ms. Olson Bourland and the Board Di- nicate an order except when made in person. rectors for the Coppell Chamber Commerce had similar com- ments. Mr. Harris commented that concluding that Internet orders are received anywhere is at odds the comptroller's long- Mr. Butcher, Mr. Ball, Ms. Armstrong, US Representative Carter, standing position that Internet orders are received at location Ms. Christian, Mr. Harris, Mr. Erb, Mr. Kroll, Mr. Camareno, Ms. in Texas. Olson Bourland, Mr. Durham, Mr. Kelemen, Ms. Carlson, Mr. Harris, Mr. Sheets, and Mr. Pannell stated that the amendment He commented that treating Internet orders for taxable is improper because it goes beyond the scope the Wayfair items differently from non-Internet orders violates Tax Code, decision, House Bill 1525, and House Bill 2153, and beyond the §321.002(a)(3) and §321.203. He commented that in City Webster, the comptroller stated that Internet orders can comptroller's authority. received place business. He further stated that Chapter Ms. Hunt, Mr. Land, Board Directors Coppell already provides rules Internet orders. Mr. Sheets Chamber Commerce, Mr. Sheets, Representative Talarico, and Ms. Olson Bourland made similar remarks.
Mr. Gilmore, Mr. Erb, Representative Zwiener, Representative Murphy, Mr. Meek, Mr. Camareno, Mr. Pannell, Mr. Taplits, Mr. Ms. Olson Bourland stated numerous reasons that she believes Harris, Mr. Hillman, Mr. Ball, and Mr. Selleck further requested amendment is contrary law, including that amendment that comptroller leave remaining issues legisla- is unconstitutional contradicts comptroller's guidelines and ture decide in future sessions. Ms. Hunt Mr. Land asked letter rulings. She also commented that comptroller is judi- that Ways Means Committee request that comptrol- cially estopped asserting that pertinent portions Tax ler only implement House Bills 2153. Code are ambiguous. Mr. Ryan, Mr. Christian, Mr. Harris, Mr. Torigian opined that She commented that term "fulfillment" does appear legislature has accepted comptroller's long-standing ad- statute, but instead contains term "consummate," which ministration local sales taxes without regard technology means offer, acceptance, payment item. Mr. Sheets used by customer submit order that comptrol- proposed revise rule provide that Internet orders are ler cannot make changes without statutory change. Mr. Harris treated same as orders submitted received by other commented that Combs v. City Webster, Court stated means communication. He also proposed that when making that "whether {a} result involves 'fair' tax policy is question orders through Internet by any other means commu- legislature." nication, sale is consummated where order is received, regardless where order fulfilled. Mr. Kelemen made Mr. Presley commented that way comptroller has pro- similar request revision. posed changes has given legislature adequate time ad- dress issue. Representative Leman commented that it In response these comments, comptroller deleted pro- part comptroller's function provide clarifications when posed language regarding Internet orders. needed timely manner so that we can have successful Representative Talarico, Representative Zwiener, Mr. Sheets, economy. Mr. Morgan, Ms. Olson Bourland, Mr. Ryan, Mr. Ball stated The comptroller declines make revisions based these com- that origin-based sales has been applied across board ments. The comptroller has broad rulemaking authority under all transactions. Ms. Olson Bourland further stated that Tax Code, §§111.002 (Comptroller's Rules; Compliance; Forfei- amendment completely upends framework by making Inter- ture); 321.306 (Comptroller's Rules); 323.306 (Comptroller's net orders destination-sourced purposes sales tax. Rules). There ambiguity consummation rule as evi- Mr. Ryan commented that taxes default place denced questions comptroller received. There are delivery customer only when there no place business situations same fact pattern results sourcing seller taxes should allocated. companies different manners. The comptroller's changes pro- vide clear guidance address these situations. The comptroller Mr. Sheets commented Tax §321.203(b) states if conducted statewide fiscal impact analysis required under retailer has only one place business, all retailer's sales Administrative Procedures Act. comptroller declines taxable items consummated place business, except only implement House Bills Wayfair de- provided subsection (e). Mr. Sheets proposed language cision. comptroller delays implementation subsection effect. Mr. Sheets commented if comptroller applies (b)(5), regarding orders received personnel, until Internet order rule seller single place business October giving interested parties time seek legisla- state, amendment illegal. Ms. Carlson Mr. Butcher *136 tive change. had similar requests. May Texas Register The comptroller adds new subsection (d) to include the provi- Representative Talarico commented that sales tax is based on sions in former subsection (i), relating to use tax. The comp- the business, not on the consumer, and thus, it should apply to troller adds new paragraph (1), which includes the language in purchases over the phone or online. Mr. Stratton commented former subsection (i)(1) concerning general local use tax rules that he supports an origin-based sales tax system because it is with non-substantive changes for ease readability. "simpler to calculate, harder to pass the buck on, and more pro- tective our privacy." However, Mr. Presley commented that all The comptroller adds new paragraph (2) to include the provisions transactions other than the customer showing up at the business in former subsection (i)(2) concerning general use tax rules ap- should be based on destination. plied to specific situations with changes. The comptroller declines to make revisions based on these com- In light the Wayfair decision, the comptroller gives effect to the ments. For the reasons previously stated, the comptroller is Tax Code's requirement that sellers engaged in business in the deleting the provisions regarding Internet orders, and is adopt- state collect local use tax for sales consummated in Texas and ing provisions regarding orders placed in person, and those not for sales consummated outside Texas based on the local tax- placed in person. ing jurisdictions in which taxable item is first used, stored, consumed, regardless the specific local jurisdiction in which Mr. Kelemen, Mr. Kennedy, Mr. Kroll, Mr. Pannell, Mr. Land, seller is engaged in business. See Tax Code, §§321.205, Ms. Hurlbert, Mr. Edmonson, Mr. Ryan, Ms. Christian, Mr. 322.105 (Use Tax: Where Use Occurs), and 323.205. Duffie, Mr. Harris, Ms. Olson Bourland, the Board Directors for the Coppell Chamber Commerce, and the Round Rock When sale is consummated in Texas, seller is engaged in Chamber Commerce commented that proposed provision business in this state through presence property em- for Internet orders will place additional administrative compliance ployees in state. See Tax §§151.107 (Retailer En- burdens on sellers which will force them to update their software gaged in Business in this State), 321.203, and 323.203. There- within short timeframe. fore, language that seller engaged in business in local jurisdiction for sales consummated in Texas is superflu- Mr. Pannell commented that amendment will create an un- ous. Moreover, an engaged business standard for local use due burden on Texas retailers as they will required to calculate tax does not give effect to Tax Code's requirement that and collect tax based on method communication through seller collect local use tax that is due and creates opportu- which their customers choose to submit orders. Mr. Edmonson, nity for sellers to avoid collecting local use tax due. See Tax Mr. Kroll, Mr. Land, Mr. Torigian, Mr. Ryan, Ms. Christian, Mr. Code §§151.103(Collection by Retailer; Purchaser's Receipt), Duffie, Mr. Harris, and Board Directors Coppell 321.003 (Other Portions Tax Applicable), 321.205, 322.108 Chamber Commerce made similar comments. (Certain Provisions Municipal Sales and Use Tax Applicable), The comptroller declines to make revisions based on these com- 323.003(Other Portions Tax Applicable), and 323.205. There- ments because taxpayers already must keep records sales, fore, comptroller deletes "engaged business" require- such burden inherent consummation statutes (like ment local use tax throughout section. burden identifying particular place business that re- In new paragraph (2), comptroller implements Wayfair ceives order when business has multiple places busi- decision by clarifying that seller responsible collecting ness). Taxpayers will also have time to update their systems local use tax due on sale based upon location under extended implementation date. state to order shipped delivered at Mr. Ryan, Mr. Christian, Ms. Olson Bourland, Mr. Butcher, Mr. purchaser item takes possession. Harris, Mr. Kroll commented proposed provisions In new subparagraphs (B) (C), comptroller also explic- regarding Internet orders violate Internet Tax Freedom Act itly states location seller does not affect because they discriminate against Internet. determination whether seller required collect addi- The provisions do not impose tax on discriminate against tional local use tax due. In new clauses (i) (ii), comptrol- Internet, therefore, do violate Internet Tax Freedom ler provides two examples illustrate when seller required Act. collect additional local use taxes. Mr. Ryan commented sellers are at risk class action law- The comptroller adds new subsection (e) include provi- suits failing notify their customers they may pay sions former subsection (b), relating effects other law, higher amount tax depending on method customer with minor non-substantive changes provisions they ap- uses place order. Mr. Ryan adds sellers are also peared former subsection (b). risk if they are unable distinguish between Internet orders The comptroller adds new subsection (f), include pro- other orders when calculating taxes. visions former subsection (c), relating tax rates without Mr. Kelemen; Mr. Hillman; Mr. Olsen; Mr. Land; Ms. Hurlbert; changing provisions they appeared former subsection Mr. Camareno; Mr. Voelker; Ms. May; Mr. Scott; Mr. Kennedy; (c). Ms. Olson Bourland; Mr. Durham; Mr. Harris; Teresa Wiley, comptroller adds new subsection (g) include provi- on behalf Sysco, Inc., requested comptroller delay sions former subsection (d), relating jurisdictional bound- implementation date provide additional time entities aries, combined areas, city imposed through strategic comply with provisions Internet orders traveling partnership agreements, non-substantive changes made salespersons. In response these comments, comptroller language combined areas ease readability. has deleted proposed provision regarding Internet orders, delayed implementation subsections (b)(4) (b)(5) comptroller adds new subsection (h) include provi- regarding orders received sales personnel when they sions former subsection (f) concerning places business place business seller orders received job sites crossed taxing jurisdiction boundaries personnel October 2021. *137 ADOPTED RULES May 22, 45 TexReg 3507 local use tax rate that will be in effect for that calendar year in change to the title the subsection to read places business the Texas Register. the seller. No other changes were made to those provisions. New subparagraph (F) provides the calculation for the single lo- The comptroller adds new subsection (i). Throughout new sub- section (i), the comptroller implements the Wayfair decision for cal use tax rate. local use tax to address sales consummated in Texas and sales New subparagraph (G) provides that a purchaser may request consummated outside Texas, including sales by remote sell- a refund based on local use taxes paid in a calendar year. The ers. refund is for the difference between the single local use tax rate paid by the purchaser the amount the purchaser would have In new paragraph (1), the comptroller adds the language found in paid based on the combined tax rate for all applicable local use former subsection (g)(1) with changes. The comptroller explicitly taxes. Non-permitted purchasers may request a refund directly states in paragraph (1) that the location the seller in Texas the comptroller on an annual basis without having to meet does not affect the determination whether the seller is required the requirements in §3.325(a)(1) this title (relating to Refunds to collect additional local use tax due. Payments Under Protest) the statute limitation under In new paragraph (2), the comptroller includes the language in Tax §111.104 (Refunds). former subsection (g)(2) with changes. The comptroller makes New subparagraph (H) addresses marketplace providers a cross-reference to new subsection (i)(3) the amendment, states that a marketplace provider may only use the combined which implements House Bill 2153. The comptroller also clarifies tax rate all applicable local use taxes when computing the that new subsection (i)(2) applies to sales not consummated in amount local use tax to collect remit. Texas. The amendment provides that local use tax is based upon the location in this state to which the item is shipped delivered In new paragraph (4), the comptroller restates the language in at which the purchaser takes possession. deleted subsection (g)(4) concerning purchasers responsible for accruing remitting local taxes if the seller fails to collect with- In new paragraph (3), the amendment addresses local use tax out any changes. for remote sellers implements the single local use tax rate for remote sellers enacted in House Bill 2153. In new paragraph (5), comptroller restates the language in deleted subsection (g)(5) concerning local tax due on sales New subparagraph (A)(i) provides that a remote seller is required price a taxable item without any changes. to collect remit using combined rate all applicable local use taxes based on location to which item is shipped The comptroller adds new paragraph (6) to relieve purchaser delivered which purchaser takes possession. New liability for additional use tax if purchaser pays local use subparagraph (A)(ii) provides that remote seller's election, tax using single local use tax rate to eligible remote seller remote seller may elect to use single local use tax rate electing to use single local use tax rate. Paragraph (6) also published in Texas Register. requires purchaser verify on comptroller's website that remote seller has elected use single local use tax rate. New subparagraph (B) addresses single local use tax rate Moreover, paragraph (6) provides that if remote seller is when remote seller stores tangible personal property Texas listed on comptroller's website, purchaser will liable sold on marketplace. The comptroller recognizes that additional use tax due. remote seller selling tangible personal property on marketplace may have control where their tangible personal property Mr. Edmonson commented TechNet believes that para- is stored. Therefore, ease burden on remote seller, this graph (6) will create undue burden on buyer verify if provision allows remote seller elect single local use tax remote seller is registered with comptroller. He commented rate. state should pursue seller, buyer. The comp- troller declines make revision based on this comment. New subparagraph (C) addresses notice requirements remote seller sends comptroller its election revocation The comptroller deletes existing subsection (b), relating election use single local use tax rate. New clause (i) pro- effect other law, as this information is contained new sub- vides remote seller must notify comptroller its elec- section (e) with minor, non-substantive changes. tion use single local use tax rate on form prescribed by The comptroller deletes existing subsection (c) relating tax comptroller may notify comptroller election its rates, as information is contained new subsection (f) with- use tax permit application form before being able use sin- out change. gle local use tax rate. New clause (i) also requires remote seller use single local use tax rate all its taxable The comptroller deletes existing subsection (d) relating ju- items until remote seller revokes election writing risdictional boundaries, combined areas, city tax imposed comptroller. New clause (ii) addresses requirements through strategic partnership agreements, as this information remote seller revoke its election collect single local use contained new subsection (g) non-substantive changes tax rate filing form prescribed comptroller by October made provisions combined areas ease readabil- calendar year. ity. New subparagraph (D)(i) provides initial single local use tax comptroller deletes existing subsection (e) relating place rate 1.75%, effect period beginning October business - special definitions, this information contained 1, 2019, ending December 31, 2019. Subparagraph (D)(ii) new subsection (b) changes. provides initial single use rate 1.75%, effect period beginning January 1, 2020, ending comptroller deletes existing subsection (f) concerning December 2020. places business job sites crossed taxing ju- risdiction boundaries, information contained new New subparagraph (E) provides before beginning calendar year, comptroller will publish notice single May Register
CP Ex-23-0023 of 0032 §3.334. Local Sales and Use Taxes. subsection (h) with a change only to title subsection to read places business seller. (a) Definitions. The following words and terms, when used in this section, shall have following meanings, unless context The comptroller deletes subsection (g) concerning sellers' and clearly indicates otherwise. purchasers' responsibilities for collecting or accruing local taxes, as those provisions, except for subsection (g)(3), which was (1) Cable system--The system through which a cable ser- deleted in its entirety, are contained in new subsection (i) with vice provider delivers cable television or bundled cable service, as changes. those terms are defined in §3.313 this title (relating to Cable Televi- sion Service and Bundled Cable Service). The comptroller deletes existing subsection (h) concerning local sales tax, as this information is contained in new subsection (c) (2) City--An incorporated city, municipality, town, or vil- with changes. lage. The comptroller deletes existing subsection (i) concerning use (3) City sales and use tax--The tax authorized under Tax tax, as this information is contained in new subsection (d) with Code, §321.101(a), including additional municipal sales and use changes. tax authorized under Tax Code, §321.101(b), municipal sales and use tax street maintenance authorized under Tax Code, §327.003, The comptroller adds new subsection (k)(5) to implement House Type A Development Corporation sales and use tax authorized un- Bill 1525, to address sales taxable items through marketplace der Local Government Code, §504.251, Type B Development Cor- providers. Subsequent paragraphs are renumbered. poration sales and use tax authorized under Local Government Code, Mr. Kroll commented that House Bill 1525 could be interpreted §505.251, a sports and community venue project sales and use tax to only source third-party marketplace seller transactions to des- adopted by a city under Local Government Code, §334.081, and a mu- tination. He commented that provision should be amended nicipal development corporation sales and use tax adopted by city un- to ensure that all taxable sales made via marketplace, either der Local Government Code, §379A.081. The term does not include by marketplace provider itself or on behalf marketplace fire control, prevention, and emergency medical services district seller, should sourced to destination. He suggested language sales and use tax authorized under Tax Code, §321.106, or munic- that effect. The comptroller declines make this revision be- ipal crime control and prevention district sales and use tax authorized cause House Bill 1525 is specific sales made by market- under Tax Code, §321.108. place providers on behalf marketplace sellers. It does not (4) Comptroller's website--The agency's website concern- provide sourcing on marketplace provider's own sales. ing local taxes located at: https://comptroller.texas.gov/taxes/sales/. Additionally, amending §3.286 this title in this section is not appropriate. (5) County sales and use tax--The tax authorized under Tax Code, §323.101, including sports and community venue project The provisions related remote sellers, single local use tax sales and use tax adopted by county under Local Government Code, rate, and marketplace providers took effect October 1, 2019. §334.081. The term does not include county health services sales Joe Strong, on behalf Microsoft, made comments pertaining and use tax authorized under Tax Code, §324.021, county landfill marketplace providers and marketplace sellers, registration, and criminal detention center sales and use tax authorized under Tax good faith, information requirements, which addressed Code, §325.021, or crime control prevention district sales in §3.286 this title not this amendment. Mr. Howard use tax authorized under Tax Code, §323.105. Ms. Howard commented that they strongly disagree (6) Drop shipment--A transaction an order is re- amendment. ceived by seller one location, but item purchased is shipped by Mr. Pannell requested guidance information that will seller another location, or shipped by seller's third-party audited by comptroller penalties incorrect appli- supplier, directly location designated by purchaser. cation tax. Mr. Kroll commented comptroller (7) Engaged business--This term has meaning given does not have any training or audit materials this rule, so it §3.286 this title (relating Seller's Purchaser's Responsibil- appears businesses will not face compliance scrutiny under au- ities). dit. The comptroller declines make revisions based this comment because this section addresses sales use (8) Extraterritorial jurisdiction--An unincorporated area administration. The comptroller will provide audit guidelines contiguous corporate boundaries city defined regarding this section appropriate audit materials. Local Government Code, §42.021. Ms. May urged amendment continue designate pur- (9) Fulfill--To complete an order transferring taxable chasing offices places business if it deemed they item directly purchaser Texas location, or ship or deliver do not exist solely avoid or rebate sales tax. The comptroller taxable item location designated purchaser. The did not make any amendments definition purchasing of- term does include tracking an order, determining shipping costs, fices. managing inventory, other activities do involve transfer, shipment, delivery taxable item purchaser location comptroller adopts this amendment under Tax Code, designated purchaser. §111.002 (Comptroller's Rules; Compliance; Forfeiture), provides comptroller authority amend rules (10) Itinerant vendor--A seller who travels various loca- reflect changes constitution laws United States tions purpose receiving orders making taxable judicial interpretations thereof. items who has no place business this state. A person who sells items through vending machines also itinerant vendor. amendments implement Tax §§151.0595 (Single Lo- salesperson operates out place business state cal Tax Rate Remote Sellers), 321.203, 323.203, itinerant vendor. South Dakota v. Wayfair, Inc., S. Ct. (June 2018).
(11) Kiosk--A small stand-alone area structure: ADOPTED RULES May *139 for the purpose of buying and selling taxable goods to be used or con- (A) that is used solely to display merchandise or to sub- sumed by the retail or commercial business. mit orders for taxable items from a data entry device, or both; (18) Remote Seller--As defined in §3.286 of this title, a re- (B) that is located entirely within a location that is a mote seller is a seller engaged in business in this state whose only ac- place of business of another seller, such as a department store or shop- tivity in the state is:
ping mall; and (A) engaging in regular or systematic solicitation of (C) at which taxable items are not available for imme- sales of taxable items in this state by the distribution of catalogs, diate delivery to a purchaser. periodicals, advertising flyers, or other advertising, by means of print, (12) Local taxes--Sales and use taxes imposed by any local radio, or television media, or by mail, telegraphy, telephone, computer taxing jurisdiction. data base, cable, optic, microwave, or other communication system for purpose of effecting sales of taxable items; or (13) Local taxing jurisdiction--Any of following: (B) soliciting orders for taxable items by mail or (A) a city that imposes sales and use tax as provided through other media including Internet or other media that may under paragraph (3) of this subsection; developed in future. (B) a county that imposes sales and use tax as provided (19) Seller--This term has meaning given in §3.286 of under paragraph (5) of this subsection; this title and also refers any agent or employee of seller. (C) a special purpose district created under Special (20) Special purpose district--A local governmental entity District Local Laws Code or other provisions of Texas law that is autho- authorized by Texas legislature for a specific purpose, such as crime rized impose sales and use tax by Tax Code or other provisions control, a local library, emergency services, county health services, or of Texas law and as governed by provisions of Tax Code, Chapters a county landfill and criminal detention center. 321 or 323 and other provisions of Texas law; or (21) Storage--This term has meaning given §3.346 (D) a transit authority imposes sales and use tax as of this title (relating Use Tax). authorized by Transportation Code, Chapters, 451, 452, 453, 457, or 460 and governed by provisions of Tax Code, Chapter, 322. (22) Temporary place of business of seller--A location operated by a seller for a limited period of time for purpose of sell- (14) Marketplace provider--This term has meaning ing receiving orders for taxable items and where seller has in- given §3.286 this title. ventory available for immediate delivery a purchaser. For example, (15) Order placed person--An order placed by a pur- a person who rents a booth at a weekend craft fair or art show sell chaser with seller while physically present seller's place take orders for jewelry, or a person who maintains a facility a business regardless how seller subsequently enters order. job site rent tools equipment a contractor during construc- tion real property, has established a temporary place business. A (16) Place business seller - general definition--An temporary place business seller includes a sale outside a established outlet, office, or location operated by seller for purpose distribution center, manufacturing plant, storage yard, warehouse, or selling taxable items those other than employees, independent similar facility seller parking lot or similar space sharing contractors, natural persons affiliated with seller, where sales same physical address as facility but not within walls personnel seller receive three or more orders for taxable items facility. during calendar year. term does not include computer server, Internet protocol address, domain name, website, or software applica- (23) Transit authority--A metropolitan rapid transit author- tion. Additional criteria for determining when location place ity (MTA), advanced transportation district (ATD), regional or subre- business seller provided subsection (b) this section for gional transportation authority (RTA), city transit department (CTD), distribution centers, manufacturing plants, storage yards, warehouses county transit authority (CTA), regional mobility authority (RMA) or similar facilities; kiosks; purchasing offices. An outlet, of- coordinated county transportation authority created under Transporta- fice, facility, or any location contracts retail or commercial tion Code, Chapters 370, 451, 452, 453, 457, or 460. business process business invoices, purchase orders, bills (24) Two percent cap--A reference general rule that, lading, or other equivalent records onto sales tax added, in- except otherwise provided by Texas law explained this cluding office operated purpose buying selling taxable section, seller cannot collect, purchaser obligated pay, goods used or consumed by retail or commercial business, more than 2.0% sales price taxable item total sales place business seller if comptroller determines use taxes all taxing jurisdictions. outlet, office, facility, or location functions or exists avoid tax legally due under Tax Code, Chapters 321, 322, or exists (25) Use--This term has meaning given §3.346 solely rebate portion tax imposed those chapters this title. contracting business. An outlet, office, facility, or location does ex- (26) Use tax--A tax imposed storage, use or other ist avoid tax legally due under Tax Chapters 322, consumption taxable item state. or solely rebate portion tax imposed those chapters if outlet, office, facility, or location provides significant business (b) Determining place business seller. services, beyond processing invoices, contracting business, in- cluding logistics management, purchasing, inventory control, or other (1) Distribution centers, manufacturing plants, storage vital business services. yards, warehouses, similar facilities. (17) Purchasing office--An outlet, office, facility, any lo- (A) distribution center, manufacturing plant, storage cation contracts retail commercial business process yard, warehouse, similar facility operated seller purpose business invoices, purchase orders, bills lading, other equiva- selling taxable items where sales personnel seller receive three lent records onto added, including office operated more orders taxable items during calendar year persons May Register *140 and these locations will be treated as places of business of the seller other than employees, independent contractors, and natural persons af- purposes of subsection (c) of this section. filiated with the seller is a place of business of the seller. (5) Orders not received by sales personnel, including or- (B) If a location that is a place of business of the seller, ders received by a shopping website or shopping software application. such as a sales office, is in the same building as a distribution center, Effective October 1, 2021, these orders are received at locations that manufacturing plant, storage yard, warehouse, or similar facility op- are not places of business of the seller. erated by a seller, then the entire facility is a place of business of the seller. (c) Local sales tax - Consummation of sale - determining the local taxing jurisdictions to which sales tax is due. Except the spe- (2) Kiosks. A kiosk is not a place of business of the seller cial rules applicable to remote sellers in subsection (i)(3) of this sec- the purpose of determining where a sale is consummated local tion, direct payment permit purchases in subsection (j) of this section, tax purposes. A seller who owns or operates a kiosk in Texas is, how- certain taxable items, including taxable items sold by a market- ever, engaged in business in this state as provided in §3.286 of this title. place provider, as provided in subsection (k) of this section, each sale (3) Purchasing offices. of a taxable item is consummated at the location indicated by the pro- visions of this subsection. following rules, taken from Tax Code, (A) A purchasing office is not a place of business of the §321.203 §323.203, apply to all sellers engaged in business in this seller if the purchasing office exists solely to rebate a portion of the lo- state, regardless of whether they have no place of business in Texas, a cal sales use tax imposed by Tax Code, Chapters 321, 322, or single place of business in Texas, or multiple places of business in the to a business with which it contracts; or if the purchasing office func- state. tions or exists avoid the tax legally due under Tax Code, Chapters 321, 322, or 323. purchasing office does not exist solely rebate (1) Consummation of sale - order received at a place of a portion of the local sales use tax or avoid the tax legally due business of the seller in Texas. under Tax Chapters 321, 322, or if the purchasing office pro- (A) Order placed in person. Except as provided by vides significant business services the contracting business beyond paragraph (3) of this subsection, when an order a taxable item is processing invoices, including logistics management, purchasing, in- placed in person at a seller's place of business in Texas, including at a ventory control, or other vital business services. temporary place of business of the seller in Texas, the sale of that item (B) In making a determination under subparagraph (A) is consummated at that place of business of the seller, regardless of of this paragraph, as whether a purchasing office provides signif- the location where the order is fulfilled. icant business services the contracting business beyond processing (B) Order not placed in person. invoices, the comptroller will compare the total value of the other busi- ness services the value of processing invoices. If the total value of (i) Order fulfilled at a place of business of the seller the other business services, including logistics management, purchas- in Texas. When an order is received at a place of business of the seller ing, inventory control, or other vital business services, is less than the in Texas is fulfilled at a place of business of the seller in Texas, the value of the service process invoices, then the purchasing office will sale is consummated at the place of business where the order is fulfilled. be presumed not be a place of business of the seller. (ii) Order not fulfilled at a place of business of the (C) If the comptroller determines that a purchasing of- seller in Texas. When an order is received at a place of business of fice is not a place of business of seller, sale of any taxable item seller in Texas is fulfilled at a location that is not a place of business is deemed be consummated at place of business of seller from of seller in Texas, sale is consummated at place of business whom purchasing office purchased taxable item resale where order is received. local sales use taxes are due according following rules. (2) Consummation of sale - order not received at a place of (i) When taxable items are purchased from a Texas business of seller in Texas. seller, local sales taxes are due based on location of seller's place (A) Order fulfilled at a place of business of seller of business where sale is deemed be consummated, as determined in Texas. When an order is received at a location that is not a place in accordance with subsection (c) this section. business seller in Texas or is received outside Texas, (ii) When sale a taxable item is deemed be is fulfilled from a place business seller in Texas, sale is consummated at a location outside this state, use tax is due consummated at place business where order is fulfilled. based location where items are first stored, used or consumed (B) Order not fulfilled from place business by entity that contracted purchasing office in accordance seller in Texas. subsection (d) this section. (i) Order fulfilled in Texas. When order is re- (4) Orders received by personnel who not at ceived at location is not place business seller in Texas place business seller Texas when they receive order, is fulfilled from location Texas is place business including orders received by mail, telephone, including Voice over In- seller, sale is consummated at location Texas which ternet Protocol cellular phone calls, facsimile, email. This order is shipped or delivered, or at which purchaser item type order is treated as being received at location from which takes possession. salesperson operates, is, principal fixed location where salesperson conducts work-related activities. location from which (ii) Order fulfilled Texas. When order salesperson operates will place business seller only if received seller at location outside by remote seller, location meets definition "place business seller" fulfilled location outside Texas, sale consum- subsection (a)(16) this section its own, without regard or- mated Texas. However, use due based upon location ders imputed location this paragraph. Orders received prior this state item shipped delivered October 2021, may also treated as being received out- purchaser item takes possession as provided subsection (d) let, office, location operated seller serves base section. Except provided subsection (i)(3) this section, operations provides administrative support salesperson, ADOPTED RULES May *141 (B) If a local use tax cannot be collected or accrued at remote seller required to collect state use tax under §3.286(b)(2) of this its full rate without exceeding the two percent cap, the seller cannot title must also collect local use tax based on the location to which the collect it, or any portion of it, and the purchaser is not responsible for item is shipped or delivered or at which the purchaser of the item takes accruing it. possession. (C) If a seller collects a local sales tax on an item, or a (3) Exception for qualifying economic development purchaser accrues a local sales tax on an item, a use tax for the same agreements entered into before January 1, 2009, pursuant to Tax type of jurisdiction is not due on the same item. For example, after §321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This paragraph is city sales tax has been collected or accrued for an item, no use tax is effective until September 2024. If applicable, the local sales tax due due to that same or different city on that item, but use tax may be due on the sale of taxable item is based on the location of the qualifying county, special purpose district, or transit authority. Similarly, if warehouse, which is place of business of the seller, from which the one or more special purpose district sales taxes have been collected or item is shipped or delivered or at which the purchaser of the item takes accrued for an item, no special purpose district use tax is due on that possession. item, and if one or more transit authority sales taxes have been collected (4) Local sales taxes are due each local taxing jurisdic- or accrued for an item, no transit authority use tax is due on that item. tion with sales tax in effect where the sale is consummated. Local use (D) Collection or accrual of use tax for multiple special tax may also be due if the total amount of local sales taxes due does not purpose districts. If more than one special purpose district use tax is in reach the two percent cap, and the item purchased is shipped or deliv- effect at the location where use of item occurs, the special purpose ered location in one or more different local taxing jurisdictions, as district taxes are due in the order of their effective dates, beginning provided in subsection (d) of this section. with the earliest effective date, until the two percent cap is met. The (5) Multiple special purpose district taxes, multiple transit effective dates of all special purpose district taxes are available on the authority sales taxes, or combination of the two may apply single comptroller's website. However, if the collection or accrual of use tax transaction. If the sale of taxable item is consummated at location for the district with the earliest effective date would exceed the two within the boundaries of multiple special purpose districts or transit percent cap, the tax for that district is not due and the seller or purchaser authorities, local sales tax is owed each of the jurisdictions in effect should determine, following the criteria in subparagraphs (A) - (C) of at that location. For example, place of business of the seller located in this paragraph, whether use tax is due for the district that next became the city San Antonio is within the boundaries both the San Antonio effective. Advanced Transportation District the San Antonio Metropolitan (i) If the competing special purpose district taxes be- Transit Authority, the seller is required collect sales tax for both came effective on the same date, the special purpose district taxes are transit authorities. Similarly, place business the seller in Flower due in the order the earliest date for which the election in which the Mound is located within the boundaries two special purpose districts, district residents authorized the imposition sales use tax by the the Flower Mound Crime Control District the Flower Mound Fire district was held. Control District, the seller is responsible for collecting sales tax for both special purpose districts. (ii) If the elections impose the local taxes were held on the same date, the special purpose district taxes are due in the (6) Itinerant vendors; vending machines. order earliest date for which enabling legislation under which (A) Itinerant vendors. Sales made by itinerant vendors each district was created became effective. are consummated at, itinerant vendors must collect sales tax based (E) Collection or accrual use tax for multiple transit upon, location where item is delivered or at which purchaser authorities. If more than one transit authority use tax is in effect at item takes possession. Itinerant vendors do not have any respon- location where use item occurs, two percent cap has sibility collect use tax. been met, transit authority taxes are due in order their (B) Vending machines. Sales taxable items made effective dates, beginning with earliest effective date, until two from vending machine are consummated location vend- percent cap is met. The effective dates all transit authority taxes ing machine. See §3.293 this title (relating Food; Food Prod- are available on comptroller's website. However, if collection ucts; Meals; Food Service) for more information about vending ma- or accrual use tax for authority earliest effective date chine sales. would exceed two percent cap, tax authority is due seller or purchaser should determine, following criteria in (d) Local use tax. provisions addressing imposition subparagraphs (A) - (D) this paragraph, whether use tax is due state use tax in §3.346 this title also apply imposition authority next became effective. local use tax. For example, consistent §3.346(e) this title, all taxable items are shipped or delivered location in this state (i) If competing transit authorities became effec- is within boundaries local taxing jurisdiction are presumed tive same date, transit authority taxes are due in order have been purchased use local taxing jurisdiction as well as earliest date which election which authority residents
presumed have been purchased use state. authorized imposition sales use tax authority was held. (1) General rules. (ii) If elections impose local taxes were held same date, transit authority use taxes are due order (A) When use taxes are due addition local earliest date enabling legislation under which each taxes provided subsection (c) this section, all applicable authority was created became effective. use taxes must be collected or accrued following order until two percent cap reached: city, county, special purpose district, (2) General use tax rules applied specific situations. transit authority. If more than one special purpose district use tax due, following fact patterns explain how use tax collected or all such taxes are collected accrued before any transit authority accrued remitted comptroller based on, subject to, use tax collected accrued. See subparagraphs (D) (E) this general rules paragraph (1) subsection. paragraph. May Texas Register subsection, due based upon location where items are shipped (A) Sale consummated outside state, item delivered delivered purchaser item takes possession. outside state from location operated seller - local use due. Except provided subsection (i)(3) (e) Effect other law. *142 this section, if a sale is consummated outside of this state according to (1) Tax Code, Title 2, Subtitles A (General Provisions) and the provisions of subsection (c) of this section, and the item purchased B (Enforcement and Collection), Tax Code, Chapter (Multistate is either shipped or delivered to a location in this state as designated Tax Compact) and Tax Code, Chapter (Limited Sales, Excise, and by the purchaser from a location outside of the state, or if the order Use Tax) apply to transactions involving local taxes. Related sections is drop shipped directly to the purchaser from a third-party supplier, of this title and comptroller rulings shall also apply respect to local local use tax is owed based upon the location in this state to which taxes. This includes authorities such as court cases and federal law the order is shipped or delivered or at which the purchaser of the item that affect whether an item is taxable or is excluded or exempt from takes possession. The seller is responsible for collecting the local use taxation. tax due on the sale. If the seller does not collect the local use taxes due on the sale, the purchaser is responsible for accruing such taxes and (2) Permits, exemption certificates, and resale certificates remitting them directly to the comptroller according to the provisions in required by Tax Chapter shall also satisfy the requirements paragraph (1) of this subsection. For example, if an order for a taxable for collecting and remitting local taxes, unless otherwise indicated by item is received by a seller at a location outside of Texas, and the order this section or other sections of this title. For example, see subsection is shipped to the purchaser from a location outside of the state, local (n) of this section concerning prior contract exemptions. use tax is due based upon the location to which the order is shipped or (3) Any provisions in this section or other sections of this delivered or at which the purchaser of the item takes possession. title related to a seller's responsibilities for collecting and remitting lo- (B) Sale consummated in Texas outside a local taxing cal taxes to the comptroller shall also apply to a purchaser if the seller jurisdiction, item delivered into one or more local taxing jurisdictions - does not collect local taxes that are due. The comptroller may proceed local use tax due. If a sale is consummated at a location in Texas that is against the seller or purchaser for the local tax owed by either. outside of the boundaries of any local taxing jurisdiction according to (f) Tax rates. Except as otherwise provided by law, no local the provisions of subsection (c) of this section, and the order is shipped governmental entity may adopt or increase a sales and use tax if, as a or delivered to the purchaser at location in this state that is within the result of the adoption or increase of the tax, the combined rate of all boundaries of one or more local taxing jurisdictions, local use tax is sales and use taxes imposed by local taxing jurisdictions having terri- due based on the location to which the items are shipped or delivered tory in the local governmental entity would exceed 2.0% at any location or at which the purchaser of the item takes possession. The seller is within the boundaries of the local governmental entity's jurisdiction. responsible for collecting the local use taxes due on the sale, regardless following are the local tax rates that may be adopted. of the location of the seller in Texas. If the seller fails to collect any local use taxes due, the purchaser is responsible accruing such taxes (1) Cities. Cities may impose sales and use tax at rate and remitting them directly the comptroller. up 2.0%. (C) Sale consummated in any local taxing jurisdictions (2) Counties. Counties may impose sales and use tax at imposing less than 2.0% in total local taxes - local sales taxes and use rates ranging from 0.5% 1.5%. taxes due. If sale is consummated at location in where the (3) Special purpose districts. Special purpose districts may total local sales tax rate imposed the taxing jurisdictions in effect at impose sales and use tax at rates ranging from 0.125% 2.0%. that location does not equal 2.0% according the provisions sub- section (c) this section, and the item is shipped or delivered the (4) Transit authorities. Transit authorities may impose purchaser at location in this state is inside boundaries sales and use tax at rates ranging from 0.25% 1.0%. different local taxing jurisdiction, additional local use tax may due (g) Jurisdictional boundaries, combined areas, and city tax im- based on location which order is shipped or delivered or at posed through strategic partnership agreements. which purchaser item takes possession, subject two percent cap. seller is responsible collecting any additional lo- (1) Jurisdictional boundaries. cal use taxes due on sale, regardless location seller in Texas. See subsection (i) this section. If seller fails collect (A) City boundaries. City taxing jurisdictional bound- additional local use taxes due, purchaser is responsible accruing aries cannot overlap one another city cannot impose sales and such taxes remitting them directly comptroller. use tax in an area is already within jurisdiction another city. (i) Example one - if an order is received person at (B) County boundaries. County tax applies all loca- place business seller, such sale is consummated at tions within county. location where order received as provided under subsection (C) Special purpose district transit authority bound- (c)(1)(A) this section, local sales tax due on sale does aries. Special purpose districts transit authorities may cross or meet two percent cap, additional local use taxes are due based share boundaries other local taxing jurisdictions may encom- on location order shipped or delivered or at pass, whole or part, other local taxing jurisdictions, including purchaser item takes possession, subject provisions cities counties. A geographic location or address this state may paragraph (1) this subsection. lie within boundaries more than one special purpose district or (ii) Example two - if seller receives an order more than one transit authority. taxable item seller's place business Texas, seller ships (D) Extraterritorial jurisdictions. Except otherwise delivers item an out-of-state location location this provided paragraph (3) this subsection concerning strategic part- state designated purchaser, local sales tax due based upon nership agreements subsection (l)(5) this section concerning location place business seller where order City El Paso Fort Bliss, city sales use tax does apply received. If local sales tax due on item does meet two taxable sales are consummated outside boundaries city, percent cap, use taxes, subject provisions paragraph (1) including sales made city's extraterritorial jurisdiction. However, ADOPTED RULES May boundaries one more local taxing jurisdictions, local taxes due extraterritorial jurisdiction may lie within boundaries spe- on any separately stated charges taxable items incorporated into cial purpose district, transit authority, county, any combination real property must allocated taxing jurisdictions based three, use taxes those jurisdictions would ap- total square footage real property improvement located within ply those sales. each jurisdiction, including square footage any standalone struc- (2) Combined areas. combined area area where tures part construction, repair, remodeling project. boundaries city overlap boundaries one more other For more information about due materials used residential *143 taxing jurisdictions as a result of an annexation of additional territory and new construction job sites, refer to §3.291 of this title (relating to by the city, and where, as the result of the imposition of the city tax Contractors). in the area in addition to the local taxes imposed by the existing tax- (B) Nonresidential real property repair and improve- ing jurisdictions, the combined local tax rate would exceed 2.0%. The ment. When taxable services are performed to repair, remodel, or comptroller shall make accommodations to maintain a 2.0% rate in any restore nonresidential real property, including a pipeline, transmission combined area by distributing the 2.0% tax revenue generated in these line, or parking lot, that is crossed by the boundaries of one or more combined areas to the local taxing jurisdictions located in the combined local taxing jurisdictions, the local taxes due on the taxable services, areas as provided in Tax Code, §321.102 or Health and Safety Code, including materials and any other charges connected to the services §775.0754. Combined areas are identified on the comptroller's web- performed, must allocated among the local taxing jurisdictions site. Sellers engaged in transactions on which local sales or use taxes based upon the total mileage or square footage, as appropriate, of the are due in a combined area, or persons who must self-accrue and re- repair, remodeling, or restoration project located in each jurisdiction. mit tax directly to the comptroller, must use the combined area local For more information about tax due on materials used at nonresidential code when reporting the tax rather than the codes for the individual real property repair and remodeling job sites, refer §3.357 of this city, county, special purpose districts, or transit authorities that make title (relating Nonresidential Real Property Repair, Remodeling, up the combined area. and Restoration; Real Property Maintenance). (3) City tax imposed through strategic partnership agree- (i) Sellers' and purchasers' responsibilities for collecting or ac- ments. cruing local taxes. (A) The governing bodies of a district, as defined in (1) Sale consummated in Texas; seller responsible for col- Local Government Code, §43.0751, and a city may enter into a lim- lecting local sales taxes and applicable local use taxes. When a sale ited-purpose annexation agreement known as a strategic partnership of a taxable item is consummated at a location in Texas as provided by agreement. Under this agreement, the city may impose sales and use subsection (c) of this section, the seller must collect each local sales tax tax within all or part of the boundaries of a district. Areas within a dis- in effect at the location. If the total rate of local sales tax due on the sale trict that are annexed for this limited purpose are treated as though they does not reach the two percent cap, and the seller ships or delivers the are within the boundaries of the city for purposes of city sales and use item into another local taxing jurisdiction, then the seller is required tax. collect additional local use taxes due, if any, based on the location (B) Counties, transit authorities, and special purpose which item is shipped or delivered or at which the purchaser of the districts may not enter into strategic partnership agreements. Sales item takes possession, regardless of location of seller in Texas. and use taxes imposed by those taxing jurisdictions do apply in For more information regarding local use taxes, refer subsection (d) limited-purpose annexed area as part of a strategic partnership of this section. agreement between a city and an authorized district. However, a (2) Out-of-state sale; seller engaged in business in Texas. county, special purpose district, or transit authority sales and use tax, or Except as provided in paragraph (3) of this subsection, when a sale is any combination of these three types of taxes, may apply at locations consummated in Texas, a seller who is engaged in business in this included in a strategic partnership agreement between a city and state is required collect remit local use taxes due, if any, on orders authorized district if tax is imposed in area by applicable of taxable items shipped or delivered at direction of purchaser jurisdiction as allowed under its own controlling authorities. into a local taxing jurisdiction in this state based upon location in (C) Prior September 1, 2011, term "district" was this state which item is shipped or delivered or at which defined in Local Government Code, §43.0751 as a municipal utility purchaser item takes possession as provided in subsection (d) district or a water control improvement district. The definition this section. was amended effective September 2011, mean a conservation (3) Local use tax rate remote sellers. reclamation district operating under Water Chapter 49. (A) A remote seller required collect remit one or (h) Places business seller job sites crossed by more local use taxes in connection sale taxable item must local taxing jurisdiction boundaries. compute amount using: (1) Places business seller crossed by local taxing (i) combined tax rate all applicable local use
jurisdiction boundaries. If place business seller is crossed taxes based on location which item is shipped delivered one more local taxing jurisdiction boundaries so portion at which purchaser item takes possession; place business seller is located within taxing jurisdiction remainder place business seller lies outside (ii) remote seller's election, single local use taxing jurisdiction, tax is due local taxing jurisdictions tax rate published Texas Register. sales office is located. If there is no sales office, sales tax is due (B) A remote seller is storing tangible personal local taxing jurisdictions any cash registers are located. property Texas used fulfillment facility market- (2) Job sites. place provider has certified it will assume rights duties seller respect tangible personal property, as provided (A) Residential repair remodeling; new construc- §3.286 this title, may elect single local use tax rate under tion improvement realty. When contractor is improving real subparagraph (A)(ii) this paragraph. property under separated contract, job site crossed May Register collect remit using combined tax rate all applicable local (C) Notice comptroller election revocation use taxes. election. (4) Purchaser responsible accruing remitting local (i) Before using single local use tax rate, re- taxes if seller fails collect. mote seller must notify comptroller its election using form pre- scribed comptroller. remote seller may also notify comp- (A) If seller does collect state sales tax, any troller election on its use tax permit application form. remote applicable local sales taxes, both, sale taxable item seller must use single use rate all its sales taxable consummated Texas, then purchaser responsible filing items until election revoked provided clause (ii) this sub- return paying tax. taxes due based paragraph. location state where sale consummated provided *144 subsection (c) of this section. (ii) A remote seller may revoke its election by filing a form prescribed by the comptroller. If the comptroller receives the (B) A purchaser who buys an item for use in Texas from notice by October 1, the revocation will be effective January 1 of the a seller who does not collect the state use tax, any applicable local use following year. If the comptroller receives the notice after October 1, taxes, or both, is responsible for filing a return and paying the tax. The the revocation will be effective January of the year after the follow- local use taxes due are based on the location where the item is first ing year. For example, a remote seller must notify the comptroller by stored, used, or consumed by the purchaser. October 1, 2020, for the revocation to be effective January 1, 2021. If the comptroller receives the revocation on November 1, 2020, the re- (C) For more information about how to report and pay vocation will be effective January 1, 2022. use tax directly to the comptroller, see §3.286 of this title. (D) Single local use tax rate. (5) Local tax is due on the sales price of a taxable item, as defined in Tax Code, §151.007, in the report period in which the taxable (i) The single local use tax rate in effect for the pe- item is purchased or the period in which the taxable item is first stored, riod beginning October 1, 2019, and ending December 31, 2019, is used, or otherwise consumed in a local taxing jurisdiction. 1.75%. (6) A purchaser is not liable for additional local use tax if (ii) The single local use tax rate in effect for the pe- the purchaser pays local use tax using the rate elected by an eligible re- riod beginning January 1, 2020, and ending December 31, 2020, is mote seller according to paragraph (3) of this subsection. remote 1.75%. seller must be identified on the comptroller's website as electing to use the single local use tax rate. A purchaser must verify the remote (E) Annual publication of single local use tax rate. Be- seller is listed on the comptroller's website. If the remote seller is not fore the beginning of a calendar year, the comptroller will publish no- listed on the comptroller's website, the purchaser will be liable for ad- tice of the single local use tax rate in the Texas Register will be in ditional use tax due in accordance paragraph (4) of this subsection. effect for calendar year. (j) Items purchased under a direct payment permit. (F) Calculating the single local use tax rate. single local use tax rate effective in a calendar year is equal the estimated (1) When taxable items are purchased under a direct pay- average rate of local sales and use taxes imposed in this state during the ment permit, local use tax is due based upon the location where the preceding state fiscal year. As soon as practicable after the end of state permit holder first stores the taxable items, except if the taxable fiscal year, the comptroller must determine the estimated average rate items are not stored, then local use tax is due based upon the location of local sales and use taxes imposed in this state during the preceding where taxable items are first used or otherwise consumed by state fiscal year by: permit holder. (i) dividing total amount of net local sales and (2) If, in local taxing jurisdiction, storage facilities con- use taxes remitted comptroller during state fiscal year by tain taxable items purchased under direct payment exemption certifi- total amount of net state sales and use tax remitted comptroller cate and at time storage it is not known whether taxable items during state fiscal year; will used in Texas, then taxpayer may elect report use tax either when taxable items are first stored in Texas or are first re- (ii) multiplying amount computed under clause moved from inventory for use in Texas, long as use tax is reported (i) this subparagraph by rate provided Tax Code, §151.051; consistent manner. See also §3.288(i) this title (relating Direct and Payment Procedures and Qualifications) and §3.346(g) this title. (iii) rounding amount computed under clause (ii) (3) If local use tax is paid on stored items are subse- this subparagraph nearest .0025. quently removed from Texas before they are used, tax may re- (G) Direct refund. purchaser may request refund covered accordance refund and credit provisions §3.325 based on local use taxes paid calendar year difference be- this title and §3.338 this title (relating Multistate Tax Credits tween single local use tax rate paid by purchaser and amount Allowance Credit Tax Paid Suppliers). purchaser would have paid based on combined tax rate all (k) Special rules certain taxable goods services. Sales applicable local use taxes. Notwithstanding refund requirements following taxable goods services are consummated at, under §3.325(a)(1) this title (relating Refunds Payments Un- local tax is due based upon, location indicated this subsection. der Protest), non-permitted purchaser may request refund directly from comptroller tax paid previous calendar year, no (1) Amusement services. Local tax is due based upon earlier than January following calendar year within statute location where performance or event occurs. For more information limitation under Tax 111.104 (Refunds). on amusement services, refer §3.298 this title (relating Amuse- ment Services). (H) Marketplace providers. Notwithstanding subpara- graph (A) this paragraph, marketplace providers may not use (2) Cable services. When service provider uses cable single local use tax rate must compute amount local use tax system provide cable television bundled cable services cus- ADOPTED RULES May customer's real property. See also subsection (h)(2)(A) this section tomers, local tax is due provided §3.313 this title. When §3.291 this title. service provider uses satellite system provide cable services customers, no local tax is due on service accordance (11) Waste collection services. Local taxes due on Telecommunications Act §602. garbage other solid waste collection removal services based on location waste is collected from waste is (3) Florists. Local sales tax is due on all taxable items sold removed. For more information, refer §3.356 title (relating florist based upon location where order is received, regard- Real Property Service). less where whom delivery is made. Local use tax is due deliveries taxable items sold florists. For example, if place (l) Special exemptions provisions applicable individual business florist where an order taken within bound- jurisdictions. aries any local taxing jurisdiction, no local sales tax due (1) Residential use natural gas electricity. item no local use due regardless location delivery. If florist delivers order local taxing jurisdiction (A) Mandatory exemptions from local use tax. instruction unrelated florist, if unrelated florist did Residential use natural gas electricity exempt most lo- take order within boundaries taxing jurisdiction, *145 cal sales and use taxes. Counties, transit authorities, and most special use tax is not due on the delivery. For more information about florists' purpose districts are not authorized to impose sales and use tax on the sales and use tax obligations, refer to §3.307 of this title (relating to residential use of natural gas and electricity. Pursuant to Tax Code, Florists). §321.105, any city that adopted a local sales and use tax effective Oc- tober 1, 1979, or later is prohibited from imposing tax on the residential (4) Landline telecommunications services. Local taxes due use of natural gas and electricity. See §3.295 of this title. on landline telecommunications services are based upon the location of the device from which the call or other transmission originates. If the (B) Imposition of tax allowed in certain cities. Cities seller cannot determine where the call or transmission originates, local that adopted local sales tax prior to October 1, 1979, may, in accor- taxes due are based on the address to which the service is billed. For dance the provisions in Tax Code, §321.105, choose to repeal the more information, refer to §3.344 of this title (relating to Telecommu- exemption residential use of natural gas and electricity. The comp- nications Services). troller's website provides a list of cities that impose tax on the residen- tial use of natural gas and electricity, as well as a list of those cities that (5) Marketplace provider sales. Local taxes are due on do not currently impose the tax, but are eligible to do so. sales of taxable items through a marketplace provider based on the lo- cation in this state to which the item is shipped or delivered or at which (C) Effective January 1, 2010, a fire control, preven- the purchaser takes possession. For more information, refer to §3.286 tion, and emergency medical services district organized under Local of this title. Government Code, Chapter 344 that imposes sales tax under Tax Code, §321.106, or a crime control and prevention district organized under (6) Mobile telecommunications services. Local taxes due Local Government Code, Chapter 363 that imposes sales tax under Tax on mobile telecommunications services are based upon the location of Code, §321.108, that is located in all or part of a municipality that im- the customer's place of primary use as defined in §3.344(a)(8) of this poses tax on the residential use of natural gas and electricity as pro- title, and local taxes are to be collected as indicated in §3.344(h) of this vided under Tax Code, §321.105 may impose tax on residential use of title. natural gas and electricity at locations within the district. A list of the (7) Motor vehicle parking and storage. Local taxes are due special purpose districts that impose tax on residential use of natural based on the location of the space or facility where the vehicle is parked. gas and electricity and those districts eligible to impose the tax that do For more information, refer to §3.315 of this title (relating to Motor currently do so is available on the comptroller's website. Vehicle Parking and Storage). (2) Telecommunication services. Telecommunications ser- (8) Natural gas and electricity. Any local city and special vices are exempt from all local sales taxes unless the governing body purpose taxes due are based upon the location where the natural gas of city, county, transit authority, or special purpose district votes or electricity is delivered to the purchaser. As explained in subsection to impose sales tax on these services. However, since 1999, under (l)(1) of this section, residential use of natural gas and electricity is Tax Code, §322.109(d), transit authorities created under Transporta- exempt from all county sales and use taxes and all transit authority sales tion Code, Chapter 451 cannot repeal exemption unless repeal and use taxes, most special purpose district sales and use taxes, and is first approved governing body of each city that created many city sales and use taxes. A list cities and special purpose local taxing jurisdiction. The local sales tax limited to telecommuni- districts do impose, and those are eligible to impose, local cations services occurring between locations within Texas. See §3.344 sales and use tax on residential use natural gas and electricity this title. The comptroller's website provides list local taxing available on comptroller's website. For more information, also refer jurisdictions impose tax on telecommunications services. to §3.295 this title (relating to Natural Gas and Electricity). (3) Emergency services districts. (9) Nonresidential real property repair and remodeling ser- (A) Authority to exclude territory from imposition vices. Local taxes are due on services to remodel, repair, or restore emergency services district sales and use tax. Pursuant to provi- nonresidential real property based on location job site where sions Health and Safety Code, §775.0751(c-1), emergency ser- remodeling, repair, or restoration performed. See also subsection vices district wishing to enact sales and use tax may exclude (h)(2)(B) this section and §3.357 this title. election called authorize tax any territory in district where (10) Residential real property repair and remodeling and sales and use tax then at 2.0%. The tax, if authorized voters new construction real property improvement performed under eligible vote enactment tax, then applies only in separated contract. When contractor constructs new improvement portions district included election. tax does apply realty pursuant separated contract or improves residential real sales made excluded territories district sellers property pursuant separated contract, sale consummated at excluded territories should continue collect local sales use taxes job site at which contractor incorporates taxable items into May Register ernment Code, Chapters persons whose business consists local taxing jurisdictions effect at time election un- primarily purchasing taxable items using resale certificates then der which district sales use tax was authorized as applicable. reselling those same items related party. related party means (B) Consolidation districts resulting sales tax person entity which owns least 80% business enterprise sub-districts. Pursuant provisions Health Safety Code, sales use taxes would be rebated part economic in- §775.018(f), if territory district proposed under Health centive. Safety Code, Chapter overlaps boundaries another (n) Prior contract exemptions. provisions §3.319 this district created under chapter, commissioners court each title (relating Prior Contracts) concerning definitions exclusions county boards counties districts are located may apply prior contract exemptions. choose create consolidated district overlapping territory. If two districts want consolidate under Health Safety (1) Certain contracts bids exempt. No taxes §775.024 have different sales use tax rates, territory due sale, use, storage, other consumption state tax- former districts located within consolidated area will be designated able items used: sub-districts tax rate within each sub-district will continue imposed rate tax was imposed former (A) performance written contract executed district each sub-district was part prior consolidation. prior effective date any if contract may modified because tax; (4) East Aldine Management District. (B) pursuant obligation bid bids submitted *146 (A) Special sales and use tax zones within district; prior effective date of any local tax if bid or bids and contract separate sales and use tax rate. As set out in Special District Local entered into pursuant thereto are a fixed price and not subject Laws Code, §3817.154(e) and (f), East Aldine Management withdrawal, change, or modification because of tax. District board may create special sales and use tax zones within boundaries District and, voter approval, enact a special (2) Annexations. Any annexation of territory into an exist- sales and use tax rate each zone different from sales and ing local taxing jurisdiction also a basis claiming exemption
use tax rate imposed rest district. provided by this subsection. (B) Exemptions from special zone sales and use tax. (3) Local taxing jurisdiction rate increase; partial exemp- The sale, production, distribution, lease, or rental of; and use, stor- tion certain contracts and bids. When an existing local taxing ju- age, or other consumption within special sales and use tax zone of; a risdiction raises its sales and use tax rate, additional amount tax taxable item sold, leased, or rented by entities identified clauses would be due as result rate increase not due on sale, (i) - (vi) this subparagraph are exempt from special zone sales use, storage, or other consumption this state taxable items used: use tax. State and all other applicable local taxes apply unless oth- (A) performance written contract executed erwise exempted by law. The special zone sales use tax exemption prior effective date tax rate increase if contract may applies to: not be modified because tax; or (i) retail electric provider as defined by Utilities (B) pursuant obligation bid or bids submitted Code, §31.002; prior effective date tax rate increase if bid or bids (ii) electric utility or power generation company contract entered into pursuant thereto are fixed price subject as defined by Utilities Code, §31.002; withdrawal, change, or modification because tax. (iii) gas utility as defined by Utilities Code, (4) Three-year statute limitations. §101.003 or §121.001, or person who owns pipelines used (A) The exemption paragraph (1) this subsection transportation or sale oil or gas or product or constituent oil or partial exemption paragraph (3) this subsection have no gas; effect after three years date adoption or increase tax (iv) person who owns pipelines used trans- takes effect local taxing jurisdiction. portation or sale carbon dioxide; (B) The provisions §3.319 this title apply this (v) telecommunications provider as defined by subsection extent they consistent. Utilities Code, §51.002; or (C) Leases. Any renewal exercise option (vi) cable service provider video service extend time lease rental contract under exemptions pro- provider defined Utilities Code, §66.002. vided by this subsection shall be deemed be new contract no exemption will apply. (5) Imposition city sales tax transit tax on certain military installations; El Paso Fort Bliss. Pursuant Tax Code, (5) Records. Persons claiming exemption provided §321.1045 (Imposition Sales Use Tax Certain Federal Military subsection must maintain records can be verified Installations), purposes local sales use tax imposed under comptroller exemption will be lost. Tax Code, Chapter 321, city El Paso includes area within (6) Exemption certificate. An identification number re- boundaries Fort Bliss extent it city's extraterritorial quired on prior contract exemption certificates furnished sellers. jurisdiction. However, El Paso transit authority does include identification number should person's 11-digit tax- Fort Bliss. See Transportation Code, §453.051 concerning Creation payer number federal employer's identification (FEI) number. Transit Departments. agency certifies legal counsel has reviewed adop- (m) Restrictions sales tax rebates other economic tion found it valid exercise agency's legal au- incentives. Pursuant Local Government §501.161, Section 4A thority. 4B development corporations may offer provide economic incentives, such rebates authorized under Local Gov- Filed Office Secretary State May 2020. ADOPTED RULES May
T AB
G employee family leave pool, employees may apply for The Comptroller Public Accounts proposes new §1.200, con- leave time under family leave pool. cerning state employee family leave pool. The new section will be located Chapter 1, new Subchapter C, Administration. (2) The comptroller deputy comptroller shall designate pool administrator. The new section implements House Bill 2063, 87th Legislature, R.S., 2021, enacted Government Code, §§661.021 - (3) pool administrator will develop procedures 661.028 (State Employee Family Leave Pool). forms necessary for administration family leave pool. Proposed §1.200 creates process Comptroller's State (4) Operation family leave pool shall be consistent Employee Family Leave Pool. Subsection (a) outlines es- with Government Code, Chapter 661, Subchapter A-1. tablishment purpose, provide eligible employees agency certifies legal counsel has reviewed pro- more flexibility bonding with caring children during posal found it within state agency's legal authority child's first year following birth, adoption, foster placement, adopt. caring seriously ill family member employee, in- cluding pandemic-related illnesses complications caused Filed Office Secretary State September pandemic. Subsection (b) outlines guidelines program, provides designation pool administrator, describes 2022. responsibilities pool administrator, provides TRD-202203667 operation family leave pool shall consistent Gov- ernment Chapter Subchapter A-1. Victoria North General Counsel Fiscal Agency Affairs
Brad Reynolds, Chief Revenue Estimator, has determined Comptroller Public Accounts during first five years proposed new rule effect,
*148
Earliest possible date of adoption: October 23, 2022 the rule: will not create or eliminate government program; will For further information, please call: (512) 475-2220 not require the creation or elimination of employee positions; will not require an increase or decrease in future legislative appropri-
♦ ♦ ♦ ations to the agency; will not require an increase or decrease in fees paid to the agency; will not increase or decrease the num-
CHAPTER 3. TAX ADMINISTRATION ber of individuals subject to the rule's applicability; and will SUBCHAPTER O. STATE AND LOCAL SALES positively or adversely affect state's economy. AND USE TAXES Mr. Reynolds also has determined that the proposed new rule would have no significant fiscal impact on the state government,
34 TAC §3.334
units of local government, or individuals. The proposed new rule would benefit the public by implementing the rule regarding state The Comptroller of Public Accounts proposes amendments to employee family leave pool. There would be no significant an-
§3.334, concerning local sales and use taxes. ticipated economic cost to the public. The proposed new rule
Background.
would have no fiscal impact on small businesses or rural com-
munities. The comptroller's local sales and use tax rulemaking process began in 2018, when several issues arose regarding local sales Comments on the proposal may be submitted to Yadira Gibson, and use tax. The United States Supreme Court issued deci-
Senior Legal Counsel to Human Resources, Texas Comptrol-
sion in South Dakota v. Wayfair, Inc.,
Thus, "location" should be facility that is similar an "outlet" reaction case. And if that be so, then legislature did "office." not want warehousing storage facilities (many are The term "outlet" implies presence sales personnel, par-
outside city limits) be places where sales were consum-
ticularly sales tax context. Each retail store is considered mated sales purposes unless orders were actually be an "outlet" reporting sales tax. received there personnel working there, but wanted of-
fice location out salesman operated be place In abstract, there could many types "offices." But where sales were consummated. context "receiving orders," term implies sales office. The City Coppell others have advanced contrary expla-
Thus, provide something bright-line test buyers, sell-
nation regarding fulfillment warehouses has superficial ap-
ers, auditors follow, rule provides "established peal: warehouse cannot fulfill order unless warehouse outlet, office, location" requires staffing one more personnel.
See, Perry Homes v. Strayhorn,
S.W.3d 444, has "received" order, therefore fulfillment warehouse is inherently "place business." In abstract, argument (Tex. App.- Austin 2003, no pet.) (example bright line rule);
DuPont Photomasks, Inc. v. Strayhorn,
S.W.3d 414, may seem like reasonable interpretation word "received." But context. When words rather lengthy statu-
(Tex. App.-Austin 2006, pet. Denied) (example bright line tory definition considered, when legislative history is rule). considered, legislature intended opposite - a fulfillment This interpretation statute confirmed legislative his-
warehouse automatically "place business" simply be-
tory. The Legislature added definition "place busi-
cause orders have forwarded warehouse fulfill-
ness retailer" 1979. 66th Legislature, R.S., Ch. ment. Art. §3 (SB 582). During session legislature, The third sentence proposed definition "place busi-
House Study Group analysis stated "bill necessary ness" states: "The term does include computer server, protect state possible consequences pend-
Internet protocol address, domain name, website, software ing court suits." analysis specifically referenced "Dunigan application." This sentence consistent concept Tool Supply v. Bullock" one those suits. analy-
"place business" requires presence personnel receive sis available Legislative Reference Library website
*150
the order. Even a broad, every-day usage of the term "place of https://lrl.texas.gov/scanned/hroBillAnalyses/66-0/SB582.pdf. business" does not include computer servers, Internet protocol In the
Dunigan
litigation, retail stores took orders that were ful-
addresses, and automated telephone ordering systems. Many filled from a warehouse. The comptroller wanted to source the sellers house their computer servers at a co-location facility or local tax to the retail stores, but the district court and the court rent computer server space at a managed hosting site. An ordi-
of appeals sourced the local tax to the warehouse, declaring the nary person would not consider the physical locations of these warehouse to be a place of business.
Bullock v. Dunigan Tool
computer servers to be places of business of the seller. Simi-
& Supply Co.,
chases subsection (j), certain taxable items, including tax- less text subsection (b)(5). Except application able items sold marketplace provider, as provided sub- special rules direct payment permit purchases subsec- section (k), sale will be consummated at place busi- tion (j) this section, certain taxable items as provided ness seller Texas from which order fulfilled, if subsection (k) section, sale will be consummated at not, sale will consummated, use will consum- single place business seller Texas which mated location item shipped orders are fulfilled. See §3.334(c), (c)(2)(A), (j) (k), Tax delivered purchaser item takes possession Code, §321.203(b), (c-1), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), provided subsection (d). See §3.334(c), (c)(2), (j) (k) (k), (n). Tax §321.203(b), (c-1), (e), (e-1), (f), (g), (g-1), (g-2), If orders received personnel, such or- (g-3), (h), (i), (j), (k), (n) §321.205(c). *152 ders received by an automated shopping website operated by If orders are placed in person at the place of business of the the retailer, and the orders are shipped or delivered or the pur- seller in Texas, local tax will be sourced the same regardless chaser takes possession in the same jurisdiction in which the re- of the text of subsection (b)(5). Except for the application of tailer’s single place of business in Texas is located, local tax will special rules for direct payment permit purchases in subsection be sourced the same regardless of the text of subsection (b)(5). (j), and certain taxable items, including taxable items sold by a Except for the application of special rules for direct payment per- marketplace provider, as provided in subsection (k), the sale will mit purchases in subsection (j) of this section, and certain taxable be consummated at the single place of business of the seller in items as provided in subsection (k) of this section, the sale or use Texas where the order was received. See §3.334(c), (c)(1)(A), will be consummated in the jurisdiction where the single place (j), and (k) and Tax Code, §321.203(b), (c), (e-1), (f), (g), (g-1), of business of the seller is located. See §3.334(c), (c)(2)(A), (g-2), (g-3), (h), (i), (j), (k), and (n). (c)(2)(B)(i), (c)(2)(B)(ii), (j) and (k), and Tax Code, §321.203(b), (c-1), (e), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k), and (n) and If orders are received by sales personnel of the retailer at the §321.205(c). place of business of the seller in Texas, but the orders are not placed in person by the buyer, local tax will be sourced the same If the orders are received by a shopping website operated by a regardless of the text of subsection (b)(5). Except for the ap- marketplace provider, or the orders are received by any other plication of special rules for direct payment permit purchases physical medium operated by a marketplace provider such as in subsection (j), and certain taxable items as provided in sub- catalogs and stores, local tax will be sourced the same regard- section (k), the sale will be consummated at the single place less of the text of subsection (b)(5). Except for the application of of business of the seller in Texas where the order was received. special rules for direct payment permit purchases in subsection See §3.334(c), (c)(1)(B)(i), (c)(1)(B)(ii), (j), and (k) and Tax Code, (j), and certain taxable items as provided in subsection (k), the §321.203(b), (c-1), (d), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k), sale will be consummated at the location in Texas state which and (n). the item is shipped or delivered or at which possession is taken by the purchaser. See §3.334(k)(5), (j) and (k), and Tax Code, If orders are received by sales personnel of the retailer who are §321.203(e-1), (f), (g), (g-1), (g-2), (g-3), (h), (i), (j), (k), and (n). not at the place of business of the seller in Texas when they re- ceive the orders, but who operate out of the place of business If orders are received from purchasers direct pay permits, of the seller in Texas, local tax will be sourced the same regard- local tax will be sourced the same regardless of the text of sub- less of the text of subsection (b)(5). Except for the application section (b)(5). use will be consummated, local use tax of special rules for direct payment permit purchases in subsec- will be due based upon the location where the permit holder first September Texas Register stores or otherwise uses the item. See §3.334(j) Tax Code, circumstances described in subparagraph (F) of this paragraph,
§321.205(d). concerning qualifying economic development agreements. If the purchasers issue resale exemption certificates, subsection (B) Order received at a place of business in Texas, fulfilled at (b)(5) will have no effect because the transactions will not be a location is not a place of business. When an order that subject local tax. is placed over the telephone, through the Internet, or by any means other than in person is received by the seller at a place If orders are for the sale of exempt items, subsection (b)(5) will of business in Texas, the seller fulfills the order at a loca- have no effect because the transactions will not be subject tion is not a place of business of the seller in Texas, such as local tax. a warehouse or distribution center, the sale is consummated at the place of business at which the order for the taxable item is If the orders are for the sale of items exempt entities, subsec- received. tion (b)(5) will have no effect because the transactions will not be subject local tax. (C) Order fulfilled at a place of business in Texas. When an order is placed in person at location is not a place of business of If the orders are the sale of natural gas or electricity, local the seller this state, such as kiosk, or when an order is placed tax will be sourced the same regardless the text subsection over the telephone, through the Internet, or by any means other (b)(5). The sale will be consummated at point delivery than person, seller fulfills order at location consumer. See §3.334(k)(8) Tax Code, §321.203(f). is place business Texas, sale is consummated at If orders are sale amusement services, local tax will place business where order is fulfilled. be sourced same regardless text subsection (b)(5). (D) Order fulfilled within state at location is not place The sale will be consummated where performance or event business. When order is received by seller at any location occurs. See §3.334(k)(1) Tax Code, §321.203(h). other than place business seller this state, If orders are sale cable television service, local seller fulfills order at location Texas is not place tax, if any, will be sourced same regardless text business seller, then sale is consummated at subsection (b)(5). The sale will be consummated at point location which order is shipped or delivered, or delivery consumer. See §3.334(k)(2), §3.313, Tax location where it is transferred purchaser. Code, §321.203(j). (E) Order received outside state, fulfilled outside If orders are sale landline telecommunications ser- state. When order is received by seller at location outside vice, local tax will be sourced same regardless text Texas, order shipped or delivered into local taxing subsection (b)(5). sale will be consummated at loca- jurisdiction from location outside state, sale tion device which call other transmission orig- consummated at location Texas. However, use tax inates, billing address. See §3.334(k)(4) Tax Code, due based upon location this state item §321.203(g-1). shipped delivered possession item taken purchaser as provided subsection (i) section. If orders are sale mobile telecommunication ser- vices, will sourced same regardless text Former subsection (h)(3)(B) did distinguish between website subsection (b)(5). sale will consummated primary orders received sales personnel, such emails, web- place use. See §3.334(k)(6) Tax §321.203(g). site orders received personnel, such automated shopping cart orders. If taxpayer relied solely rule If orders sale garbage other solid waste col- *153 did not review the hearings decisions and letter rulings available lection or removal, local tax will be sourced the same regardless the comptroller's STAR system, a taxpayer might conclude of the text of subsection (b)(5). The sale will be consummated that an automated order placed through the Internet could be at location from which the waste is collected or removed. See received at a place of business, whereas proposed subsection §3.334(k)(11) and Tax Code, §321.203(k). (b)(5) explicitly states that orders not received by sales person- If the orders are for the remodeling, repair, or restoration of nel are received at locations that are not places of business of nonresidential real property, local tax will be sourced the same the seller. Thus, under the former rule, if a retailer had a com- regardless of the text of subsection (b)(5). The sale will be puter server at a single location that was a place of business of consummated at the job site. See §3.334(k)(9) and Tax Code, the seller in Texas; and if the retailer had no other location in §321.203(n). Texas where the retailer received orders; and if the orders were not fulfilled at the place of business of the seller in Texas; and In one circumstance, subsection (b)(5) of §3.334 might change if the orders were not delivered to the same jurisdiction in which the way Texas retailers with one place of business in Texas they were received; and if the orders were not received from will source local sales tax. Prior to the 2020 amendment, purchasers with direct pay permits; and if the orders were not §3.334(h)(3) provided in pertinent part (emphasis added): received from exempt purchasers; and if the purchasers did not (3) Consummation of sale. The following rules, taken from Tax issue resale exemption certificates; and if the orders were not Code, §321.203 and §323.203, apply to all sellers engaged in the sale exempt items, natural gas or electricity, amusement business in this state, regardless of whether they have a place services, cable television service, landline telecommunications of business in Texas or multiple places of business in the state. service, mobile telecommunication services, garbage or other solid waste collection or removal, or the remodeling, repair, or (A) Order placed in person at seller’s place of business in restoration of nonresidential real property; and if the orders were Texas. When purchaser places an order taxable item received by the retailer’s computer server located at its single in person at seller’s place business in Texas, the sale of place business in Texas not by marketplace provider, that item is consummated at that place business, regardless then the rule might lead the taxpayer to conclude that the sale the location where the order is fulfilled, except in the limited would be consummated at the retailer’s single place business PROPOSED RULES September picked up the item at Best Buy outlet in Houston, Best Buy in Texas where the computer server was located. If all these would collect local sales tax the City San Marcos. How- conditions were met under the version the rule (which ever, it appears that the Best Buy website was actually operated is carried forward in this proposed rulemaking), the sale would by different Best Buy affiliate, which would make it market- be consummated under subsection (c)(2)(B)(i) at the location in place provider as defined in Tax Code, §151.0242(a)(2). Un- to which the orders are shipped or delivered, or which der marketplace statute, local tax is sourced to location purchasers take possession. where item is shipped or delivered or possession is Fiscal note taken by purchaser. Thus, any loss to City San Marcos local sales tax revenue from sale to Houston resident Brad Reynolds, Chief Revenue Estimator, has determined would be result compliance with marketplace statute. following each year first five years that rule will be And loss tax revenue would not be attributable to rule. in effect. The loss resulting from compliance with statute would occur There will be no additional estimated cost state to local without regard whether proposed rule was adopted. governments expected as result enforcing or administering The City Round Rock identified Dell as entity that would proposed rule. The proposed amendments explain man- change its method reporting. The comptroller does not have ner in comptroller intends apply consummation sufficient current information about company or other affili- statutes. explanation should lead greater taxpayer com- ates determine whether company is or is not complying pliance, less audit resources required enforce or admin- with consummation statutes, former consummation rule, ister rule. consummation rule adopted or proposed consum- There will be no estimated reductions costs state mation rule. local governments as result enforcing or administering Most other cities have not identified specific taxpayers rule amendments. Local governments do administer tax, circumstances that would enable verification their claims. comptroller will be reducing size its audit staff result rule. Nevertheless, it conceivable that clarifications proposed rule will cause some vendors recognize their noncom- There could be loss increase revenue individual local pliance change their reporting methods, these governments result enforcing administering rule changes could cause shifts tax revenue between local juris- due increased compliance with consummation statutes. dictions. revenue loss one local government will often but always be revenue gain others. Amounts individual local gov- Public benefits costs ernments cannot be estimated. Brad Reynolds, Chief Revenue Estimator, has determined In general, due both number taxing jurisdictions following each year first five years rule will lack pertinent, detailed information regarding specific cir- effect. cumstances myriad businesses reporting local sales public will benefit from greater clarity regarding consum- use taxes, estimation fiscal effects proposed law rule, mation standards, making compliance easier. whether dollar amounts merely sign change, indi- vidual jurisdiction by jurisdiction basis infeasible execution. There are no probable additional economic costs person re- However, with respect rulemaking, it may noted quired comply with rule. There undoubtedly burden some cities with Local Government Chapter agree- associated collecting remitting tax. But bur- ments involving rebates use revenues den imposed by statute. It conceivable rule may certain businesses have asserted clarifications provided cause some vendors realize they noncompliant. If rule will result changes sourcing reporting lo- vendors come into compliance changing single-location cal taxes those businesses, consequent reductions *154 reporting to multiple-location reporting, their compliance burden revenue subject to the agreements, though their assessments may increase. And if vendors change from multiple-location re- such have not been verified by the comptroller. porting to single-location reporting, their compliance burden may diminish. Generally, the cities have not provided the data from which they have calculated their asserted lost revenue, have not identified Government growth impact statement the vendors that would change their method reporting, and Brad Reynolds, Chief Revenue Estimator, has determined the have not identified the circumstances that would require those following for each year the first five years that the rule will be vendors to change their methods reporting a result the effect: The amendment: will not create or eliminate a gov- rule. The significance the assertions cannot be verified. ernment program; will not require the creation or elimination An exception is the City San Marcos. During the 2020 rule- employee positions; will not require an increase or decrease making, City San Marcos filed comments claiming that future legislative appropriations to comptroller; will not re- proposed rule would cause city to lose $7-8 million local quire an increase or decrease fees paid comptroller; sales tax revenue generated by a Best Buy call center, will not create a new regulation; will not expand, limit, or repeal net effect economic development incentive revenue loss es- an existing regulation; will not increase or decrease number timated at $3.4 million, presumably because balance individuals subject rule's applicability; and will not posi- local sales tax would have been rebated Best Buy under a tively or adversely affect this state's economy. Chapter 380 agreement. Best Buy also filed comments stating Local employment impact statement that it created subsidiary called Best Buy Texas.com LLC and sourced local tax all its Internet and telephone sales For first five years that rule will be effect, effect on City San Marcos. This would mean that if resident local economies and employment, if any, cannot be determined. City Houston placed an Internet order from Houston and To extent that proposed rule leads greater awareness
47 6164 September 2022 Register Statutory or other authority under which rule proposed and compliance local tax consummation standards, be adopted
some vendors may change their reporting methods, might positively or negatively affect tax revenue particular Tax Code, §§111.002 (Comptroller's Rule; Compliance; Forfei- local tax jurisdictions. Whether change local tax revenue ture); 321.306 (Comptroller's Rules); 322.203 (Comptroller's might increase or decrease provision local government Rules); 323.306 (Comptroller's Rules) authorize comptroller services an extent that would affect local economic activity adopt rules implement tax statutes. or employment would depend on discretionary actions Sections or articles code affected governing body or electorate affected jurisdiction, and cannot be determined. Tax Code, §151.0595 (Single Local Tax Rate Remote Sell- Fiscal implications small businesses and rural communities ers); Tax Code, Chapter Subchapters A, B, C, D, and F; Tax Code, Chapter 322; Tax Code, Chapter 323. A statement fiscal implications small businesses or rural §3.334. Local Sales and Use Taxes. communities not required by Government Code, Chapter if rule proposed under Tax Code, Title 2. In this instance, (a) Definitions. The following words and terms, when used rule proposed under both Title (State Taxation) and Title this section, shall have following meanings, unless context (Local Taxation). The comptroller has determined that rule clearly indicates otherwise. will not have adverse economic effect small businesses, (1) Cable system--The system through cable ser- micro-businesses, or rural communities. vice provider delivers cable television bundled cable service, During rulemaking, comptroller received comments those terms are defined §3.313 title (relating Cable Televi- that proposed rule would increase compliance costs small sion Service and Bundled Cable Service). businesses that would have switch from origin sourcing des- (2) City--An incorporated city, municipality, town, vil- tination sourcing. However, rule does not cause that result lage. small business that has all its operations under one roof. A small business that does sell through marketplace and (3) City sales and use tax--The tax authorized under Tax that has all its operations single location, including sales Code, §321.101(a), including additional municipal sales and use and fulfillment, will "place business" under statute, tax authorized under Tax Code, §321.101(b), municipal sales and under version rule, and under proposed rule. use tax street maintenance authorized under Tax Code, §327.003, Non-marketplace orders fulfilled from location will continue Type Development Corporation sales and use tax authorized un- consummated location pursuant §3.334(c)(1) der Local Government Code, §504.251, Type B Development Cor- (c)(2)(A). Sales small business are through market- poration sales and use tax authorized under Local Government Code, place are already subject destination sourcing. §505.251, sports community venue project sales and use tax adopted by city under Local Government Code, §334.081, mu- It conceivable rule may cause some vendors, small nicipal development corporation sales use tax adopted by city un- large, realize they noncompliant. If vendors der Local Government Code, §379A.081. term does include come into compliance changing from single-location report- fire control, prevention, emergency medical services district ing multiple-location reporting, their compliance burden may sales use tax authorized under Tax Code, §321.106, munic- increase. And if vendors change from multiple-location reporting ipal crime control prevention district sales use tax authorized single-location reporting, their compliance burden may dimin- under Tax Code, §321.108. ish. (4) Comptroller's website--The comptroller's [agency's] And, extent vendors have been reaching two website concerning taxes located at: https://comptrol- percent ceiling taxes over-collecting city sales taxes, ler.texas.gov/taxes/sales/. vendors begin correctly reporting, unincorporated rural communities may actually benefit increased collection (5) County sales use tax--The tax authorized under county use tax special purpose use tax. See Tax Code, Tax Code, §323.101, including sports community venue project §321.205(b) §3.334(d)(1). sales use adopted county under Local Government §334.081. term does include county health services Public hearing *155 and use tax authorized under Tax Code, §324.021, the county landfill comptroller will hold a hearing to take public comments, on and criminal detention center sales and use tax authorized under Tax Monday, October 17, 2022, at 9:00 a.m. in Room 170 of the Code, §325.021, or the crime control and prevention district sales and Stephen F. Austin Building, 1700 Congress Ave., Austin, Texas use tax authorized under Tax Code, §323.105. 78701. Interested persons may sign up to testify beginning at (6) Drop shipment--A transaction in which an order is re- 8:30 a.m. and testimony will be heard a first come first serve ceived by a seller at one location, but the item purchased is shipped by basis. All persons will have 10 minutes to present their testimony seller from another location, or is shipped by the seller's third-party and shall also provide their testimony in writing prior to their oral supplier, directly to a location designated by purchaser. testimony. (7) Engaged in business--This term has meaning given Comments in §3.286 of this title (relating to Seller's and Purchaser's Responsibil- Comments proposal may be submitted to Jennifer ities). Burleson, Director, Tax Policy Division, P.O. Box 13528, (8) Extraterritorial jurisdiction-An unincorporated area Austin, Texas 78711-3528 or to email address: tp.rule.com- that is contiguous to corporate boundaries of a city as defined in ments@cpa.texas.gov. Comments must be received no later Local Government Code, §42.021. than 30 days from date of publication of proposal in Texas Register. (9) Fulfill--To complete an order by transferring possession of a taxable item [directly] to a purchaser [at a Texas PROPOSED RULES September 23, 2022 47 6165 location], or to ship or deliver a taxable item to a location [in Texas] a retail or commercial business to process for that business invoices, designated by purchaser. term does not include receiving or purchase orders, bills of lading, or other equivalent records onto which tracking an order, determining shipping costs, managing inventory, or sales tax is added, including an office operated for purpose of buy- other activities that do not involve transfer, shipment, or delivery ing and selling taxable goods be used or consumed by retail or of a taxable item purchaser or a location designated by commercial business, is not a place of business of seller if comp- purchaser. troller determines that outlet, office, facility, or location functions or exists avoid tax legally due under Tax Code, Chapters 321, (10) Itinerant vendor--A seller who travels various lo- 322, and or exists solely rebate a portion of tax imposed cations for purpose of receiving orders and making sales of taxable by those chapters contracting business. An outlet, office, facil- items and who has no place of business in this state. A person who ity, or location does exist avoid tax legally due under Tax sells items through vending machines is also an itinerant vendor. Code, Chapters 321, 322, and or solely rebate a portion of salesperson that operates out of a place of business in this state is tax imposed by those chapters if outlet, office, facility, or location an itinerant vendor. provides significant business services, beyond processing invoices, contracting business, including logistics management, purchasing, (11) Kiosk--A small stand-alone area or structure: inventory control, or other vital business services. (A) that is used solely display merchandise or sub- (17) Purchasing office--An outlet, office, facility, or any mit orders for taxable items a data entry device, or both; location that contracts a retail or commercial business process (B) that located entirely within a location that a for business invoices, purchase orders, bills of lading, or other place business of another seller, such as a department store or shop- equivalent records onto sales tax added, including office ping mall; and operated for purpose buying selling taxable goods be used or consumed by retail or commercial business. (C) at taxable items available for imme- diate delivery a purchaser. (18) Remote Seller--As defined in §3.286 this title, a remote seller seller engaged business in this state whose only (12) Local taxes--Sales use taxes imposed by any local activity state is: taxing jurisdiction. (A) engaging regular or systematic solicitation (13) Local taxing jurisdiction--Any following: sales taxable items this state by distribution catalogs, pe- (A) city imposes sales use tax as provided riodicals, advertising flyers, or other advertising, by means print,
under paragraph (3) this subsection; radio, or television media, or by mail, telegraphy, telephone, computer data base, cable, optic, microwave, or other communication system for (B) county imposes sales use tax as provided purpose effecting sales taxable items; or under paragraph (5) this subsection; (B) soliciting orders for taxable items by mail or (C) special purpose district created under Special through other media including Internet or other media may District Local Laws Code or other provisions Texas law autho- developed future. rized impose sales use tax by Tax Code or other provisions Texas law as governed by provisions Tax Code, Chapters (19) Seller--This term has meaning given §3.286 or other provisions Texas law; or this title also refers any agent employee seller. (D) transit authority imposes use (20) Special purpose district--A governmental entity authorized by Transportation Code, Chapters, 453, 457, authorized by legislature for specific purpose, such crime governed by provisions Tax Chapter, 322. control, library, emergency services, county health services, county landfill criminal detention center. (14) Marketplace provider--This term has meaning given §3.286 this title. (21) Storage--This term has meaning given §3.346 title (relating Use Tax). (15) Order placed person--An order placed pur- chaser seller while physically present seller's place (22) Temporary place business seller--A location business regardless how seller subsequently enters order. operated seller limited period time purpose sell- ing receiving orders taxable items where seller has in- (16) Place business seller- general definition--A ventory available immediate delivery purchaser. For example, place business seller must [An] established outlet, office, person who rents booth weekend craft fair art show sell location operated seller purpose receiving orders *156 and take orders for jewelry, or a person who maintains a facility at a taxable items from persons [selling taxable items to those] other than job site to rent tools and equipment to a contractor during the construc- employees, independent contractors, and natural persons affiliated with tion of real property, has established a temporary place of business. A the seller. An "established outlet, office, or location" requires staffing temporary place of business of the seller includes a sale outside of a by one or more sales personnel.[, where sales personnel of the seller re- distribution center, manufacturing plant, storage yard, warehouse, or ceive three or more orders for taxable items during the calendar year.] similar facility of the seller in a parking lot or similar space sharing The term does not include a computer server, Internet protocol address, the same physical address as the facility but not within the walls of the domain name, website, or software application. The "purpose" element facility. of the definition may be established by proof that the sales personnel of the seller receive three or more orders for taxable items at the facility (23) Transit authority--A metropolitan rapid transit author- during the calendar year. Additional criteria for determining when a ity (MTA), advanced transportation district (ATD), regional or subre- location is a place of business of the seller are provided in subsection gional transportation authority (RTA), city transit department (CTD), (b) of this section for distribution centers, manufacturing plants, stor- county transit authority (CTA), regional mobility authority (RMA) or age yards, warehouses and similar facilities; kiosks; and purchasing coordinated county transportation authority created under Transporta- offices. An outlet, office, facility, or any location that contracts with tion Code, Chapters 370, 451, 452, 453, 457, or 460. September 23, Texas Register of business where the sale is deemed to be consummated, as determined (24) Two percent cap--A reference to the general rule that, in accordance with subsection (c) of this section. except as otherwise provided by Texas law as explained in this section, a seller cannot collect, a purchaser is not obligated to pay, (ii) When the sale of a taxable item is deemed more than 2.0% of the sales price of a taxable item in total local sales be consummated at a location outside of this state, local use tax is due use taxes for all local taxing jurisdictions. based on the location where the items are first stored, used or consumed by the entity that contracted with the purchasing office in accordance (25) Use--This term has the meaning given in §3.346 of with subsection (d) of this section. this title. (4) An order that is received by a salesperson who is not at (26) Use tax--A tax imposed the storage, use or other a place of business of the seller when the salesperson receives the order consumption of a taxable item in this state. is treated as being received at the location from which the salesperson (b) Determining the place of business of a seller. operates. Examples include orders that a salesperson receives [Orders received by sales personnel who are not at a place of business of (1) Distribution centers, manufacturing plants, storage seller in Texas when they receive order, including orders received] yards, warehouses, similar facilities. by mail, telephone, including Voice over Internet Protocol cellu- (A) A distribution center, manufacturing plant, storage lar phone calls, facsimile, email while traveling. The [This type yard, warehouse, or similar facility operated by a seller for purpose of order is treated as being received at the] location from which of selling taxable items where sales personnel of seller receive three salesperson operates[, that] is[,] principal fixed location where or more orders for taxable items during calendar year from persons salesperson conducts work-related activities. The location from which other than employees, independent contractors, natural persons af- a salesperson operates will be a place of business of seller only if filiated seller is a place of business of seller. forward- location meets definition of a "place of business of a seller" in ing of previously received orders facility fulfilment does not subsection (a)(16) of this section its own, without regard or- make facility a place of business. ders imputed that location by this paragraph. [Orders received prior October 1, 2021, may also treated as being received at out- (B) If a location is a place of business of seller, let, office, or location operated by seller serves as a base of such as a sales office, is in same building as a distribution center, operations or provides administrative support salesperson, manufacturing plant, storage yard, warehouse, or similar facility op- these locations will treated as places of business of seller erated by a seller, then entire facility is a place of business of purposes subsection (c) of this section.] seller. (5) An order is not received by a salesperson is re- (2) Kiosks. A kiosk is not a place business seller ceived at a location is not a place business seller. Ex- purpose determining where sale is consummated local amples are orders received by computer server through shopping tax purposes. A seller who owns or operates kiosk in is, how- cart software program orders received by automated telephone ever, engaged in business in this state as provided in §3.286 this title. ordering system. [Orders not received by sales personnel, including or- (3) Purchasing offices. ders received by shopping website or shopping software application. Effective October 1, 2021, these orders are received at locations (A) A purchasing office place business places business seller.] seller if purchasing office exists solely rebate portion lo- cal sales use tax imposed by Tax Code, Chapters 321, 322, or (c) Local sales tax- Consummation sale - determining business it contracts; or if purchasing office func- taxing jurisdictions sales tax due. Except spe- tions or exists avoid tax legally due under Tax Code, Chapters cial rules applicable remote sellers in subsection (i)(3) this sec- 321, 322, or 323. purchasing office does exist solely rebate tion, direct payment permit purchases subsection (j) this section, portion use avoid tax legally due certain taxable items, including taxable items sold market- under Tax Code, Chapters if purchasing office pro- place provider, as provided subsection (k) this section, each sale vides significant business services contracting business beyond taxable item consummated location indicated pro- processing invoices, including logistics management, purchasing, in- visions this subsection. following rules, taken Tax ventory control, other vital business services. §321.203 §323.203, apply all sellers engaged business this state, regardless whether they have no place business Texas, (B) In making determination under subparagraph (A) single place business Texas, multiple places business this paragraph, whether purchasing office provides signif- state. icant business services contracting business beyond processing invoices, comptroller will compare total value other busi- (1) Consummation sale- order received place ness services value processing invoices. If total value business seller Texas. other business services, including logistics management, purchas- (A) Order placed person. Except provided ing, inventory control, other vital business services, less than paragraph (3) subsection, when order taxable item value service process invoices, then purchasing office will *157 placed in person at a seller's place of business in Texas, including at a be presumed not to be a place of business of the seller. temporary place of business of the seller in Texas, the sale of that item (C) If the comptroller determines that a purchasing of- is consummated at that place of business of the seller, regardless of the fice is not a place of business of the seller, the sale of any taxable item location where the order is fulfilled. is deemed to be consummated at the place of business of the seller from (B) Order not placed in person. whom the purchasing office purchased the taxable item for resale and local sales and use taxes are due according to the following rules. (i) Order fulfilled at a place of business of the seller in Texas. When an order is received at a place of business of the seller (i) When taxable items are purchased from a Texas in Texas is fulfilled at a place of business of the seller in Texas, the seller, local sales taxes are due based on the location of the seller's place sale is consummated at the place of business where the order is fulfilled. PROPOSED RULES September 23, transit authorities. Similarly, a place of business of the seller in Flower (ii) Order not fulfilled at a place of business of the Mound is located within the boundaries of two special purpose districts, seller in Texas. When an order is received at a place of business of the the Flower Mound Crime Control District the Flower Mound Fire seller in Texas is fulfilled at a location that is not a place of business Control District, the seller is responsible for collecting sales tax for of the seller in Texas, the sale is consummated at the place of business both special purpose districts. where the order is received. (6) Itinerant vendors; vending machines. (2) Consummation of sale- order not received at a place of business of the seller in Texas. (A) Itinerant vendors. Sales made by itinerant vendors are consummated at, itinerant vendors must collect sales tax based (A) Order fulfilled at a place of business of the seller upon, the location where the item is delivered or at which the purchaser in Texas. When an order is received at a location that is not a place of the item takes possession. Itinerant vendors do not have any respon- of business of the seller in Texas or is received outside of Texas, sibility to collect use tax. is fulfilled from a place of business of the seller in Texas, the sale is consummated at the place of business where the order is fulfilled. (B) Vending machines. Sales of taxable items made from a vending machine are consummated at the location of the vend- (B) Order not fulfilled from a place of business of ing machine. See §3.293 of this title (relating to Food; Food Prod- seller in Texas. ucts; Meals; Food Service) for more information about vending ma- (i) Order fulfilled in Texas. When an order is re- chine sales. ceived at a location that is not a place of business of seller in Texas (d) Local use tax. provisions addressing imposition is fulfilled from a location in Texas that is not a place of business state use tax in §3.346 of this title also apply imposition of seller, sale is consummated at location in Texas which local use tax. For example, consistent with §3.346(e) this title, all order is shipped or delivered, or at which purchaser item taxable items that are shipped or delivered a location in this state that takes possession. is within boundaries a local taxing jurisdiction are presumed (ii) Order not fulfilled in Texas. When an order is have been purchased for use in that local taxing jurisdiction as well as received a seller at a location is not a place business presumed have been purchased for use in state. seller in [outside Texas or a remote seller], is fulfilled
(1) General rules. from a location outside Texas, sale is not consummated in Texas. However, a use is considered be consummated at first point in (A) When local use taxes are due in addition local this state where item is stored, used, or consumed after inter- sales taxes as provided subsection (c) this section, all applicable state transit has ceased. taxable item delivered point in this state use taxes must be collected or accrued in following order until is presumed be used for storage, use, or consumption at point two percent cap is reached: city, county, special purpose district, until contrary is established. Local use tax should be collected as transit authority. If more than one special purpose district use tax is due, provided subsection (d) this section. [local use tax is due based all such taxes are be collected or accrued before any transit authority upon location this state which item is shipped or delivered use tax is collected or accrued. See subparagraphs (D) (E) this or at which purchaser item takes possession as provided paragraph. subsection (d) this section.] Except provided subsection (i)(3) (B) If local use tax cannot be collected or accrued at this section, remote seller required collect state use tax under its full rate without exceeding two percent cap, seller cannot §3.286(b)(2) this title must also collect local use tax [based on collect it, or any portion it, purchaser is responsible for location which item is shipped or delivered or at which pur- accruing it. chaser item takes possession]. (C) If seller collects local sales tax on an item, or (3) Exception qualifying economic development purchaser accrues local sales tax on an item, use tax same agreements entered into before January 2009, pursuant Tax type jurisdiction is due on same item. For example, after §321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This paragraph is city sales tax has been collected or accrued an item, no use tax is effective until September 2024. If applicable, local sales tax due due same or different city on item, but use tax may due on sale taxable item is based on location qualifying county, special purpose district, or transit authority. Similarly, if warehouse, is place business seller, which one or more special purpose district sales taxes have been collected or item is shipped or delivered or purchaser item takes accrued an item, no special purpose district use tax is due on possession. item, if one or more transit authority sales taxes have been collected (4) Local sales taxes are due each local taxing jurisdic- or accrued item, no transit authority use tax due item. tion sales tax effect where sale consummated. Local use (D) Collection accrual use tax multiple special tax may also due if total amount sales taxes due does purpose districts. If more than one special purpose district use tax reach two percent cap, item purchased shipped deliv- effect location where use item occurs, special purpose ered location one more different taxing jurisdictions, district taxes are due order their effective dates, beginning provided subsection (d) section. earliest effective date, until two percent cap met. (5) Multiple special purpose district taxes, multiple transit effective dates all special purpose district taxes available authority taxes, combination two may apply single comptroller's website. However, if collection accrual use *158 transaction. If the sale of a taxable item is consummated at a location for the district with the earliest effective date would exceed the two within the boundaries of multiple special purpose districts or transit percent cap, the tax for that district is not due and the seller or purchaser authorities, local sales tax is owed to each of the jurisdictions in effect should determine, following the criteria in subparagraphs (A) - (C) of at that location. For example, a place of business of the seller located in this paragraph, whether use tax is due for the district that next became the city of San Antonio is within the boundaries of both the San Antonio effective. Advanced Transportation District and the San Antonio Metropolitan Transit Authority, and the seller is required to collect sales tax for both September 23, Texas Register or at which the purchaser of the item takes possession. The seller is (i) If the competing special purpose district taxes responsible for collecting the local use taxes due on the sale, regardless became effective on the same date, the special purpose district taxes of the location of the seller in Texas. If the seller fails to collect any are due in the order of the earliest date for which the election in which local use taxes due, the purchaser is responsible for accruing such taxes the district residents authorized the imposition of sales and use tax by and remitting them directly to the comptroller. the district was held. (C) Sale consummated in any local taxing jurisdictions (ii) If the elections to impose the local taxes were imposing less than 2.0% in total local taxes - local sales taxes and use held on the same date, the special purpose district taxes are due in the taxes due. If a sale is consummated at a location in Texas where the order of the earliest date for which the enabling legislation under which total local sales tax rate imposed by the taxing jurisdictions in effect at each district was created became effective. that location does not equal 2.0% according to the provisions of sub- (E) Collection or accrual of use tax for multiple transit section (c) of this section, and the item is shipped or delivered to the authorities. If more than one transit authority use tax is in effect at purchaser at a location in this state that is inside the boundaries of a the location where use of an item occurs, and the two percent cap has different local taxing jurisdiction, additional local use tax may due not been met, the transit authority taxes are due in the order of their based on the location to which the order is shipped or delivered or at effective dates, beginning with the earliest effective date, until the two which the purchaser of the item takes possession, subject to the two percent cap is met. The effective dates of all transit authority taxes percent cap. The seller is responsible for collecting any additional lo- are available on the comptroller's website. However, if the collection cal use taxes due on the sale, regardless of the location of the seller in or accrual of use tax for the authority the earliest effective date Texas. See subsection (i) of this section. If the seller fails to collect the would exceed the two percent cap, the tax for that authority is not due additional local use taxes due, the purchaser is responsible for accruing and the seller or purchaser should determine, following the criteria in such taxes and remitting them directly to the comptroller. subparagraphs (A)- (D) of this paragraph, whether use tax is due for (i) Example one - if an order is received in person the authority next became effective. at a place of business of the seller, such the sale is consummated at (i) If the competing transit authorities became ef- the location where the order is received as provided under subsection fective on the same date, the transit authority taxes are due in the order (c)(1)(A) this section, and the local sales tax due on the sale does the earliest date for which the election in which the authority res- not meet the two percent cap, additional local use taxes are due based idents authorized the imposition sales and use tax by the authority on the location to which the order is shipped or delivered or at which was held. the purchaser the item takes possession, subject to the provisions in paragraph (1) this subsection. (ii) If the elections to impose local taxes were held on the same date, the transit authority use taxes are due in the order (ii) Example two - if a seller receives an order for the earliest date for which the enabling legislation under which each taxable item at a seller's place business in Texas, and seller authority was created became effective. ships or delivers item from an out-of-state location location in this state as designated by purchaser, local sales tax is due based (2) General use tax rules applied specific situations. The upon location place business seller where order following fact patterns explain how local use tax is collected or is received. If local tax due on item does not meet two accrued and remitted comptroller based on, and subject to, percent cap, use taxes, subject provisions in paragraph (1) this general rules paragraph (1) this subsection. subsection, are due based upon location where items are shipped (A) Sale consummated outside state, item delivered or delivered or at which purchaser item takes possession. from outside state or from location Texas is operated by (e) Effect other law. seller - local use tax due. Except as provided subsection (i)(3) this section, if sale is consummated outside this state according (1) Tax Code, Title Subtitles (General Provisions) provisions subsection (c) this section, item purchased B (Enforcement Collection), Tax Code, Chapter (Multistate is either shipped or delivered location this state as designated Tax Compact) Tax Code, Chapter (Limited Sales, Excise, by purchaser from location outside state, or if order Use Tax) apply transactions involving local taxes. Related sections is drop shipped directly purchaser from third-party supplier, this title comptroller rulings shall also apply respect local local use tax is owed based upon location this state which taxes. This includes authorities such court cases federal law order is shipped or delivered or at which purchaser item affect whether item is taxable or is excluded or exempt from takes possession. seller is responsible collecting local use taxation. tax due sale. If seller does collect local use taxes due (2) Permits, exemption certificates, resale certificates sale, purchaser is responsible accruing such taxes required by Tax Chapter shall also satisfy requirements remitting them directly comptroller according provisions collecting remitting local taxes, unless otherwise indicated by paragraph (1) this subsection. For example, if order taxable this section or other sections this title. For example, see subsection item is received seller at location outside Texas, order (n) this section concerning prior contract exemptions. is shipped purchaser location outside state, local use tax due based upon location order shipped (3) Any provisions this section other sections this delivered purchaser item takes possession. title related seller's responsibilities collecting remitting lo- cal taxes comptroller shall also apply purchaser if seller (B) Sale consummated Texas outside local taxing does collect local taxes due. comptroller may proceed jurisdiction, item delivered into one more local taxing jurisdictions - against seller purchaser local tax owed either. local use due. If sale consummated location outside boundaries any taxing jurisdiction according (f) Tax rates. Except otherwise provided law, no provisions subsection (c) section, order shipped *159 governmental entity may adopt or increase a sales and use tax if, as a re- or delivered to the purchaser at a location in this state that is within the sult of the adoption or increase of the tax, the combined rate of all sales boundaries of one or more local taxing jurisdictions, local use tax is and use taxes imposed by local taxing jurisdictions having territory in due based on the location to which the items are shipped or delivered PROPOSED RULES September 23, the local governmental entity would exceed 2.0% at any location within agreement. Under this agreement, the city may impose sales and use the boundaries of the local governmental entity's jurisdiction. The fol- tax within all or part of the boundaries of a district. Areas within a dis- lowing are the local tax rates that may be adopted. trict that are annexed for this limited purpose are treated as though they are within the boundaries of the city purposes of city sales and use (1) Cities. Cities may impose sales and use tax at a rate of tax. up to 2.0%. (B) Counties, transit authorities, and special purpose (2) Counties. Counties may impose sales and use tax at districts may enter into strategic partnership agreements. Sales and rates ranging from 0.5% to 1.5%. use taxes imposed by those taxing jurisdictions do apply in the lim- ited-purpose annexed area as part of a strategic partnership agreement (3) Special purpose districts. Special purpose districts may between a city and an authorized district. However, a county, special impose sales and use tax at rates ranging from 0.125% to 2.0%. purpose district, or transit authority sales and use tax, or any combina- (4) Transit authorities. Transit authorities may impose tion of these three types of taxes, may apply at locations included in a sales and use tax at rates ranging 0.25% to 1.0%. strategic partnership agreement between a city and an authorized dis- trict if the tax is imposed in that area by the applicable jurisdiction as (g) Jurisdictional boundaries, combined areas, and city tax im- allowed under its own controlling authorities. posed through strategic partnership agreements. (C) Prior September 1, 2011, the term "district" was (1) Jurisdictional boundaries. defined in Local Government Code, §43.0751 as a municipal utility (A) City boundaries. City taxing jurisdictional bound- district or a water control and improvement district. The definition aries cannot overlap one another and a city cannot impose a sales and was amended effective September mean a conservation and use tax in an area that is already within the jurisdiction of another city. reclamation district operating under Water Code, Chapter 49. (B) County boundaries. County tax applies all loca- (h) Places of business of the seller and job sites crossed by tions within county. local taxing jurisdiction boundaries. (C) Special purpose district and transit authority (1) Places of business of the seller crossed by local taxing boundaries. Special purpose districts and transit authorities may jurisdiction boundaries. If a place business seller is crossed by cross or share boundaries other local taxing jurisdictions and one or more local taxing jurisdiction boundaries so portion may encompass, in whole or in part, other local taxing jurisdictions, place business seller is located within taxing jurisdiction and
including cities and counties. A geographic location or address in this remainder place business seller lies outside state may lie within boundaries more than one special purpose taxing jurisdiction, tax is due local taxing jurisdictions in which district or more than one transit authority. sales office located. If there is no sales office, sales tax is due local taxing jurisdictions in any cash registers are located. (D) Extraterritorial jurisdictions. Except as otherwise provided by paragraph (3) this subsection concerning strategic part- (2) Job sites. nership agreements and subsection (l)(5) this section concerning (A) Residential repair and remodeling; new construc- City El Paso and Fort Bliss, city sales and use tax does apply tion an improvement realty. When contractor improving real taxable sales are consummated outside boundaries city, property under separated contract, and job site crossed by including sales made in city's extraterritorial jurisdiction. However, boundaries one or more local taxing jurisdictions, local taxes due an extraterritorial jurisdiction may lie within boundaries spe- on any separately stated charges taxable items incorporated into cial purpose district, transit authority, county, or any combination real property must allocated local taxing jurisdictions based on three, sales use taxes those jurisdictions would ap- total square footage real property improvement located within ply those sales. each jurisdiction, including square footage any standalone struc- (2) Combined areas. combined area area where tures are part construction, repair, or remodeling project. boundaries city overlap boundaries one or more other local For more information about tax due on materials used residential taxing jurisdictions as result annexation additional territory new construction job sites, refer §3.291 this title (relating by city, where, as result imposition city tax Contractors). in area in addition local taxes imposed existing tax- (B) Nonresidential real property repair improve- ing jurisdictions, combined local tax rate would exceed 2.0%. ment. When taxable services are performed repair, remodel, or re- comptroller shall make accommodations maintain 2.0% rate any store nonresidential real property, including pipeline, transmission combined area distributing 2.0% tax revenue generated these line, or parking lot, crossed boundaries one or more combined areas local taxing jurisdictions located combined local taxing jurisdictions, local taxes due on taxable services, areas as provided Tax Code, §321.102 or Health Safety Code, including materials any other charges connected services per- §775.0754. Combined areas are identified on comptroller's web- formed, must allocated among local taxing jurisdictions based site. Sellers engaged transactions local sales or use taxes upon total mileage square footage, as appropriate, repair, due combined area, persons who must self-accrue re- remodeling, restoration project located each jurisdiction. For mit tax directly comptroller, must use combined area local more information about tax due materials used nonresidential code when reporting tax rather than codes individual real property repair remodeling job sites, refer §3.357 ti- city, county, special purpose districts, transit authorities make tle (relating Nonresidential Real Property Repair, Remodeling, up combined area. Restoration; Real Property Maintenance). (3) City imposed through strategic partnership agree- (i) Sellers' purchasers' responsibilities collecting ments. accruing local taxes. (A) governing bodies district, defined (1) Sale consummated Texas; seller responsible col- Local Government §43.0751, city may enter into lim- lecting taxes applicable use taxes. When sale ited-purpose annexation agreement known strategic partnership *160 47 TexReg 6170 September 23, 2022 Texas Register (ii) The single local use tax rate in effect for the of a taxable item is consummated at a location in Texas as provided by period beginning January 1, 2020, and ending December 31, 2020, is subsection (c) of this section, the seller must collect each local sales tax 1.75%. in effect at the location. If the total rate of local sales tax due on the sale does not reach the two percent cap, and the seller ships or delivers the (E) Annual publication of single local use tax rate. Be- item into another local taxing jurisdiction, then the seller is required to fore the beginning of a calendar year, the comptroller will publish no- collect additional local use taxes due, if any, based on the location tice of the single local use tax rate in the Texas Register will be in which the item is shipped or delivered or at which the purchaser of the effect for calendar year. item takes possession, regardless of the location of the seller in Texas. For more information regarding local use taxes, refer subsection (d) (F) Calculating the single local use tax rate. The single of this section. local use tax rate effective in a calendar year is equal the estimated average rate of local sales and use taxes imposed in this state during the (2) Out-of-state sale; seller engaged in business in Texas. preceding state fiscal year. As soon as practicable after the end of a state Except as provided in paragraph (3) of this subsection, when a sale is fiscal year, the comptroller must determine the estimated average rate not consummated in Texas, a seller who is engaged in business in this of local sales and use taxes imposed in this state during the preceding state is required collect and remit local use taxes due, if any, on orders state fiscal year by: of taxable items shipped or delivered at the direction of the purchaser into a local taxing jurisdiction in this state based upon the location in (i) dividing the total amount net local sales and this state which the item is shipped or delivered or at which the use taxes remitted the comptroller during the state fiscal year by the
purchaser the item takes possession as provided in subsection (d) total amount net state sales and use tax remitted the comptroller this section. during the state fiscal year; (3) Local use tax rate for remote sellers. (ii) multiplying the amount computed under clause (i) this subparagraph by the rate provided in Tax Code, §151.051; (A) A remote seller required collect remit one or more local use taxes in connection a sale a taxable item must compute the amount using: (iii) rounding the amount computed under clause (ii) this subparagraph the nearest .0025. (i) the combined tax rate all applicable local use taxes based on the location which the item is shipped or delivered or (G) Direct refund. A purchaser may request a refund at which the purchaser the item takes possession; or based on local use taxes paid in a calendar year for the difference be- tween the single local use tax rate paid by the purchaser the amount (ii) the remote seller's election, the single local the purchaser would have paid based on the combined tax rate for all use tax rate published in Texas Register. applicable local use taxes. Notwithstanding refund requirements under §3.325(a)(1) this title (relating Refunds Payments Un- (B) A remote seller is storing tangible personal der Protest), non-permitted purchaser may request a refund directly property in Texas be used for fulfillment facility market- from comptroller for tax paid in previous calendar year, no place provider has certified it will assume rights duties earlier than January 1 following calendar year within statute seller respect tangible personal property, as provided limitation under Tax Code, 111.104 (Refunds). for in §3.286 this title, may elect single local use tax rate under subparagraph (A)(ii) this paragraph. (H) Marketplace providers. Notwithstanding subpara- graph (A) this paragraph, marketplace providers may use (C) Notice comptroller election revocation single local use tax rate must compute amount local use tax election. collect remit using combined tax rate all applicable local (i) Before using single local use tax rate, re- use taxes. mote seller must notify comptroller its election using form pre- (4) Purchaser responsible for accruing remitting local scribed by comptroller. A remote seller may also notify comp- taxes if seller fails collect. troller election on its use tax permit application form. The remote seller must use single local use tax rate all its sales taxable (A) If seller does collect state sales tax, any items until election is revoked as provided in clause (ii) this sub- applicable local sales taxes, both, on sale taxable item paragraph. is consummated in Texas, then purchaser is responsible filing return paying tax. The local sales taxes due are based on (ii) A remote seller may revoke its election by filing location this state where sale is consummated provided form prescribed by comptroller. If comptroller receives subsection (c) this section. notice October 1, revocation will be effective January following year. If comptroller receives notice after October 1, (B) purchaser who buys item use revocation will be effective January year after follow- seller who does collect state use tax, any applicable local use ing year. For example, remote seller must notify comptroller taxes, both, is responsible filing return paying tax. October 1, 2020, revocation effective January 1, 2021. If local use taxes due based on location where item first comptroller receives revocation November 1, 2020, re- stored, used, consumed purchaser. vocation will effective January 1, 2022. (C) For more information about how report pay (D) Single local use tax rate. use tax directly comptroller, see §3.286 title. (i) single use tax rate effect pe- (5) Local due price taxable item, riod beginning October 2019, ending December 31, 2019, defined Tax §151.007, report period taxable 1.75%. item purchased period taxable item first stored, used, otherwise consumed taxing jurisdiction. PROPOSED RULES September
CP Ex-31-0014 of 0017 For more information, refer to §3.344 of this title (relating to Telecom- (6) A purchaser is not liable additional local use tax if munications Services). the purchaser pays local use tax using the rate elected by an eligible re- mote seller according to paragraph (3) of this subsection. remote (5) Marketplace provider sales. Local taxes are due on seller must be identified on the comptroller's website as electing to use sales of taxable items through a marketplace provider based on the lo- the single local use tax rate. A purchaser must verify that the remote cation in this state to which the item is shipped or delivered or at which seller is listed on the comptroller's website. If the remote seller is not the purchaser takes possession. For more information, refer to §3.286 listed on the comptroller's website, the purchaser will be liable ad- of this title. ditional use tax due in accordance to paragraph (4) of this subsection. (6) Mobile telecommunications services. Local taxes due (j) Items purchased under a direct payment permit. on mobile telecommunications services are based upon the location of the customer's place of primary use as defined in §3.344(a)(8) of this (1) When taxable items are purchased under a direct pay- title, and local taxes are to be collected as indicated in §3.344(h) of this ment permit, local use tax is due based upon the location where the title. permit holder first stores the taxable items, except if the taxable items are not stored, then local use tax is due based upon the location (7) Motor vehicle parking and storage. Local taxes are where the taxable items are first used or otherwise consumed by the due based on location of space or facility where the vehicle is permit holder. parked. For more information, refer to §3.315 of this title (relating to Motor Vehicle Parking and Storage). (2) If, in a local taxing jurisdiction, storage facilities con- tain taxable items purchased under a direct payment exemption certifi- (8) Natural gas and electricity. Any local city and special cate and at time of storage it is not known whether taxable items purpose taxes due are based upon location where natural gas will used in Texas, then taxpayer may elect to report use tax or electricity is delivered to purchaser. As explained in subsection either when taxable items are first stored in Texas or are first re- (l)(1) of this section, residential use of natural gas and electricity is moved from inventory use in Texas, long as use tax is reported exempt from all county sales and use taxes and all transit authority sales consistent manner. See also §3.288(i) of this title (relating to Direct and use taxes, most special purpose district sales and use taxes, and Payment Procedures and Qualifications) and §3.346(g) of this title. many city sales and use taxes. list of cities and special purpose districts do impose, and those are eligible to impose, local (3) If local use tax is paid on stored items are subse- sales and use tax on residential use of natural gas and electricity is quently removed from Texas before they are used, tax may re- available on comptroller's website. For more information, also refer covered accordance with refund and credit provisions of §3.325 to §3.295 this title (relating to Natural Gas and Electricity). this title and §3.338 this title (relating to Multistate Tax Credits and Allowance Credit Tax Paid to Suppliers). (9) Nonresidential real property repair and remodeling ser- vices. Local taxes are due on services to remodel, repair, or restore (k) Special rules certain taxable goods and services. Sales nonresidential real property based on location job site where following taxable goods and services are consummated at, and remodeling, repair, or restoration is performed. See also subsection local tax is due based upon, location indicated this subsection. (h)(2)(B) this section and §3.357 this title. (1) Amusement services. Local tax is due based upon (10) Residential real property repair and remodeling and location where performance or event occurs. For more information new construction real property improvement performed under on amusement services, refer §3.298 this title (relating Amuse- separated contract. When contractor constructs new improvement ment Services). realty pursuant separated contract or improves residential real (2) Cable services. When service provider uses cable property pursuant separated contract, sale is consummated at system provide cable television or bundled cable services cus- job site at which contractor incorporates taxable items into tomers, local tax is due provided §3.313 this title. When customer's real property. See also subsection (h)(2)(A) this section service provider uses satellite system provide cable services and §3.291 this title. customers, no local tax is due on service accordance (11) Waste collection services. Local taxes are due on Telecommunications Act 1996, §602. garbage or other solid waste collection or removal services based on (3) Florists. Local sales tax is due on all taxable items location which waste is collected from which waste is sold florist based upon location where order is received, removed. For more information, refer §3.356 this title (relating regardless where whom delivery is made. Local use tax is not Real Property Service). due on deliveries taxable items sold florists. For example, if (l) Special exemptions provisions applicable individual place business florist where an order is taken is not within jurisdictions. boundaries any local taxing jurisdiction, no local sales tax is due on item no local use tax due regardless location delivery. (1) Residential use natural gas electricity. If Texas florist delivers order local taxing jurisdiction (A) Mandatory exemptions from local sales use instruction unrelated florist, if unrelated florist did tax. Residential use natural gas electricity exempt from most take order within boundaries local taxing jurisdiction, local local sales use taxes. Counties, transit authorities, most spe- use tax due on delivery. For more information about florists' cial purpose districts are authorized impose sales use tax on sales use tax obligations, refer §3.307 this title (relating residential use natural gas electricity. Pursuant Tax Code, Florists). §321.105, any city adopted local sales use tax effective Octo- (4) Landline telecommunications services. Local taxes ber 1, 1979, later prohibited from imposing tax on residential due landline telecommunications services are based upon loca- use natural gas electricity. See §3.295 title. tion device call other transmission originates. (B) Imposition tax allowed certain cities. Cities If seller cannot determine where call transmission originates, adopted prior October 1979, may, accordance taxes due based address service billed. provisions Tax §321.105, choose repeal exemp- September Register *162 (B) Exemptions from special zone sales and use tax. tion for residential use of natural gas and electricity. The comptroller's The sale, production, distribution, lease, or rental of; and the use, stor- website provides a list of cities that impose tax on the residential use age, or other consumption within a special sales and use tax zone of; a of natural gas and electricity, as well as a list of those cities that do not taxable item sold, leased, or rented by the entities identified in clauses currently impose the tax, but are eligible to do so. (i)- (vi) of this subparagraph are exempt from the special zone sales (C) Effective January 1, 2010, a fire control, preven- and use tax. State and all other applicable local taxes apply unless oth- tion, and emergency medical services district organized under Local erwise exempted by law. The special zone sales and use tax exemption Government Code, Chapter 344 that imposes sales tax under Tax Code, applies to: §321.106, or a crime control and prevention district organized under (i) a retail electric provider as defined by Utilities Local Government Code, Chapter 363 that imposes sales tax under Tax Code, §31.002; Code, §321.108, that is located in all or part of a municipality that im- poses a tax on the residential use of natural gas and electricity as pro- (ii) an electric utility or a power generation com- vided under Tax Code, §321.105 may impose tax on residential use of pany as defined by Utilities Code, §31.002; natural gas and electricity at locations within the district. A list of the (iii) a gas utility as defined by Utilities Code, special purpose districts that impose tax on residential use of natural §101.003 or §121.001, or a person who owns pipelines used gas and electricity and those districts eligible to impose the tax that do transportation or sale of oil or gas or product or constituent of oil or not currently do so is available on the comptroller's website. gas; (2) Telecommunication services. Telecommunications (iv) person who owns pipelines used the trans- services are exempt from all local sales taxes unless the governing portation or sale of carbon dioxide; body of city, county, transit authority, or special purpose district votes to impose sales tax on these services. However, since 1999, under Tax (v) telecommunications provider as defined by Code, §322.109(d), transit authorities created under Transportation Utilities Code, §51.002; or Code, Chapter 451 cannot repeal the exemption unless the repeal is (vi) cable service provider or video service first approved by the governing body of each city created the local provider as defined by Utilities Code, §66.002. taxing jurisdiction. The local sales tax limited to telecommunica- tions services occurring between locations within Texas. See §3.344 (5) Imposition of city sales tax and transit tax on certain of this title. The comptroller's website provides list of local taxing military installations; El Paso and Fort Bliss. Pursuant to Tax Code, jurisdictions impose tax on telecommunications services. §321.1045 (Imposition of Sales and Use Tax in Certain Federal Military Installations), purposes the local sales and use tax imposed under (3) Emergency services districts. Tax Code, Chapter 321, the city El Paso includes the area within the (A) Authority to exclude territory from imposition boundaries Fort Bliss to extent it in the city's extraterritorial emergency services district sales and use tax. Pursuant to provi- jurisdiction. However, El Paso transit authority does not include sions Health and Safety Code, §775.0751(c-1), an emergency ser- Fort Bliss. See Transportation Code, §453.051 concerning Creation vices district wishing to enact sales and use tax may exclude from Transit Departments. election called to authorize tax any territory in district where (m) Restrictions on local sales tax rebates and other economic sales and use tax then at 2.0%. The tax, if authorized voters incentives. Pursuant Local Government Code, §501.161, Section 4A eligible vote enactment tax, then applies only in and 4B development corporations may not offer provide economic portions district included in election. tax does apply incentives, such as local sales tax rebates authorized under Local Gov- sales made excluded territories in district and sellers in ernment Code, Chapters or persons whose business consists excluded territories should continue collect local sales and use taxes primarily purchasing taxable items using resale certificates and then local taxing jurisdictions effect at time election un- reselling those same items related party. related party means der which district sales and use tax was authorized as applicable. person or entity which owns at least 80% business enterprise (B) Consolidation districts resulting sales tax sales and use taxes would be rebated part economic in- sub-districts. Pursuant provisions Health and Safety Code, centive. §775.018(f), if territory district proposed under Health and (n) Prior contract exemptions. provisions §3.319 Safety Code, Chapter overlaps boundaries another this title (relating Prior Contracts) concerning definitions and exclu- district created under chapter, commissioners court each sions apply prior contract exemptions. county boards counties districts are located may choose create consolidated district overlapping territory. If (1) Certain contracts bids exempt. No local taxes are two districts want consolidate under Health Safety Code, due sale, use, storage, other consumption this state tax- §775.024 have different sales use tax rates, territory able items used: former districts located within consolidated area will be designated sub-districts sales tax rate within each sub-district will (A) performance written contract executed continue imposed rate tax was imposed former prior effective date any local tax if contract may district each sub-district was part prior consolidation. modified because tax; (4) East Aldine Management District. (B) pursuant obligation bid bids submitted prior effective date any tax if bid bids contract (A) Special sales use tax zones within district; entered into pursuant thereto fixed price subject separate sales use tax rate. As set out Special District Local withdrawal, change, modification because tax. Laws §3817.154(e) (f), East Aldine Management District board may create special sales use tax zones within (2) Annexations. Any annexation territory into exist- boundaries District and, voter approval, enact special ing taxing jurisdiction also basis claiming exemption use tax rate each zone different sales provided subsection. use rate imposed rest district. PROPOSED RULES September *163 (3) Local taxing jurisdiction rate increase; partial exemp- §16.38, concerning special rule for overlapping project areas tion for certain contracts and bids. When an existing taxing ju- noncommercial applications, §16.39, concerning application risdiction raises its and use tax rate, additional amount tax requirements, §16.40, concerning evaluation criteria, §16.41, that would be due as result rate increase due on sale, concerning application protest process, §16.42, concerning use, storage, or other consumption this state taxable items used: awards; grant agreement, §16.43, concerning reporting, §16.44, concerning records retention; audit, §16.45, concerning failure (A) for performance written contract executed to perform, and §16.46, concerning forms; notices. These new prior to effective date tax rate increase if contract may sections implement Texas Broadband Development Office. be modified because tax; or The new sections will be located Chapter 16 (Broadband Development), new Subchapter B (Broadband Development (B) pursuant to obligation bid or bids submitted Program). prior to effective date tax rate increase if bid or bids and contract entered into pursuant thereto are fixed price and subject The proposal to comply with Government Code, Chapter 490I, withdrawal, change, or modification because tax. was enacted by House Bill 5, 87th Legislature, R.S., 2021. Government §490I.0109, permits comptroller adopt (4) Three-year statute limitations. rules regarding Texas Broadband Development Office (A) The exemption paragraph (1) this subsection necessary implement that chapter. and partial exemption paragraph (3) this subsection have no Section 16.30 provides definitions. effect after three years from date adoption or increase takes effect taxing jurisdiction. Section 16.31 provides that office shall publish notice funds availability. (B) The provisions §3.319 this title apply this subsection extent they are consistent. Section 16.32 establishes office may establish eligibil- ity and program requirements and preferences and make award (C) Leases. Any renewal or exercise an option decisions compliance with state or federal law, rule, regula- extend time lease or rental contract under exemptions pro- tion, or guidance applicable type funding extent vided by this subsection shall be deemed be new contract no necessary avoid conflict between relevant law, rule, reg- exemption will apply. ulation, or guidance this subchapter. (5) Records. Persons claiming exemption provided by Section 16.33 describes designated area eligibility requirements subsection must maintain records can be verified compliance with state federal law, rule, regulation comptroller exemption will be lost. guidance. (6) Exemption certificate. An identification number re- Section 16.34 establishes process for petitioning for desig- quired prior contract exemption certificates furnished sellers. nated area reclassification. The identification number should be person's 11-digit Texas tax- payer number federal employer's identification (FEI) number. Section 16.35 describes program eligibility requirements. agency certifies legal counsel has reviewed pro- Section 16.36 describes application process. posal found it be within state agency's legal authority Section 16.37 establishes criteria for overlapping project areas. adopt. Section 16.38 establishes application amendment process Filed with Office Secretary State September 9, applications from noncommercial broadband service providers contain project areas overlap with project areas ap- 2022. plications commercial broadband service providers.
TRD-202203623 Section 16.39 establishes application requirements. Jenny Burleson Director, Tax Policy Division Section 16.40 establishes criteria office shall use evalu- Comptroller Public Accounts ate applications provides preferences office may use Earliest possible date adoption: October make award decisions. For further information, please call: (512) 475-2220 Section 16.41 establishes application protest process. ♦ ♦ ♦ Section 16.42 provides award decisions will made sole discretion office, requires awards used only cer- CHAPTER 16. BROADBAND DEVELOPMENT tain specified purposes, establishes timeline grant re- SUBCHAPTER B. BROADBAND cipients negotiate sign grant agreements. DEVELOPMENT PROGRAM Section 16.43 provides requirements submission re- ports documentation grant recipient. TAC §§16.30 - 16.46 Section 16.44 provides records retention requirements de- Comptroller Public Accounts proposes new §16.30, scribes requirements providing records, documentation, concerning definitions, §16.31, concerning notice funds other information required office authorizes of- availability, §16.32, concerning federal funding; conflict fice, upon reasonable notice, audit activities grant laws, rules, regulations, guidance, §16.33, concerning recipient necessary ensure grant funds used designated area eligibility, §16.34, concerning designated intended purpose reimbursement award area reclassification, §16.35, concerning program eligibility grant recipient has complied terms, conditions, re- requirements, §16.36, concerning application process generally, quirements grant. §16.37, concerning overlapping applications project areas, September Register
T AB H *165 The department has determined that the rule as proposed will The agency certifies that legal counsel has reviewed the pro- not affect rural communities, as it does not directly regulate any posal and found it to be within the state agency's legal authority rural community. to adopt.
The department has not drafted local employment impact Filed with the Office of the Secretary of State on April 8, 2024. statement under the Administrative Procedures Act, §2001.022, TRD-202401417 as the agency has determined that the rule as proposed will not impact local economies. James Murphy General Counsel
The department has determined that Government Code, Texas Parks and Wildlife Department §2001.0225 (Regulatory Analysis of Major Environmental Earliest possible date of adoption: May 19, 2024 Rules), does not apply to the proposed rule. For further information, please call: (512) 389-4775 The department has determined there will not be taking of ♦ ♦ ♦ private real property, as defined by Government Code, Chapter 2007, as result of the proposed rule.
TITLE 34. PUBLIC FINANCE
In compliance with the requirements of Government Code, PART 1. COMPTROLLER OF PUBLIC §2001.0221, department has prepared following Govern-
ment Growth Impact Statement (GGIS). The rule as proposed, ACCOUNTS if adopted, will not create government program; not result in an increase or decrease in number full-time equivalent CHAPTER 3. TAX ADMINISTRATION employee needs; not result in need additional General SUBCHAPTER O. STATE AND LOCAL SALES Revenue funding; not affect amount any fee; create new regulation (to prohibit "canned" hunting mountain lions AND USE TAXES establish trapping rules); expand existing regulation; neither increase nor decrease number individuals subject
34 TAC §3.334
regulation; positively or adversely affect state's The Comptroller Public Accounts proposes repeal economy. §3.334, concerning local use taxes. The comptroller Comments on proposed rule may be submitted Richard repeals existing §3.334 replace it with new §3.334. The Heilbrun, Texas Parks Wildlife Department, 4200 Smith repeal §3.334 will be effective date new §3.334 takes School Road, Austin, Texas 78744; (512) 389-8104; email: effect. richard.heilbrun@tpwd.texas.gov or via department website
Brief explanation proposed rulemaking.
www.tpwd.texas.gov. It has been called comptroller's attention October The new rule proposed under authority Parks 27, 2023 notice proposed rulemaking did contain state-
Wildlife Code, §67.004, which requires commission by ment fiscal implications small businesses or rural commu-
regulation establish any limits on taking, possession, nities as required Government Code, Chapter 2006. See (48 propagation, transportation, importation, exportation, sale, or TexReg 6340) (October 27, 2023). Therefore, comptroller offering sale nongame fish or wildlife department proposing repeal adopted rule as proposed October considers necessary manage species. 27, 2023 notice proposed rulemaking. The comptroller si-
The proposed new rule affects Parks Wildlife Chapter multaneously proposing readopt text rule effective 67. January 2024, with amendments, under same num-
ber title, with repeal be effective as date
§65.950. Mountain Lions (Puma concolor).
adopted rule. (a) In this section "captivity" means state being held
Fiscal note.
under control, or kept caged, penned, or trapped. (b) No person this state may: Brad Reynolds, Chief Revenue Estimator, has determined repeal current rule no consequence apart from facilita-
(1) hunt mountain lion captivity; tion adoption new substitute §3.334 has no fiscal im-
(2) release mountain lion from captivity purposes of: plications itself. The fiscal implications repeal are same as fiscal implication proposed new substitute (A) being hunted; §3.334. The statements this fiscal note supplemented additional statements preamble proposed new (B) training dogs; §3.334, comptroller will propose adopt concurrently (3) allow live mountain lion be captured trap or this proposed repeal. snare more than hours; or Brad Reynolds has determined following each year (4) conduct, promote, assist, or advertise activity pro-
first five years proposed repeal substitute new hibited subsection. rule will effect. (c) This section does not:
The additional estimated cost state local govern-
ments expected result enforcing or administering rule.
(1) prohibit person humanely dispatching lawfully trapped mountain lion; or There will no additional estimated cost state governments expected result enforcing administering (2) apply use snares designed break away proposed repeal existing rule concurrent new rule. disassemble pounds force less.
TRIAL EXHIBIT CP Ex-38
D-1-GN-21-003198
April Register
affect economic activity employment would depend proposed amendments explain manner discretionary actions governing body electorate comptroller intends apply consummation statutes. ex-
*166
an affected jurisdiction, and cannot be determined. planation should lead to greater taxpayer compliance, and less audit resources required to enforce or administer the rule.
Government growth impact statement. The estimated reductions in costs to the state and to local gov-
Brad Reynolds, Chief Revenue Estimator, has determined the
ernments as a result of enforcing or administering the rule.
following each year of the first five years that the existing rule will be repealed and the proposed new rule will be in effect: the There will be no estimated reductions in costs to the state and to amendment will not create or eliminate a government program; local governments as a result of enforcing or administering the will not require the creation or elimination of employee positions; proposed repeal of the existing rule and the concurrent new rule. will not require an increase or decrease in future legislative ap-
Local governments do not administer the tax, and the comptroller propriations to the comptroller; will not require increase or will not be reducing the size of its audit staff as a result of the rule. decrease in fees paid to the comptroller; will not create a new
The estimated loss or increase in revenue to the state or to local
regulation; will increase the number of individuals subject to the
governments result of enforcing or administering the rule,
rule's applicability because sellers without physical presence
and the foreseeable implications relating cost or revenues of
in local tax jurisdiction will be required collect local use tax if
the state or local governments.
they are required collect state use tax; and will positively or adversely affect state's economy. Change in sourcing of transactions subject local sales taxation could result in net change in sales tax revenue of local taxing en-
Economic impact statement and regulatory flexibility analysis.
tities generally, which may be significant some jurisdictions. A "rural community" is municipality with population of less Most, but all, reductions in taxable transactions sourced than 25,000. The comptroller estimates that there are 1,098 some jurisdictions would be increases in taxable transactions such rural communities, of which 1,017 impose sales tax and sourced other jurisdictions. If the comptroller repeals the exist-
may have revenue affected by compliance with the rule. ing rule and concurrently adopts the proposed new rule, it is esti-
mated that there could be $28.5 million reduction in aggregate A "small business" legal entity, including corporation, part-
local sales tax levies sourced unincorporated areas without lo-
nership, or sole proprietorship, that: (A) formed the pur-
cal sales tax or with cumulative local county and special district pose making profit; (B) independently owned and oper-
tax rates less than the cumulative local rates that applied the ated; and (C) has fewer than 100 employees or less than $6 locations where the taxable transactions were formerly sourced. million in annual gross receipts. The Comptroller estimates that $28.5 million reduction aggregate local tax levies would re-
there are 470,000 businesses with fewer than employees, sult reduced state service charge revenue $570,000. and 377,000 businesses with annual gross receipts less than $6 million; the sum these two estimates would overstate the num-
Reliable estimates net changes revenue each the ber small businesses, many businesses would be expected 1,759 local sales taxing jurisdictions that might stem from compli-
have both fewer than employees and less than $6 million ance with proposed repeal existing rule and concurrent annual gross receipts. adoption new rule cannot feasibly be produced by comp-
troller. To extent that repeal existing rule and adoption
Public benefits and costs.
proposed new rule leads greater awareness and compli-
ance with local tax consummation standards, some vendors Brad Reynolds, Chief Revenue Estimator, has determined may change their reporting methods, which might positively or following each year first five years that existing rule negatively affect tax revenue particular local tax jurisdic-
will be repealed proposed new rule will be effect. tions. As previously explained, comptroller does have sufficient data on business operations each business The public will benefit from greater clarity regarding consum-
identify quantify businesses transactions that might mation standards, making compliance easier. be affected, positive or negative revenue impact on each There may be additional economic costs person required tax jurisdiction. comply proposed repeal existing rule adoption It conceivable that repeal existing rule adoption new rule. The rule may cause some vendors realize that proposed new rule may cause some vendors, small large, they are noncompliant. If vendors come into compliance realize that they are noncompliant. If vendors come into changing from single-location reporting multiple-location re-
compliance changing from single-location reporting multi-
porting, their compliance burden may increase. And if vendors ple-location reporting, their compliance burden may increase. change from multiple-location reporting single-location report-
ing, their compliance burden may diminish. The repeal existing rule adoption proposed
Local employment impact statement.
new rule will expand local tax collection obligations remote sellers - out-of-state sellers that collect state use tax must also For first five years existing rule will be repealed collect local sales tax. The expansion remote seller local proposed new rule will effect, effect local tax collection obligation may benefit small businesses economies employment, if any, cannot determined. To reducing perception customers purchases extent repeal existing rule proposed out-of-state sellers preferable because out-of-state sellers new rule leads greater awareness compliance charge less sales use tax than small businesses Texas. local tax consummation standards, some vendors may change The proposed new rule adds subsection (b)(6): their reporting methods, which might positively negatively af-
fect tax revenue particular local tax jurisdictions. Whether "If small business micro-business operates single lo-
change local tax revenue might increase decrease cation out it conducts all its business activities, provision local government services extent would
PROPOSED RULES April 19, TexReg
comptroller will presume location place business 53) (January 5, 2024), (48 TexReg 391) (January 27, 2023), (45 seller." 3499) (May 22, 2020). amendments implemented House Bill 86th Legislature, 2019, placed sales To extent repeal existing rule facilitates adop-
use tax collection responsibilities marketplace providers. tion proposed new rule, repeal will simplify collec-
amendments also implemented House Bill 86th Leg-
tion many small businesses micro-busi-
*167
islature, 2019, which set a single local use tax rate that remote nesses. sellers may elect to use. The amendments also expanded the
Public hearing
local sales tax collection responsibilities of sellers based on the United States Supreme Court decision in
South Dakota v. Way-
The comptroller will hold a hearing to take public comments, on
fair, Inc.,
The repeal is proposed under Tax Code, §§111.002 (Comp- troller's Rule; Compliance; Forfeiture), 321.306 (Comptroller's (C) has more than 20 employees." Rules), 322.203 (Comptroller's Rules), and 323.306 (Comptrol- ler's Rules), which authorize comptroller to adopt rules to "Small business--a legal entity, including corporation, partner- implement tax statutes. ship, or sole proprietorship, that: Sections or articles code affected. (A) formed purpose making profit; The repeal affects Tax Code, §151.0595 (Single Local Tax Rate (B) independently owned and operated; and Remote Sellers); Tax Code, Chapter 321, Subchapters A, B, (C) has fewer than 100 employees or less than $6 million an- C, D, and F; Tax Code, Chapter 322; and Tax Code, Chapter nual gross receipts." 323. The definition "independently owned and operated business" §3.334. Local Sales Use Taxes. taken from Attorney General Texas' Government Code The agency certifies that legal counsel has reviewed pro- Chapter 2006 Small Businesses Rural Communities Impact posal found it to be within state agency's legal authority Guidelines updated December 2017. adopt. The definitions "micro-business" "small business" taken Government Chapter 2006. Filed Office Secretary State April 8, 2024. The comptroller further proposes add subsection (b)(6): TRD-202401426 Jenny Burleson "If small business seller or micro-business seller operates Director, Tax Policy Division single location out it conducts all its business activi- Comptroller Public Accounts ties, comptroller will presume that location place Earliest possible date adoption: May 19, 2024 business seller." For further information, please call: (512) 475-2220 Fiscal note. ♦ ♦ ♦ Brad Reynolds, Chief Revenue Estimator, has determined following each year first five years that rule will be TAC §3.334 effect. The fiscal note considers effect prior 2020, The Comptroller Public Accounts proposes new §3.334, con- 2023, amendments rule, as well as amend- cerning local sales use taxes. The comptroller proposes ments proposal. new §3.334 readopt text existing §3.334 proposed The additional estimated cost state local govern- repeal, addition paragraph (b)(6). ments expected as result enforcing or administering rule. Brief explanation proposed rule. There will no additional estimated cost state local In January 2020, comptroller initiated rulemaking update governments expected as result enforcing or administering its local sales use tax rule. The comptroller subsequently proposed rule. The proposed amendments explain man- adopted amendments 2023, 2024. (49 TexReg April Register The comptroller does have sufficient data verify these cal- ner comptroller intends apply consummation culations or make similar estimates other jurisdictions. The statutes. explanation should lead greater taxpayer com- agency does have data regarding amount tax re- pliance, less audit resources required enforce admin- ceipts vendor reports local jurisdictions. But, ister rule. data does prove vendor incorrectly reporting, estimated reductions costs state gov- vendor would change its reporting as result rule ernments as result enforcing administering rule. amendments, specific jurisdictions would gain lose revenue result rule amendments. Those determi- There will no estimated reductions costs state nations would require understanding business opera- governments result enforcing administering *168 tions of the vendor to determine which business locations were rule amendments. Local governments do not administer the tax, "places of business" for purposes of local tax sourcing. Then, and the comptroller will not be reducing the size of its audit staff the comptroller would have to examine individual transactions to as a result of the rule. determine the location where the orders were received, the loca- The estimated loss or increase in revenue to the state or to local tion where the orders were fulfilled, and the location where the governments as a result of enforcing or administering the rule, order was delivered, since all three locations are potential sourc- and the foreseeable implications relating to cost or revenues of ing locations. Then, the comptroller would have to compare that the state or local governments. information with how the vendor has been reporting local tax on each transaction, identify the circumstances, if any, that would Change in sourcing of transactions subject to local sales taxa- require the vendor to change its methods of reporting as a result tion could result in net change in sales tax revenue of local tax- of the rule, and determine the dollar value for each transaction. ing entities generally, with the net change quite significant for The comptroller does not have sufficient information on the indi- some jurisdictions. Most, but not all, reductions in taxable trans- vidual vendors to make this determination. actions sourced to some jurisdictions would be increases in tax- able transactions sourced to other jurisdictions. But to the ex- The consultant's explanation of his methodology confirms that tent that transactions previously sourced within an incorporated the comptroller does not have sufficient data on hand, and that municipality would be sourced to an unincorporated area with- the comptroller could not reasonably acquire the necessary data out a cumulative local tax rate levied by municipal (pursuant to to perform a study for every jurisdiction. The consultant identified a limited purpose annexation agreement), county, and/or special and researched the "top tier" taxpayers for the cities in his study, purpose taxing authorities commensurate with the cumulative lo- and then conducted research to determine who they were selling cal tax rate levied by the municipal, county, and/or special pur- to whether any sales were made other than through web- pose taxing authorities applicable where the transactions were sites. The research ranged from interviews with local employ- formerly sourced, there would be a reduction in aggregate lo- ees, to passive research web pages, job postings, certificate cal sales tax levies consequent reduction in state service of occupancy maps/filings, in some instances, purchases charge revenues under §§ 321.503, 322.303, 323.503, Tax were made as well as physical visits to the taxpayer's locations. Code. From this research, the consultant identified "suspect" taxpay- ers estimated the value of their shipment outside of the city. For reasons further discussed, reliable estimates of net changes In doing work, the consultant estimated that he spent forty in revenue by individual jurisdictions 1,759 local sales tax- hours per jurisdiction. The comptroller does not have time or ing jurisdictions that might stem from compliance with rule resources to conduct what is essentially audit of tens of cannot feasibly be produced by comptroller. Even if req- thousands of permitted taxpayers to identify noncompliant tax- uisite audits of potentially affected sales tax permittees every payers then estimate extent of their noncompliance. jurisdiction could be timely performed to support such estima- tion, sales tax permittees are not static entities. It would not With exception of City of Round Rock, Plaintiff cities be plausible to assume that those who currently source local tax have alleged that their jurisdictions have a particular type of tax- to a location that is not a place of business as defined payer that is primarily affected - "fulfillment centers" that ship or- rule would not adjust their operations to qualify such locations ders to customers. According to cities, fulfillment cen- places business consequently be obligated to change ters are sourcing local tax to cities which they are located, sourcing local tax. pursuant to Tax Code, §321.203(c-1)(1), which provides that a sale is consummated at place business retailer Plaintiff cities allege that portions proposed rule are invalid, from which retailer ships or delivers item. For subsec- that proposed rule "dramatically" or "fundamentally" changes tion (c-1)(1) apply, a fulfillment center has a "place former rule, that compliance proposed rule will re- business retailer" local sales tax sourcing purposes. quire vendors change existing reporting methods, that The term "place business retailer" (hereinafter "place changes existing reporting methods will result loss business") is defined Tax §321.002(a)(3)(A) include revenue cities. a location which three or more orders are received during a One consultant estimated that City Carrollton would have calendar year. a likely net loss $1.1 $2 million; that City Coppell The Plaintiff cities contend that fulfillment centers are prop-
would have a likely net loss $18.8 million $30.8 million, that erly sourcing local tax cities they are located be- City DeSoto would have a likely net loss $5.1 million, cause every fulfillment center is automatically a "place busi- City Farmers Branch would have likely net loss ness." The theory is fulfillment center is automatically $600,000 $1.8 million, City Humble would have "place business" because it has "receive" orders nec- likely net loss $5.6 million. The consultant did provide essary prerequisite fulfilling orders, fulfillment center comptroller data support these calculations he can expected "receive" three or more orders calendar declined identify vendors he predicted would have year. change their reporting methods. PROPOSED RULES April "(2) Distribution centers, manufacturing plants, storage yards, Subsection (c)(7) proposed rule now explicitly states warehouses, similar facilities. location where order is "received" purposes local sales tax sourcing is location where order is initially re- (A) distribution center, manufacturing plant, storage yard, ceived. Therefore, under proposed rule, fulfillment cen- warehouse, similar facility operated seller ter processes orders forwarded another location seller receives three more orders taxable items during automatically "place business" local tax sourcing. The calendar year place business. Plaintiff cities contend if fulfillment centers their juris- diction begin sourcing tax other cities, they will lose (B) If salesperson who receives three more orders tax- millions dollars tax revenue. able items within calendar year assigned work from, work at, distribution center, manufacturing plant, storage yard, merits conflicting interpretations discussed warehouse, similar facility operated seller, then facil- preambles previous rulemakings. issue here ity place business. effect revenue, whether comptroller can reli- *169 ably estimate the effect on cities, individually or collectively. The (C) If a location that is a place of business of the seller, such as a sales office, is in the same building as a distribution center, estimates of the Plaintiff cities and the fulfillment centers in those cities cannot be reliably projected to other cities. The comptrol- manufacturing plant, storage yard, warehouse, or similar facility operated by a seller, then the entire facility is a place of business ler does not have data to identify the "fulfillment centers" in any particular jurisdiction or statewide - it is not a characteristic that of the seller." is reported the agency. (41 TexReg 260, 263) (2016) (former 34 Tex. Admin. Code And, even if agency could identify "fulfillment centers" from its §3.334(e)(2), emphasis added); (39 TexReg 9597, 9605) (2014) data, the agency could not assume that the fulfillment centers (former 34 Tex. Admin. Code §3.334(e)(2), emphasis added). in other cities are sourcing local tax like the Plaintiff cities' ful- If a distribution center were automatically a "place of business" fillment centers purportedly are sourcing. For reasons enumer- for local tax sourcing as the Plaintiff cities contend, subpara- ated the Revenue Estimating Division by agency counsel, it graphs (B) and (C) would not be required - there would be no is comptroller's opinion that a fulfillment center could reasonably need for a salesperson or a sales office "then" make the dis- reach a different conclusion, and conclude that it was not auto- tribution center a "place of business" for local tax sourcing pur- matically a "place of business" for local tax sourcing purposes, poses. as claimed by the Plaintiff cities. Third, in addition its rule, the comptroller distributed Publica- First, the text of former §3.334(h)(3) indicated that a fulfillment tion 94-105, sometimes called the "Local Sales Use Tax center is not automatically a "place of business" for local sourcing Bulletin - Guidelines for Collecting Local Sales Use Tax," (emphasis added): or "Tax Topics - Guidelines of Collecting Local Sales Use "(3) Consummation of sale. The following rules, taken from Tax Tax" (Guidelines). These Guidelines were posted on the comp- §321.203 §323.203, apply all sellers engaged in troller's website indexed in the comptroller's State Tax Au- business in this state, regardless of whether they have a place tomated Research System. Since at least 2007, the Guidelines of business in Texas or multiple places of business in the state. referred a "location within the state that is not a place of busi- ness (such as a warehouse or distribution center)." E.g., STAR ... Accession No. 200902596L (February 2009). The Guidelines were intended as a general guide not as a comprehensive (B) Order received at a place business in Texas, fulfilled at resource. But, an ordinary reader would not walk away with the a location that is not a place business. When an order that impression that a taxpayer's fulfillment center was automatically is placed over the telephone, through the Internet, or by any a "place business" for purposes local tax sourcing. means other than in person is received by the seller at a place business in Texas, the seller fulfills the order at a loca- Fourth, in 2016, comptroller rewrote the Guidelines be tion that is not a place business seller in Texas, such as even more specific regarding fulfillment centers: "The ware- a warehouse or distribution center, sale is consummated at house from which person ships those items is not a place place business at which order taxable item is business, unless warehouse separately qualifies as a place received. business." STAR Accession No. 201606995L (June 1, 2016). ... And, fifth, in 2019, a comptroller letter ruling discussed fulfillment centers, referring former rule, then in effect: "Scenario (D) Order fulfilled within state at a location that is not a place One: Taxpayer Retailer operates fulfillment centers in Texas that business. When an order is received by a seller at any location are not open public. ... When an order is received at a lo- other than a place business seller in state, cation that is not a place business is fulfilled Texas at seller fulfills order at a location Texas that is not a place a location that is not a place business, sale is consum- business seller, then sale is consummated mated location Texas which order is shipped. location Texas order is shipped or delivered, or See §3.334(h)(3)(D). For Scenario One, local sales use tax location where it is transferred purchaser." is due based on location where order is delivered." STAR Accession No. 201906015L (June 13, 2019) (emphasis added). (41 TexReg 260, 265) (2016) (former Tex. Admin. Code §3.334(h)(3), emphasis added); (39 TexReg 9606) (2014) If Plaintiff cities their consultant's study are right about (former Tex. Admin. Code §3.334(h)(3), emphasis added). how various fulfillment centers their cities reported local tax, those fulfillment centers must have either disregarded Second, consummation rules former §3.334(h)(3) were comptroller's prior written guidance, overlooked guidance, augmented with explicit provision fulfillment centers, or interpreted guidance as being opposite what former rule referred as "distribution centers" (emphasis comptroller intended. But, it cannot be assumed that fulfillment added): April Register The City Round Rock suggests that a single facility that con- centers other cities have also disregarded, overlooked, in- ducts all transactions through automated shopping cart software terpreted prior rulings such a way that they will have may be affected, since software application does not consti- change their reporting as result proposed rule. So, even tute "place business." However, threshold becoming if comptroller could identify permitted locations are "place business" very low, including receipt by sales fulfillment centers, revenue implications proposed rule personnel three more orders per year. If vendor occa- cannot be reliably extrapolated study conducted on be- sionally engages customer directly, such by telephone half Plaintiff cities. email, final step receiving order under subsection Furthermore, cities' calculations revenue loss assume (c)(7), vendor's location should be "place business" proposed rule would force fulfillment centers begin sourcing local tax sourcing, even if orders ordinarily processed by local tax other cities, when case. Legisla- vendor's automated software. To ease burden auditors, ture set low threshold location "place business" small businesses micro-businesses operate out tax sourcing - the receipt three more orders dur- single location, proposed subsection (b)(6) presumes ing calendar year. fulfillment center "place case. business" under proposed rule could easily become one Third, made through marketplace seller
directly receiving three more orders. Plaintiff cities have single place business will affected because those or- alleged it easier source one jurisdiction than *170 ders are sourced to destination by Tax Code, §321.203(e-1). to source to many. So, a fulfillment warehouse would have an incentive to become a "place of business." And, a fulfillment cen- The City of Round Rock claims that Dell Technologies has a sin- ter with a tax sharing agreement with a city would have an even gle place of business in the city and suggests that Dell is sourc- greater incentive to make the minor adjustments required to be- ing all of its local sales tax collections to the City of Round Rock. come a "place of business," so as to maintain the return on its The city further claims that it will lose a significant amount of local revenue sharing agreement. Therefore, even if the potential tax sales tax revenue under the proposed rule. However, when the revenue loss from fulfillment centers could be reliably measured, comptroller served third party discovery on Dell to understand it is unreasonable to assume that no fulfillment center would take how Dell's current business operations would be affected by the remedial efforts to continue its sourcing procedures. proposed rule, both Round Rock and Dell objected. Dell insisted that the inquiry should only be "conducted under the applicable The City of Round Rock has asserted claims that are different sections of the Texas Tax Code" in Chapter 111 -- in other words, from in addition to the claims of the other Plaintiff cities. The an audit. City has suggested that the proposed rule will radically change the way that Texas retailers with one place of business in This discovery dispute illustrates the impracticability of preparing Texas will source local tax. However, for enumerated reasons, a revenue impact estimate for the City of Round Rock - it would agency counsel advises that it should be assumed that in most require the audit of Dell and any other vendors from whom the instances, the proposed rule will not change the sourcing of city thinks there will be a revenue loss. A local sales tax audit products sold by Texas retailers with one place of business in of Dell would have to examine all business locations of Dell Texas. to determine which, if any of locations were a "place of busi- ness" for local tax sourcing purposes. And, if comptroller First, proposed rule does not change comptroller's previ- verified that Dell in fact operated a single "place of business" in ous application of statute, which does not recognize special Texas, comptroller would still have to audit sourcing of treatment for vendors with a "single place of business" for pur- Dell's sales to determine which sales were compliant and which poses local tax sourcing. Proposed subsection (c) states in sales were noncompliant with proposed rule. For example, relevant part: Dell purports to have a sales force in Round Rock. Assuming "The following rules, taken from Tax Code, §321.203 and that orders generated by that sales force are received in Round §323.203, apply to all sellers engaged in business in Texas, Rock not fulfilled from a "place business" elsewhere in regardless whether they have no place business in Texas, a Texas, those sales would still be sourced to Round Rock. And, single place business in Texas, multiple places business any orders fulfilled from Dell's "place business" in Round Rock in Texas." would still be sourced Round Rock. And, any orders delivered in Round Rock would still be sourced Round Rock. Therefore, The language in proposed rule has same effect meaningfully determine revenue impact proposed language in prior 2014 2016 versions rule - no rule on City Round Rock, comptroller would have special treatment vendors with a single "place business": thoroughly audit Dell any other vendors from whom Round "The following rules, taken from Tax §321.203 Rock thinks there will be a revenue loss. §323.203, apply all sellers engaged in business in this state, Repeating audit exercise on jurisdiction-by-jurisdiction ba- regardless whether they have place business in sis across state is infeasible. Audits are quick easy. multiple places business in state." Considerable time effort is required acquire analyze (41 TexReg 260, 265) (2016) (former 34 Tex. Admin. Code taxpayer data. Taxpayers are understandably reluctant furnish §3.334(h)(3); (39 TexReg 9597, 9606) (2014) (former 34 Tex. confidential business data. And, data varies in degree ac- Admin. Code §3.334(h)(3)). cessibility. The average duration an audit in fiscal year 2023 was 450 days, average number auditor hours spent on Second, proposed rule should have little impact on most an audit was 80.5 hours. businesses that are single place business ordinary sense word - i.e., all operations are conducted at single It also possible that an audit Dell other vendors would location. If orders are received fulfilled single facility, identify noncompliance with sourcing provisions that are in- local sales tax will continue be sourced that location. typ- volved disputed rulemaking. For example, if Dell were ical example would retail store. sourcing marketplace sales City Round Rock rather than PROPOSED RULES April 2024 49 TexReg 2445 2023 rulemaking, comptroller explained how reference delivery location specified by statute, Dell would have sales personnel logical extension prior comptroller change its sourcing methods City Round Rock would statements, including prior statements regarding fulfillment suffer revenue loss. But, that revenue loss should attributed warehouses computer servers. See (48 398) marketplace statute enacted by Legislature, (2023). proposed comptroller rule. Agency counsel has advised that there several instances This possibility real. During 2020 rulemaking, City rule proposed readoption substantively different San Marcos filed comments claiming that proposed rule than version rule. Subsection (c)(2)(B)(ii) pro- would cause city lose $7-8 million local sales tax rev- vides seller required collect state use tax must also enue generated Best Buy call center, net effect collect local use tax. This provision expands collection re- economic development incentive revenue loss estimated $3.4 sponsibilities sellers, which, formerly were obligated collect million. Best Buy also filed comments stating it created local use tax only if they were engaged business local subsidiary called Best Buy Texas.com LLC sourced lo- jurisdiction. This provision should have positive, but indeter- cal tax all its Internet telephone sales City San minant revenue effect all local jurisdictions. Marcos. This would mean if resident City Houston placed online order Houston picked up item proposed rule, compared version, adds affiliated Best Buy Stores outlet Houston, Best Buy Texas.com provisions sourcing marketplace sales based LLC would collect City San Marcos. destination, because consummation statute was amended However, it appears Best Buy website was actually op- House Bill require result. fiscal note erated different Best Buy affiliate, would make it House Bill estimated probable revenue gain *171 marketplace provider as defined in Tax §151.0242(a)(2). governments. However, because House Bill 1525 was already Under the marketplace statute, local tax is sourced to the loca- in effect, and rulemaking is not required to effectuate the legisla- tion where the item is shipped or delivered or at which posses- tion, the comptroller is assigning no fiscal implication to the rule sion is taken by the purchaser. Thus, any loss to the City of San revision incorporating House Bill 1525, other than a potential in- Marcos of local sales tax revenue from the sale to the Houston crease in compliance with the statute. resident would be the result of compliance with the marketplace The proposed rule, as compared with the 2016 version, also statute. And the loss of tax revenue would not be attributable adds provisions for remote sellers to apply a single local tax rate, to the rule. The loss resulting from compliance with the statute as authorized by House Bill 2153 in 2019. The fiscal note for would occur without regard to whether the proposed rule was House Bill 2153 stated: adopted. "There would be no significant fiscal implications for local gov- The comptroller has considered various other comments of the ernments in the aggregate; there could be some variance in dis- Plaintiff cities and others to the effect that the proposed rule tribution of revenue among jurisdictions compared with the distri- will dramatically change local tax sourcing and concluded that bution that would occur were all remote sellers required to collect the comments do not accurately apply the proposed rule. The and remit tax at applicable local combined rates, but the extent of comptroller disagrees with the allegation that the proposed rule such variance cannot be determined and would not be expected will "dramatically change where a sale is consummated if the to be significant in relation to the total allocations of local sales Comptroller interprets the change to require destination sourc- and use tax revenues." ing when a sale is made online using a retailer's website, even
if the retailer has only one place of business." And, the comp- The comptroller is assigning no fiscal implication to the rule re- troller disagrees with the allegation that "sales made by way of vision incorporating House Bill 2153, since the statute went into websites using the Internet are treated as having been consum- effect before the rulemaking, rulemaking was not required mated where the taxable item is delivered to the buyer instead implement the statute. of where the order the item is received fulfilled by the The proposed rule, as compared with the version, alters seller." The consummation hierarchy in subsection (c) does not the treatment a "traveling salesperson," which was previously require the alleged results. defined as: "A seller, or an agent or employee seller, who The comptroller has amended the definition "place business visits potential purchasers in person solicit sales, who the seller" subsection (a)(18) provide that the term does does not carry inventory ready immediate sale, but who may not include computer server, Internet protocol address, domain carry samples or perform demonstrations items sale." For- name, website, or software application. While the discussion mer §3.334(h)(4) provided: "Orders taken by traveling sales- computer servers was added the rule 2020, the comptroller persons are received by seller at the administrative office had previously advised taxpayers that location server or other place business from which traveling salesperson does not create "place business" purposes local tax operates." (41 TexReg 260, 265) (2016) (former Tex. Admin. collection that orders placed on website though applica- Code §3.334(h)(4)). The former rule did not further explain tions processed routed by servers are not "received at" location from which traveling salesperson operates. place business. See STAR Accession Nos. 200510723L (Oc- Subsection (b)(4) proposed rule replaces traveling tober 6, 2005), 200605592L (May 17, 2006), 201906015L salesperson language with provision an order that is re- (June 2019). ceived by salesperson who is not place business when The comptroller has also amended definition "place salesperson receives order. Subsection (b)(4) provides business seller" subsection (a)(18) provide that that order is treated being received location from staffing one more sales personnel is usually required. which salesperson operates. Subsection (b)(4) further The statement is not requirement, but an objective criterion provides that location from which salesperson operates that will often be important factor determining whether an is principal fixed location where salesperson conducts outlet, office, location is "place business." In January work-related activities. April Register Public benefits costs. Commenters have reported orders from some traveling salespersons have been sourced location which Brad Reynolds, Chief Revenue Estimator, has determined traveling salesperson is "assigned," even though traveling following each year first five years rule will be salesperson may conduct principal work-related activities from effect. another location. In these situations, proposed rule might public will benefit from greater clarity regarding consum- result change local tax sourcing. However, signifi- mation standards, making compliance easier. cance change indeterminant. comptroller does not have data identify traveling salespersons defined under There may be additional economic costs person required former rule, does have data identify instances comply rule. It conceivable rule may cause which traveling salesperson has been "assigned" location some vendors realize they noncompliant. If ven- from which salesperson does conduct principal work-re- dors come into compliance changing from single-location re- lated activities. And, if agency could identify those instances, porting multiple-location reporting, their compliance burden without conducting extensive audits, agency would still may increase. And if vendors change from multiple-location re- know instances would result change sourcing. For porting single-location reporting, their compliance burden may example, if order fulfilled "place business," diminish. location salesperson irrelevant. Local employment impact statement. In summary, due both number taxing jurisdictions For first five years rule will effect, effect lack pertinent, detailed information regarding specific local economies employment, if any, cannot determined. circumstances myriad businesses reporting To extent proposed rule leads greater awareness use taxes, estimation fiscal effects proposed rule, compliance tax consummation standards, whether dollar amounts merely sign change, indi- some vendors may change their reporting methods, vidual jurisdiction jurisdiction basis infeasible execution. might positively negatively affect revenue particular *172 The comptroller recognizes that compliance with the proposed local tax jurisdictions. Whether a change in local tax revenue rule could result in changes to the local tax reporting methods might increase or decrease the provision of local government of some vendors. As a result, there could be loss or increase in services to an extent that would affect local economic activity revenue to individual local governments. A revenue loss to one or employment would depend on discretionary actions of the local government will often but not always be a revenue gain to governing body or the electorate of an affected jurisdiction, and others. There will also be revenue gains experienced by all lo- cannot be determined. cal tax jurisdictions from the expansion of the use tax collection Government growth impact statement. obligations of remote, out-of-state sellers. For the reasons pre- viously stated, the aggregate net gain or loss cannot be reliably Brad Reynolds, Chief Revenue Estimator, has determined the estimated by the comptroller from available or reasonably acces- following for each year of the first five years that the rule will be sible data. in effect: the amendment will not create or eliminate a govern- ment program; will not require the creation or elimination of em- The comptroller has been provided with estimates that some ployee positions; will not require increase or decrease in fu- cities will experience net revenue losses. However, the comp- ture legislative appropriations to the comptroller; will not require troller has not been provided with sufficient information to verify increase or decrease in fees paid to the comptroller; will not estimates, and data from the estimates cannot be extrap- create a new regulation; will increase number of individuals olated to other local tax jurisdictions. That said, estimates of subject to rule's applicability because sellers without a phys- anticipated revenue losses provided by Plaintiffs and others in ical presence in a local tax jurisdiction will be required to collect comments to proposed rulemakings are accepted as valid good local use tax if they are required to collect state use tax; and will faith estimates and may serve as a basis for estimating a min- not positively or adversely affect this state's economy. imum amount of revenue from online sales associated with lo- cations that are not places of business as defined in rule, Economic impact statement and regulatory flexibility analysis. that will be subject to different sourcing if affected sales tax A statement of fiscal implications small businesses or rural permittees cannot or choose not to modify their procedures in or- communities under Government Code, Chapter 2006 is normally der to qualify such business locations as places business not required a comptroller rule because rule is proposed purposes local sales tax sourcing. As those estimates were under Tax Code, Title 2. In instance, rule is proposed constructed 2020 data and there has been significant infla- under both Title 2 (State Taxation) and Title 3 (Local Taxation). tion as well as real economic growth since then, they are scaled So, comptroller provides following statement. up by a factor 1.35 yield a minimum estimate $110 million on a current annual basis that may be lost those cities, plus A "rural community" is a municipality with a population less another $80 million that may be lost other local taxing juris- than 25,000. The comptroller estimates that there are 1,098 dictions imposing tax affected locations, a total $190 such rural communities, which 1,017 impose sales tax and million gross revenue reductions, which 85% or $161.5 mil- may have revenue affected compliance with rule. lion would be estimated gains other local taxing jurisdiction, A "small business" is legal entity, including corporation, part- and 15% or $28.5 million would be reduction in aggregate local nership, or sole proprietorship, that: (A) formed pur- sales tax levies sourced unincorporated areas without local pose making profit; (B) independently owned and oper- sales tax or with cumulative local county special district tax ated; (C) has fewer than 100 employees or less than $6 rates less than cumulative local rates that applied lo- million in annual gross receipts. The Comptroller estimates that cations where taxable transactions were formerly sourced. there are 470,000 businesses with fewer than 100 employees, $28.5 million reduction in aggregate local tax levies would result 377,000 businesses with annual gross receipts less than $6 reduced state service charge revenue $570,000. million; sum these two estimates would overstate num- PROPOSED RULES April 19, 2024 49 2447 ers charge less sales or use tax than small businesses ber small businesses, as many businesses would be expected Texas. have both fewer than employees less than $6 million annual gross receipts. Since comptroller initiated its rulemaking 2020, agency has considered ways minimize potential adverse impact on To extent proposed rule leads greater awareness small businesses. In fall 2020, agency added multi- compliance with local tax consummation standards, address search capability its local sales tax rate locator. And some vendors may change their reporting methods, spring agency added downloadable address might positively or negatively affect tax revenue particular files determine local tax rates. And, winter local tax jurisdictions. As previously explained, comptroller agency added map search latitude/longitude search options. does have sufficient data on business operations each business identify quantify businesses In addition, comptroller proposing add subsection (b)(6): transactions might be affected, positive or negative "If small business or micro-business operates single lo- revenue impact on each tax jurisdiction. cation out it conducts all its business activities, Although fiscal implications local tax jurisdictions can- comptroller will presume location place business be quantified without additional information, several obser- seller." vations can be made. First, cities asserting clarifica- comptroller cannot make location "place business" tions provided rule will result changes sourcing rule if statute does allow it. But, agency can pre- reporting local taxes, with consequent reductions their rev- sume location "place business" based on indicative enues, tend be cities with Local Government Code, Chapter facts, such small, independent business conducts all agreements involving rebates sales use tax rev- its business operations out single location. If extraordinary enues. And, cities Government Chapter agree- facts presented agency, presumption may re- ments involving distribution or fulfillment centers tend larger butted. than rural communities. Of 1,017 rural communities impos- ing sales tax, have Chapter agreements involving sales agency has considered other alternatives reduce ad- tax on file comptroller. Almost all those involve re- verse impact small businesses micro-businesses, such bates sales tax physical shopping centers restaurants, allowing small micro-businesses source sales tax paid equipment building materials, would their principal place business, establishing single lo- *173 unlikely be affected by a change in sourcing online sales as- cal sales tax rate small or micro-businesses that would be sociated with locations that are not places business; two distributed similar to distribution single local sales tax 45 communities that are not party to suit against collected by remote sellers. However, because these proposals comptroller appear to involve distribution or fulfillment centers would require amendments to consummation statutes, and could be affected if centers will not qualify as places comptroller does not have regulatory flexibility to implement business (in Grand Prairie and Waxahachie). Five six these proposed methods. cities currently suing Comptroller have populations greater Public hearing than 25,000. The comptroller has not verified assertions revenue shifting. But, if assertions are correct, revenue The comptroller will hold a hearing to take public comments, on shifting away from cities Chapter 380 agreements may re- May 9, 2024, at 9:00 a.m. in Room 2.034 Barbara Jordan sult positive revenues smaller rural communities from Building, 1601 Congress Avenue, Austin, Texas 78701. Inter- whom revenues have been diverted. ested persons may sign up to testify beginning at 8:30 a.m. and testimony will be heard beginning at 9:00 a.m. a first come Second, although comptroller does not have sufficient infor- first serve basis. All persons will have 10 minutes to present their mation determine number small businesses that may testimony and shall also provide their testimony writing prior change their local tax reporting as a result greater awareness their oral testimony. and compliance local tax consummation standards, it is reasonable assume that many small businesses will not be Comments affected. A small business that has all its operations at a sin- You may submit comments proposal Jenny gle location Texas, including sales and fulfillment, is probably Burleson, Director, Tax Policy Division, P.O. Box 13528 reporting local sales tax taxing jurisdiction where it is lo- Austin, Texas 78711 or email address: cated, and it will continue that reporting. Non-marketplace or- tp.rule.com- ments@cpa.texas.gov. The comptroller must receive your ders fulfilled from that location will continue consummated comments no later than 30 days from date publication that location pursuant §3.334(c)(1) or (c)(2)(A). And, sales proposal Texas Register. small business that are through a marketplace are already subject destination sourcing performed by marketplace Statement statutory or other authority under which rule provider. Nevertheless, some circumstances, it is conceivable is proposed adopted. that rule may cause some vendors, small or large, realize Tax Code, §§111.002 (Comptroller's Rule; Compliance; Forfei- that they are noncompliant. If vendors come into compli- ture), 321.306 (Comptroller's Rules), 322.203 (Comptroller's ance by changing from single-location reporting multiple-loca- Rules), and 323.306 (Comptroller's Rules) authorize comp- tion reporting, their compliance burden may increase. troller adopt rules implement tax statutes. Third, proposed rule expands local tax collection obliga- Sections or articles code affected. tions remote sellers - out-of-state sellers that collect state use tax must also collect local sales tax. The expansion remote Tax Code, §151.0595 (Single Local Tax Rate Remote Sell- seller local tax collection obligation may benefit small businesses ers); Tax Code, Chapter 321, Subchapters A, B, C, D, and F; Tax Texas by reducing perception customers that purchases Code, Chapter 322; and Tax Code, Chapter 323 are affected. from out-of-state sellers are preferable because out-of-state sell- April 19, 2024 Texas Register sells items through vending machines is also itinerant vendor. A §3.334. Local Sales and Use Taxes. salesperson that operates out place business this state (a) Definitions. following words and terms, when used itinerant vendor. this section, shall have following meanings, unless context clearly indicates otherwise. (12) Kiosk--A small stand-alone area or structure: (1) Cable system--The system through cable ser- (A) that used solely display merchandise or sub- vice provider delivers cable television or bundled cable service, as mit orders taxable items data entry device, or both; those terms are defined §3.313 this title (relating Cable Televi- sion Service and Bundled Cable Service). (B) located entirely within location place business another seller, such as department store or shop- (2) City--An incorporated city, municipality, town, or vil- ping mall; and lage. (C) taxable items available imme- (3) City sales and use tax--The tax authorized under Tax diate delivery purchaser. Code, §321.101(a), including additional municipal sales and use tax authorized under Tax Code, §321.101(b), municipal sales and (13) Local taxes--Sales and use taxes imposed by any
use tax street maintenance authorized under Tax Code, §327.003, taxing jurisdiction. Type Development Corporation sales and use tax authorized un- (14) Local taxing jurisdiction--Any following: der Local Government Code, §504.251, Type B Development Cor- poration sales and use tax authorized under Local Government Code, (A) city imposes sales and use tax as provided §505.251, sports community venue project sales and use tax under paragraph (3) this subsection; adopted by city under Local Government Code, §334.081, mu- (B) county imposes sales use tax as provided nicipal development corporation sales use tax adopted by city un- under paragraph (5) subsection; der Local Government Code, §379A.081. term does include fire control, prevention, emergency medical services district (C) special purpose district created under Special sales use tax authorized under Tax Code, §321.106, or munic- District Local Laws Code other provisions Texas law autho- ipal crime control prevention district sales use tax authorized rized impose sales use tax by Tax Code other provisions under Tax Code, §321.108. Texas law governed provisions Tax Code, Chapters other provisions law; (4) Comptroller's website--The comptroller's website concerning taxes located at: https://comptrol- (D) transit authority imposes use ler.texas.gov/taxes/sales/. authorized Transportation Code, Chapters, 453, 457, governed provisions Tax Chapter, 322. *174 (5) County sales and use tax--The tax authorized under Tax Code, §323.101, including a sports and community venue project (15) Marketplace provider--This term has the meaning sales and use tax adopted by a county under Local Government Code, given in §3.286 of this title. §334.081. The term does not include the county health services sales (16) Micro-business--A legal entity, including a corpora- and use tax authorized under Tax Code, §324.021, the county landfill tion, partnership, or sole proprietorship, that: and criminal detention center sales and use tax authorized under Tax Code, §325.021, or the crime control and prevention district sales and (A) is formed for the purpose of making a profit; use tax authorized under Tax Code, §323.105. (B) is independently owned and operated; and (6) Drop shipment--A transaction in which an order is re- (C) has not more than 20 employees. ceived by a seller at one location, but the item purchased is shipped by the seller from another location, or is shipped by the seller's third-party (17) Order placed in person--An order placed by a pur- supplier, directly to a location designated by the purchaser. chaser with the seller while physically present the seller's place of business regardless of how the seller subsequently enters the order. (7) Engaged in business--This term has the meaning given in §3.286 of this title (relating to Seller's and Purchaser's Responsibil- (18) Place of business of the seller - general definition--A ities). place of business of the seller must be an established outlet, office, or location operated by a seller for purpose of receiving orders for (8) Extraterritorial jurisdiction--An unincorporated area taxable items from persons other than employees, independent con- that is contiguous to corporate boundaries of a city as defined in tractors, and natural persons affiliated with seller. An "established Local Government Code, §42.021. outlet, office, or location" usually requires staffing by one or more (9) Fulfill--To complete an order by transferring possession sales personnel. The term does not include a computer server, Inter- of a taxable item a purchaser, or to ship or deliver a taxable item net protocol address, domain name, website, or software application. a location designated by purchaser. term does not include "purpose" element of definition may be established by proof receiving or tracking an order, determining shipping costs, managing that sales personnel of seller receive three or more orders for inventory, or other activities that do not involve transfer, shipment, taxable items facility during calendar year. Additional crite- or delivery of a taxable item purchaser or a location designated ria for determining when a location is a place of business of seller by purchaser. provided in subsection (b) of this section for distribution centers, manufacturing plants, storage yards, warehouses and similar facilities; (10) Independently owned and operated business--A self- kiosks; and purchasing offices. An outlet, office, facility, or any loca- controlling entity that is not a subsidiary of another entity or otherwise tion that contracts with a retail or commercial business process for subject control by another entity, that is not publicly traded. business invoices, purchase orders, bills of lading, or other equiva- (11) Itinerant vendor--A seller who travels various loca- lent records onto sales tax is added, including office operated tions for purpose of receiving orders making sales of taxable for purpose of buying selling taxable goods be used or con- items who has no place of business in this state. A person who sumed by retail or commercial business, is not a place of business PROPOSED RULES April 19, seller if comptroller determines outlet, office, facil- county transit authority (CTA), regional mobility authority (RMA) or ity, or location functions or exists avoid tax legally due under Tax coordinated county transportation authority created under Transporta- Code, Chapters 321, 322, or exists solely rebate a portion tion Code, Chapters 370, 451, 452, 453, 457, or 460. tax imposed by those chapters contracting business. An out- (27) Two percent cap--A reference general rule that, let, office, facility, or location does not exist avoid tax legally due except as otherwise provided by law as explained in this under Tax Chapters or solely rebate a por- section, a seller cannot collect, a purchaser is obligated pay, tion tax imposed by those chapters if outlet, office, facility, more than 2.0% sales price a taxable item in total local sales or location provides significant business services, beyond processing use taxes for all taxing jurisdictions. invoices, contracting business, including logistics management, purchasing, inventory control, or other vital business services. (28) Use--This term has meaning given in §3.346 this title. (19) Purchasing office--An outlet, office, facility, or any lo- cation contracts a retail or commercial business process for (29) Use tax--A tax imposed storage, use or other business invoices, purchase orders, bills lading, or other equiva- consumption taxable item in this state. lent records onto sales is added, including office operated (b) Determining place business seller. for purpose buying selling taxable goods used or con- sumed by retail or commercial business. (1) Distribution centers, manufacturing plants, storage yards, warehouses, similar facilities. (20) Remote Seller--As defined §3.286 this title, re- mote seller is seller engaged business this state whose only ac- (A) A distribution center, manufacturing plant, storage tivity state is: yard, warehouse, or similar facility operated by seller for purpose selling taxable items where sales personnel seller receive three (A) engaging regular or systematic solicitation or more orders taxable items during calendar year persons sales taxable items this state by distribution catalogs, other than employees, independent contractors, natural persons af- periodicals, advertising flyers, or other advertising, by means print, filiated seller is place business seller. Forwarding radio, or television media, or mail, telegraphy, telephone, computer previously received orders facility fulfilment does make data base, cable, optic, microwave, or other communication system facility place business. purpose effecting sales taxable items; (B) If location place business seller, (B) soliciting orders taxable items mail such office, same building distribution center, through other media including Internet other media may manufacturing plant, storage yard, warehouse, similar facility op- developed future. erated seller, then entire facility place business (21) Seller--This term has meaning given §3.286 seller. title also refers any agent employee seller. (2) Kiosks. kiosk place business seller (22) Small business--A legal entity, including corpora- purpose determining where sale consummated *175 tion, partnership, or sole proprietorship, that: tax purposes. A seller who owns or operates a kiosk in Texas is, how- ever, engaged in business in this state as provided in §3.286 of this title. (A) is formed for the purpose of making a profit; (3) Purchasing offices. (B) is independently owned and operated; and (A) A purchasing office is not a place of business of the (C) has fewer than 100 employees or less than $6 mil- seller if the purchasing office exists solely to rebate a portion of the lo- lion in annual gross receipts. cal sales and use tax imposed by Tax Code, Chapters 321, 322, or to a business with which it contracts; or if the purchasing office func- (23) Special purpose district--A local governmental entity tions or exists to avoid the tax legally due under Tax Code, Chapters authorized by the Texas legislature for a specific purpose, such as crime 321, 322, or 323. A purchasing office does not exist solely to rebate control, a local library, emergency services, county health services, or a portion of the local sales and use tax or to avoid the tax legally due a county landfill and criminal detention center. under Tax Chapters 322, or if the purchasing office pro- (24) Storage--This term has the meaning given in §3.346 vides significant business services to the contracting business beyond of this title (relating to Use Tax). processing invoices, including logistics management, purchasing, in- ventory control, or other vital business services. (25) Temporary place of business of the seller--A location operated by a seller for a limited period of time for the purpose of sell- (B) In making a determination under subparagraph (A) ing and receiving orders for taxable items and where the seller has in- of this paragraph, as to whether a purchasing office provides signif- ventory available immediate delivery a purchaser. For example, icant business services the contracting business beyond processing a person who rents a booth at a weekend craft fair or art show sell invoices, the comptroller will compare the total value of the other busi- and take orders jewelry, or a person who maintains a facility at a ness services the value of processing invoices. If the total value of job site rent tools and equipment a contractor during the construc- the other business services, including logistics management, purchas- tion of real property, has established a temporary place of business. A ing, inventory control, or other vital business services, is less than the temporary place of business of the seller includes a sale outside of a value of the service process invoices, then the purchasing office will distribution center, manufacturing plant, storage yard, warehouse, or be presumed not be a place of business of the seller. similar facility of the seller in a parking lot or similar space sharing (C) If the comptroller determines that a purchasing of- the same physical address as the facility but not within the walls of the fice is not a place of business of the seller, the sale of any taxable item facility. is deemed be consummated at the place of business of the seller from (26) Transit authority--A metropolitan rapid transit author- whom the purchasing office purchased the taxable item resale ity (MTA), advanced transportation district (ATD), regional or subre- local sales use taxes are due according the following rules. gional transportation authority (RTA), city transit department (CTD), April Texas Register (i) Order fulfilled at a place of business of the seller (i) When taxable items are purchased from a Texas in Texas. When an order is received at a place of business of the seller seller, local sales taxes are due based on the location of the seller's place in Texas is fulfilled at a place of business of the seller in Texas, the of business where sale is deemed be consummated, as determined sale is consummated at place of business where order is fulfilled. in accordance with subsection (c) of this section. (ii) Order not fulfilled at a place of business of (ii) When sale of a taxable item is deemed be seller in Texas. When an order is received at a place of business of consummated at a location outside of this state, use tax is due seller in Texas is fulfilled at a location that is not a place of business based location where items are first stored, used or consumed of seller in Texas, sale is consummated at place of business by entity that contracted with purchasing office in accordance where order is received. subsection (d) of this section. (2) Consummation of sale - order not received at a place of (4) An order that is received by a salesperson who is not business of seller in Texas. at a place of business of seller when salesperson receives order is treated as being received at location from which sales- (A) Order fulfilled at a place of business of seller person operates. Examples include orders that a salesperson receives in Texas. When an order is received at a location that is not a place by mail, telephone, including Voice over Internet Protocol cellular of business of seller in Texas or is received outside of Texas, phone calls, facsimile, email while traveling. location from is fulfilled from a place of business of seller in Texas, sale is which salesperson operates is principal fixed location where consummated at place of business where order is fulfilled. salesperson conducts work-related activities. location from which (B) Order not fulfilled from a place business a salesperson operates will be a place business seller only if seller in Texas. location meets definition a "place business a seller" in subsection (a)(16) this section its own, without regard or- (i) Order fulfilled in Texas. When an order is re- ders imputed that location this paragraph. ceived at a location is not a place business seller in Texas is fulfilled from a location Texas is not a place business (5) A facility without sales personnel is usually not a "place seller, sale is consummated at location Texas business seller." A vending machine is not "an established order is shipped or delivered, or at purchaser item outlet, office, or location," does not constitute "place business takes possession. seller." Instead, vending machine sale is treated as sale an itinerant vendor. See subsections (a)(10) (c)(6) this section. (ii) Order not fulfilled Texas. When an order is However, walk-in retail outlet stock goods available im- received seller at location is not place business mediate purchase through cashier-less point sale terminal at seller Texas, is fulfilled location outside Texas, outlet would be "an established outlet, office, location" so as con- sale is not consummated Texas. However, use is consummated stitute "place business seller" even though personnel first point Texas where item stored, used, consumed not required every sale. A computer operates an automated after interstate transit has ceased. A taxable item delivered shopping cart software program not established outlet, office, point presumed storage, use, consumption location," does constitute "place business seller." point until contrary established. Local use tax should collected computer operates automated telephone ordering system provided subsection (d) this section. Except provided "an established outlet, office, location," does constitute subsection (i)(3) this section, remote seller required collect state "place business seller." use under §3.286(b)(2) title must also collect use tax. *176 (6) If a small business or a micro-business operates a sin- (3) Exception for qualifying economic development gle location out of which it conducts all of its business activities, the agreements entered into before January 1, 2009, pursuant to Tax Code, comptroller will presume that the location is a place of business of the §321.203(c-4) - (c-5) or §323.203(c-4) - (c-5). This paragraph is seller. effective until September 2024. If applicable, the local sales tax due on the sale of a taxable item is based on the location of the qualifying (c) Local sales tax - Consummation of sale - determining the warehouse, which is a place of business of the seller, from which the local taxing jurisdictions to which sales tax is due. Except for the spe- item is shipped or delivered or at which the purchaser of the item takes cial rules applicable remote sellers in subsection (i)(3) of this section, possession. direct payment permit purchases in subsection (j) of this section, and certain taxable items, including taxable items sold by a marketplace (4) Local sales taxes are due each local taxing jurisdic- provider, as provided in subsection (k) of this section, each sale of a tion with sales tax in effect where the sale is consummated. Local use taxable item is consummated at the location indicated by the provisions tax may also be due if the total amount of local sales taxes due does not of this subsection. The following rules, taken from Tax §321.203 reach the two percent cap, and the item purchased is shipped or deliv- §323.203, apply all sellers engaged in business in Texas, regard- ered a location in one or more different local taxing jurisdictions, as less of whether they have no place of business in Texas, single place provided in subsection (d) of this section. of business in Texas, or multiple places of business in Texas. (5) Multiple special purpose district taxes, multiple transit (1) Consummation of sale - order received at place of authority sales taxes, or combination of the two may apply single business of the seller in Texas. transaction. If the sale of taxable item is consummated at location within the boundaries of multiple special purpose districts or transit (A) Order placed in person. Except as provided by authorities, local sales tax is owed each of the jurisdictions in effect paragraph (3) of this subsection, when an order for taxable item is at that location. For example, place of business of the seller located in placed in person at seller's place of business in Texas, including at the city of San Antonio is within the boundaries of both the San Antonio temporary place of business of the seller in Texas, the sale of that item Advanced Transportation District the San Antonio Metropolitan is consummated at that place of business of the seller, regardless of Transit Authority, the seller is required collect sales tax for both the location where the order is fulfilled. transit authorities. Similarly, place of business of the seller in Flower (B) Order not placed in person. Mound is located within the boundaries two special purpose districts,
PROPOSED RULES April with the earliest effective date, until the two percent cap is met. The the Flower Mound Crime Control District the Flower Mound Fire effective dates all special purpose district taxes are available on the Control District, the seller is responsible for collecting sales tax for comptroller's website. However, if the collection or accrual use tax both special purpose districts. for the district with the earliest effective date would exceed the two (6) Itinerant vendors; vending machines. percent cap, the tax for that district is not due the seller or purchaser should determine, following the criteria in subparagraphs (A) - (C) (A) Itinerant vendors. Sales made by itinerant vendors this paragraph, whether use tax is due for the district next became are consummated at, itinerant vendors must collect sales tax based effective. upon, the location where the item is delivered or at which the purchaser the item takes possession. Itinerant vendors do not have any respon- (i) If the competing special purpose district taxes be- sibility collect use tax. came effective on the same date, the special purpose district taxes are due in the order the earliest date for which the election in which the (B) Vending machines. Sales taxable items made district residents authorized the imposition sales use tax by the from vending machine are consummated the location the vend- district was held. ing machine. See §3.293 this title (relating Food; Food Prod- ucts; Meals; Food Service) for more information about vending ma- (ii) If the elections impose the local taxes were chine sales. held on same date, the special purpose district taxes are due in the order earliest date for which enabling legislation under which (7) The location where order is received by or on be- each district was created became effective. half seller means physical location seller or third party such as an established outlet, office location, or automated order re- (E) Collection or accrual use tax for multiple transit ceipt system operated by or on behalf seller where order is authorities. If more than one transit authority use tax is in effect initially received by or on behalf seller not where order location where use item occurs, two percent cap has may be subsequently accepted, completed or fulfilled. An order is re- been met, transit authority taxes are due in order their ceived when all information from purchaser necessary effective dates, beginning with earliest effective date, until two determination whether order can be accepted has been received by percent cap is met. The effective dates all transit authority taxes or on behalf seller. The location which product is shipped are available on comptroller's website. However, if collection shall be used in determining location where order is received accrual use tax for authority earliest effective date seller. would exceed two percent cap, tax authority is due seller purchaser should determine, following criteria in (d) Local use tax. provisions addressing imposition subparagraphs (A) - (D) this paragraph, whether use tax due state use tax §3.346 this title also apply imposition authority next became effective. local use tax. For example, consistent §3.346(e) this title, all taxable items are shipped delivered location this state (i) If competing transit authorities became effec- within boundaries local taxing jurisdiction are presumed tive same date, transit authority taxes are due order have been purchased use local taxing jurisdiction well as earliest date which election which authority residents presumed have been purchased use state. authorized imposition sales use tax authority was held. (1) General rules. (ii) If elections impose local taxes were held same date, transit authority use taxes are due order (A) When use taxes due addition local earliest date enabling legislation under each taxes provided subsection (c) section, all applicable authority was created became effective. use taxes must collected accrued following order until two percent cap reached: city, county, special purpose district, (2) General use tax rules applied specific situations. transit authority. If more than one special purpose district use tax due, following fact patterns explain how use collected *177 all such taxes are to be collected or accrued before any transit authority accrued and remitted to the comptroller based on, and subject to, the use tax is collected or accrued. See subparagraphs (D) and (E) of this general rules in paragraph (1) of this subsection. paragraph. (A) Sale consummated outside the state, item delivered (B) If a local use tax cannot be collected or accrued at from outside the state or from a location in Texas that is not operated by its full rate without exceeding the two percent cap, the seller cannot the seller - local use tax due. Except as provided in subsection (i)(3) of collect it, or any portion of it, and the purchaser is not responsible for this section, if a sale is consummated outside of this state according to accruing it. the provisions of subsection (c) of this section, and the item purchased is either shipped or delivered to a location in this state as designated (C) If a seller collects a local sales tax on an item, or a by the purchaser from a location outside of the state, or if the order purchaser accrues a local sales tax on an item, a use tax for the same is drop shipped directly to the purchaser from a third-party supplier, type of jurisdiction is not due on the same item. For example, after a local use tax is owed based upon the location in this state to which city sales tax has been collected or accrued for an item, no use tax is the order is shipped or delivered or at which the purchaser of the item due to that same or a different city on that item, but use tax may be due takes possession. The seller is responsible for collecting the local use to a county, special purpose district, or transit authority. Similarly, if tax due on the sale. If the seller does not collect the local use taxes due one or more special purpose district sales taxes have been collected or on the sale, the purchaser is responsible for accruing such taxes and accrued for an item, no special purpose district use tax is due on that remitting them directly to the comptroller according to the provisions in item, and if one or more transit authority sales taxes have been collected paragraph (1) of this subsection. For example, if an order for a taxable or accrued for an item, no transit authority use tax is due on that item. item is received by a seller at a location outside of Texas, and the order (D) Collection or accrual of use tax for multiple special is shipped to the purchaser from a location outside of the state, local purpose districts. If more than one special purpose district use tax is in use tax is due based upon the location to which the order is shipped or effect at the location where use of an item occurs, the special purpose delivered or at which the purchaser of the item takes possession. district taxes are due in the order of their effective dates, beginning April Texas Register cal taxes to the comptroller shall also apply to a purchaser if the seller (B) Sale consummated in Texas outside a local taxing does not collect local taxes that are due. The comptroller may proceed jurisdiction, item delivered into one or more local taxing jurisdictions - against the seller or purchaser the local tax owed by either. local use tax due. If a sale is consummated at a location in Texas that is outside of the boundaries of any local taxing jurisdiction according to (f) Tax rates. Except as otherwise provided by law, no local the provisions of subsection (c) of this section, and the order is shipped governmental entity may adopt or increase sales and use tax if, as a or delivered to the purchaser at location in this state that is within the result the adoption or increase the tax, the combined rate of all boundaries one or more local taxing jurisdictions, local use tax is sales and use taxes imposed by local taxing jurisdictions having terri- due based on the location which the items are shipped or delivered tory in the local governmental entity would exceed 2.0% at any location or at which the purchaser the item takes possession. The seller is within the boundaries the local governmental entity's jurisdiction. responsible collecting the local use taxes due on the sale, regardless following are the local tax rates that may adopted. location seller in Texas. If the seller fails collect any (1) Cities. Cities may impose sales and use tax at rate local use taxes due, purchaser is responsible accruing such taxes up 2.0%. and remitting them directly comptroller. (2) Counties. Counties may impose sales and use tax at (C) Sale consummated in any local taxing jurisdictions rates ranging from 0.5% 1.5%. imposing less than 2.0% in total local taxes - local sales taxes and use taxes due. If sale is consummated at location in where (3) Special purpose districts. Special purpose districts may total local sales tax rate imposed taxing jurisdictions in effect at impose sales and use tax at rates ranging from 0.125% 2.0%. location does not equal 2.0% according provisions sub- (4) Transit authorities. Transit authorities may impose section (c) this section, and item is shipped or delivered sales and use tax at rates ranging from 0.25% 1.0%. purchaser at location in this state is inside boundaries different local taxing jurisdiction, additional local use tax may due (g) Jurisdictional boundaries, combined areas, city tax im- based on location which order is shipped or delivered or at posed through strategic partnership agreements. which purchaser item takes possession, subject two percent cap. seller is responsible collecting any additional lo- (1) Jurisdictional boundaries. cal use taxes due on sale, regardless location seller in (A) City boundaries. City taxing jurisdictional bound- Texas. See subsection (i) this section. If seller fails collect aries cannot overlap one another city cannot impose sales additional local use taxes due, purchaser is responsible accruing use tax in an area is already within jurisdiction another city. such taxes remitting them directly comptroller. (B) County boundaries. County tax applies all loca- (i) Example one - if an order is received person at tions within county. place business seller, such sale consummated at location where order received as provided under subsection (C) Special purpose district transit authority bound- (c)(1)(A) this section, local sales tax due on sale does aries. Special purpose districts transit authorities may cross or meet two percent cap, additional local use taxes are due based share boundaries other local taxing jurisdictions may encom- location order shipped delivered or pass, whole part, other local taxing jurisdictions, including purchaser item takes possession, subject provisions cities counties. geographic location address this state may paragraph (1) this subsection. lie within boundaries more than one special purpose district more than one transit authority. (ii) Example two - if seller receives an order taxable item seller's place business Texas, seller ships (D) Extraterritorial jurisdictions. Except otherwise delivers item out-of-state location location this provided paragraph (3) this subsection concerning strategic part- state designated purchaser, sales tax due based upon nership agreements subsection (l)(5) this section concerning location place business seller where order City El Paso Fort Bliss, city sales use tax does apply received. If sales due item does meet two taxable sales are consummated outside boundaries city, percent cap, use taxes, subject provisions paragraph (1) including made city's extraterritorial jurisdiction. However, subsection, due based upon location where items are shipped extraterritorial jurisdiction may lie within boundaries spe- *178 or delivered or at which the purchaser of the item takes possession. cial purpose district, transit authority, county, or any combination of the three, and the sales and use taxes for those jurisdictions would ap- (e) Effect of other law. ply to those sales. (1) Tax Code, Title 2, Subtitles A (General Provisions) and (2) Combined areas. A combined area is an area where the B (Enforcement and Collection), Tax Code, Chapter (Multistate boundaries of a city overlap the boundaries of one or more other local Tax Compact) and Tax Code, Chapter (Limited Sales, Excise, and taxing jurisdictions as a result of an annexation of additional territory Use Tax) apply to transactions involving local taxes. Related sections by the city, and where, as the result of the imposition of the city tax of this title and comptroller rulings shall also apply with respect to local in the area in addition to the local taxes imposed by the existing tax- taxes. This includes authorities such as court cases and federal law ing jurisdictions, the combined local tax rate would exceed 2.0%. The that affect whether an item is taxable or is excluded or exempt comptroller shall make accommodations to maintain a 2.0% rate in any taxation. combined area by distributing the 2.0% tax revenue generated in these (2) Permits, exemption certificates, and resale certificates combined areas to the local taxing jurisdictions located in the combined
required by Tax Code, Chapter 151, shall also satisfy the requirements areas as provided in Tax Code, §321.102 or Health and Safety Code, for collecting and remitting local taxes, unless otherwise indicated by §775.0754. Combined areas are identified on the comptroller's web- this section or other sections of this title. For example, see subsection site. Sellers engaged in transactions on which local sales or use taxes (n) of this section concerning prior contract exemptions. are due in a combined area, or persons who must self-accrue and re- mit tax directly to the comptroller, must use the combined area local (3) Any provisions in this section or other sections of this code when reporting the tax rather than the codes for the individual title related a seller's responsibilities for collecting and remitting lo- PROPOSED RULES April 19, real property repair and remodeling job sites, refer §3.357 of this city, county, special purpose districts, or transit authorities that make title (relating Nonresidential Real Property Repair, Remodeling, up the combined area. and Restoration; Real Property Maintenance). (3) City tax imposed through strategic partnership agree- (i) Sellers' and purchasers' responsibilities for collecting or ac- ments. cruing local taxes. (A) governing bodies of a district, as defined in (1) Sale consummated in Texas; seller responsible for col- Local Government Code, §43.0751, and a city may enter into a lim- lecting local sales taxes and applicable local use taxes. When a sale ited-purpose annexation agreement known as a strategic partnership of a taxable item is consummated at a location in Texas as provided by agreement. Under this agreement, the city may impose sales and use subsection (c) of this section, the seller must collect each local sales tax tax within all or part of the boundaries of a district. Areas within a dis- in effect at the location. If the total rate of local sales tax due on the sale trict are annexed this limited purpose are treated as though they does not reach two percent cap, and the seller ships or delivers the are within boundaries of city purposes of city sales and use item into another local taxing jurisdiction, then seller is required tax. collect additional local use taxes due, if any, based on location (B) Counties, transit authorities, and special purpose which item is shipped or delivered or at which purchaser of districts may enter into strategic partnership agreements. Sales item takes possession, regardless of location of seller in Texas. and use taxes imposed by those taxing jurisdictions do apply in For more information regarding local use taxes, refer subsection (d) limited-purpose annexed area as part of a strategic partnership of this section. agreement between a city an authorized district. However, a (2) Out-of-state sale; seller engaged in business in Texas. county, special purpose district, or transit authority sales use tax, or Except as provided in paragraph (3) this subsection, when a sale is any combination these three types taxes, may apply at locations consummated in Texas, a seller who is engaged in business in this included in strategic partnership agreement between a city state is required collect remit local use taxes due, if any, on orders authorized district if tax is imposed in area by applicable taxable items shipped or delivered at direction purchaser jurisdiction as allowed under its own controlling authorities. into local taxing jurisdiction this state based upon location in (C) Prior September 1, 2011, term "district" was this state which item is shipped or delivered or at which defined Local Government Code, §43.0751 as municipal utility purchaser item takes possession provided subsection (d) district or water control improvement district. definition this section. was amended effective September mean conservation (3) Local use tax rate remote sellers. reclamation district operating under Water Chapter 49. (A) A remote seller required collect remit one or (h) Places business seller job sites crossed by more local use taxes connection sale taxable item must local taxing jurisdiction boundaries. compute amount using: (1) Places business seller crossed local taxing (i) combined tax rate all applicable local use jurisdiction boundaries. If place business seller is crossed taxes based on location which item is shipped delivered one more local taxing jurisdiction boundaries so portion at which purchaser item takes possession; place business seller is located within taxing jurisdiction remainder place business seller lies outside (ii) remote seller's election, single local use taxing jurisdiction, tax is due local taxing jurisdictions tax rate published Texas Register. office located. If there no sales office, sales tax is due (B) remote seller storing tangible personal local taxing jurisdictions any cash registers located. property used fulfillment facility market- (2) Job sites. place provider has certified it will assume rights duties seller respect tangible personal property, provided (A) Residential repair remodeling; new construc- §3.286 this title, may elect single local use tax rate under tion improvement realty. When contractor improving real subparagraph (A)(ii) paragraph. property under separated contract, job site crossed boundaries one more local taxing jurisdictions, local taxes due (C) Notice comptroller election revocation any separately stated charges taxable items incorporated into election. real property must allocated taxing jurisdictions based (i) Before using single use rate, re- total square footage real property improvement located within *179 mote seller must notify the comptroller of its election using a form pre- each jurisdiction, including the square footage of any standalone struc- scribed by the comptroller. A remote seller may also notify the comp- tures that are part of the construction, repair, or remodeling project. troller of the election on its use tax permit application form. The remote For more information about tax due on materials used at residential seller must use the single local use tax rate for all of its sales of taxable and new construction job sites, refer to §3.291 of this title (relating to items until the election is revoked as provided in clause (ii) of this sub- Contractors). paragraph. (B) Nonresidential real property repair and improve- (ii) A remote seller may revoke its election by filing ment. When taxable services are performed to repair, remodel, or a form prescribed by the comptroller. If the comptroller receives the restore nonresidential real property, including a pipeline, transmission notice by October 1, the revocation will be effective January 1 of the line, or parking lot, that is crossed by the boundaries of one or more following year. If the comptroller receives the notice after October 1, local taxing jurisdictions, the local taxes due on the taxable services, the revocation will be effective January of the year after the follow- including materials and any other charges connected to the services ing year. For example, a remote seller must notify the comptroller by performed, must be allocated among the local taxing jurisdictions October 1, 2020, for the revocation to be effective January 1, 2021. If based upon the total mileage or square footage, as appropriate, of the the comptroller receives the revocation on November 1, 2020, the re- repair, remodeling, or restoration project located in each jurisdiction. vocation will be effective January 1, 2022. For more information about tax due on materials used nonresidential April 19, Texas Register (D) Single local use tax rate. (5) Local tax is due on the sales price a taxable item, as defined in Tax Code, §151.007, in the report period in the taxable (i) The single local use tax rate in effect for the pe- item is purchased or the period in the taxable item is first stored, riod beginning October 1, 2019, and ending December 31, 2019, is used, or otherwise consumed in a local taxing jurisdiction.
1.75%. (6) A purchaser is not liable for additional local use tax if (ii) The single local use tax rate in effect for the pe- the purchaser pays local use tax using the rate elected by eligible re- riod beginning January 2020, and ending December 31, 2020, is mote seller according to paragraph (3) this subsection. remote 1.75%. seller must be identified on the comptroller's website as electing use the single local use tax rate. A purchaser must verify the remote (E) Annual publication single local use tax rate. Be- seller is listed on the comptroller's website. If the remote seller is not fore the beginning a calendar year, the comptroller will publish no- listed on the comptroller's website, the purchaser will be liable for ad- tice the single local use tax rate in the Texas Register will be in ditional use tax due in accordance paragraph (4) this subsection. effect for calendar year. (j) Items purchased under a direct payment permit. (F) Calculating the single local use tax rate. single local use tax rate effective in a calendar year is equal the estimated (1) When taxable items are purchased under a direct pay- average rate local sales and use taxes imposed in this state during the ment permit, local use tax is due based upon location where preceding state fiscal year. As soon as practicable after end state permit holder first stores taxable items, except if taxable fiscal year, comptroller must determine estimated average rate items are not stored, then local use tax is due based upon location local sales and use taxes imposed in this state during preceding where taxable items are first used or otherwise consumed by state fiscal year by: permit holder. (i) dividing total amount net local sales and (2) If, in local taxing jurisdiction, storage facilities con- use taxes remitted comptroller during state fiscal year by tain taxable items purchased under direct payment exemption certifi- total amount net state sales and use tax remitted comptroller cate and time storage it is not known whether taxable items during state fiscal year; will used in Texas, then taxpayer may elect report use tax either when taxable items are first stored in Texas are first re- (ii) multiplying amount computed under clause moved from inventory for use in Texas, long as use tax is reported (i) this subparagraph by rate provided Tax Code, §151.051; consistent manner. See also §3.288(i) this title (relating Direct and Payment Procedures Qualifications) §3.346(g) this title. (iii) rounding amount computed under clause (ii) (3) If local use tax is paid on stored items are subse- this subparagraph nearest .0025. quently removed from before they are used, tax may re- (G) Direct refund. purchaser may request refund covered accordance refund credit provisions §3.325 based on local use taxes paid calendar year for difference be- this title §3.338 this title (relating Multistate Tax Credits tween single local use tax rate paid purchaser amount Allowance Credit for Tax Paid Suppliers). purchaser would have paid based on combined tax rate all (k) Special rules certain taxable goods services. Sales applicable local use taxes. Notwithstanding refund requirements following taxable goods services consummated at, under §3.325(a)(1) this title (relating Refunds Payments Un- local tax is due based upon, location indicated this subsection. der Protest), non-permitted purchaser may request refund directly comptroller tax paid previous calendar year, no (1) Amusement services. Local tax is due based upon earlier than January following calendar year within statute location where performance event occurs. For more information limitation under Tax 111.104 (Refunds). on amusement services, refer §3.298 this title (relating Amuse- ment Services). (H) Marketplace providers. Notwithstanding subpara- graph (A) this paragraph, marketplace providers may use (2) Cable services. When service provider uses cable single local use tax rate must compute amount local use tax system provide cable television bundled cable services cus- collect remit using combined tax rate all applicable local tomers, local tax is due provided §3.313 title. When use taxes. service provider uses satellite system provide cable services customers, no local tax is due on service accordance (4) Purchaser responsible accruing remitting Telecommunications Act §602. taxes if seller fails collect. (3) Florists. Local sales tax is due on all taxable items sold (A) If seller does collect state sales tax, any florist based upon location where order received, regard- applicable taxes, both, sale taxable item less where whom delivery made. Local use due consummated Texas, then purchaser responsible filing *180 deliveries of taxable items sold by florists. For example, if the place of a return and paying the tax. The local sales taxes due are based on business of the florist where an order is taken is not within the bound- the location in this state where the sale is consummated as provided in aries of any local taxing jurisdiction, no local sales tax is due on the subsection (c) of this section. item and no local use tax is due regardless of the location of delivery. (B) A purchaser who buys an item use in Texas from If a florist delivers an order in a local taxing jurisdiction at the a seller who does not collect the state use tax, any applicable local use instruction of unrelated florist, and if the unrelated florist did not taxes, or both, is responsible filing a return and paying the tax. The take the order within the boundaries of a local taxing jurisdiction, local local use taxes due are based on the location where the item is first use tax is not due on the delivery. For more information about florists' stored, used, or consumed the purchaser. sales and use tax obligations, refer to §3.307 of this title (relating to Florists). (C) For more information about how to report and pay use tax directly to the comptroller, see §3.286 of this title. PROPOSED RULES April 19, 49 2455 §321.105, any city that adopted a local sales and use tax effective Oc- (4) Landline telecommunications services. Local taxes due tober 1, 1979, or later is prohibited from imposing tax on the residential on landline telecommunications services are based upon the location of use of natural gas and electricity. See §3.295 of this title. the device from which the call or other transmission originates. If the seller cannot determine where the call or transmission originates, local (B) Imposition of tax allowed in certain cities. Cities taxes due are based on the address to which the service is billed. For that adopted local sales tax prior to October 1, 1979, may, in accor- more information, refer to §3.344 of this title (relating to Telecommu- dance the provisions in Tax Code, §321.105, choose to repeal the nications Services). exemption residential use of natural gas and electricity. The comp- troller's website provides a list of cities that impose tax on the residen- (5) Marketplace provider sales. Local taxes are due on tial use of natural gas and electricity, as well as a list of those cities that sales of taxable items through marketplace provider based on the lo- do currently impose the tax, but are eligible to do so. cation in this state to which the item is shipped or delivered or at which the purchaser takes possession. For more information, refer to §3.286 (C) Effective January 2010, fire control, preven- of this title. tion, and emergency medical services district organized under Local Government Code, Chapter that imposes sales tax under Tax Code, (6) Mobile telecommunications services. Local taxes due §321.106, or crime control and prevention district organized under on mobile telecommunications services are based upon the location of Local Government Code, Chapter that imposes sales tax under Tax the customer's place of primary use as defined in §3.344(a)(8) of this Code, §321.108, that is located in all or part of municipality that im- title, and local taxes are to collected as indicated in §3.344(h) of this poses tax on residential use of natural gas and electricity pro- title. vided under Tax Code, §321.105 may impose tax on residential use (7) Motor vehicle parking and storage. Local taxes are due natural gas and electricity at locations within district. A list based on location space or facility where vehicle is parked. special purpose districts that impose tax on residential use natural For more information, refer to §3.315 this title (relating to Motor gas and electricity and those districts eligible to impose tax do Vehicle Parking and Storage). currently do so is available on comptroller's website. (8) Natural gas and electricity. Any local city and special (2) Telecommunication services. Telecommunications ser- purpose taxes due are based upon location where natural gas vices are exempt from all local sales taxes unless governing body or electricity is delivered to purchaser. As explained in subsection city, county, transit authority, or special purpose district votes (l)(1) this section, residential use natural gas and electricity is to impose sales tax on these services. However, since under exempt from all county sales and use taxes and all transit authority sales Tax Code, §322.109(d), transit authorities created under Transporta- and use taxes, most special purpose district sales and use taxes, and tion Code, Chapter cannot repeal exemption unless repeal many city sales and use taxes. list cities and special purpose is first approved governing body each city created districts do impose, and those are eligible to impose, local local taxing jurisdiction. The local sales tax is limited telecommuni- sales and use tax on residential use natural gas and electricity is cations services occurring between locations within Texas. See §3.344 available on comptroller's website. For more information, also refer this title. The comptroller's website provides list local taxing §3.295 this title (relating Natural Gas and Electricity). jurisdictions impose tax on telecommunications services. (9) Nonresidential real property repair and remodeling ser- (3) Emergency services districts. vices. Local taxes are due on services remodel, repair, or restore (A) Authority exclude territory from imposition nonresidential real property based on location job site where emergency services district sales and use tax. Pursuant provi- remodeling, repair, restoration performed. See also subsection sions Health and Safety Code, §775.0751(c-1), emergency ser- (h)(2)(B) this section §3.357 this title. vices district wishing enact sales use tax may exclude from (10) Residential real property repair remodeling election called authorize tax any territory in district where new construction real property improvement performed under sales use tax then at 2.0%. tax, if authorized voters separated contract. When contractor constructs new improvement eligible vote on enactment tax, then applies only realty pursuant separated contract improves residential real portions district included election. tax does apply property pursuant separated contract, sale consummated at sales made excluded territories district sellers job site at which contractor incorporates taxable items into excluded territories should continue collect sales use taxes customer's real property. See also subsection (h)(2)(A) this section taxing jurisdictions effect time election un- §3.291 this title. der which district sales use tax was authorized applicable. (11) Waste collection services. Local taxes are due (B) Consolidation districts resulting garbage other solid waste collection removal services based sub-districts. Pursuant provisions Health Safety Code, location waste collected which waste §775.018(f), if territory district proposed under Health removed. For more information, refer §3.356 title (relating Safety Chapter overlaps boundaries another Real Property Service). district created under chapter, commissioners court each county boards counties districts located may (l) Special exemptions provisions applicable individual choose create consolidated district overlapping territory. If jurisdictions. *181 two districts want to consolidate under Health and Safety Code, (1) Residential use of natural gas and electricity. §775.024 have different sales and use tax rates, the territory of the former districts located within the consolidated area will be designated (A) Mandatory exemptions from local sales and use tax. as sub-districts and the sales tax rate within each sub-district will Residential use of natural gas and electricity is exempt from most lo- continue to be imposed at the rate the tax was imposed by the former cal sales and use taxes. Counties, transit authorities, and most special district each sub-district was part of prior to the consolidation. purpose districts are not authorized to impose sales and use tax on the residential use of natural gas and electricity. Pursuant to Tax Code, (4) East Aldine Management District. April 19, Texas Register (B) pursuant to the obligation of a bid or bids submitted (A) Special sales and use tax zones within district; prior to effective date of any local tax if the bid or bids and contract separate sales and use tax rate. As set out in Special District Local entered into pursuant thereto are at a fixed price and not subject to Laws Code, §3817.154(e) and (f), East Aldine Management withdrawal, change, or modification because of tax. District board may create special sales and use tax zones within boundaries of District and, voter approval, enact a special (2) Annexations. Any annexation of territory into an exist- sales and use tax rate in each zone different from sales and ing local taxing jurisdiction also a basis claiming exemption use tax rate imposed rest of district. provided by this subsection. (B) Exemptions from special zone sales and use tax. (3) Local taxing jurisdiction rate increase; partial exemp- The sale, production, distribution, lease, or rental of; and use, stor- tion certain contracts and bids. When an existing local taxing ju- age, or other consumption within a special sales and use tax zone of; a risdiction raises its sales and use tax rate, additional amount of tax taxable item sold, leased, or rented by entities identified clauses would be due as result of rate increase not due on sale, (i) - (vi) of this subparagraph are exempt from special zone sales use, storage, or other consumption this state of taxable items used: and use tax. State and all other applicable local taxes apply unless oth- erwise exempted by law. The special zone sales and use tax exemption (A) performance of written contract executed applies to: prior to effective date tax rate increase if contract may not be modified because tax; or (i) retail electric provider as defined by Utilities Code, §31.002; (B) pursuant obligation bid or bids submitted prior effective date tax rate increase if bid or bids and (ii) an electric utility or power generation company contract entered into pursuant thereto are fixed price and subject as defined by Utilities Code, §31.002; withdrawal, change, or modification because tax. (iii) gas utility as defined by Utilities Code, (4) Three-year statute limitations. §101.003 or §121.001, or person who owns pipelines used transportation or sale oil or gas or product or constituent oil or (A) The exemption paragraph (1) this subsection gas; partial exemption paragraph (3) this subsection have no effect after three years date adoption or increase tax (iv) person who owns pipelines used trans- takes effect local taxing jurisdiction. portation or sale carbon dioxide; (B) The provisions §3.319 this title apply this (v) telecommunications provider as defined by subsection extent they are consistent. Utilities Code, §51.002; or (C) Leases. Any renewal or exercise option (vi) cable service provider or video service extend time lease or rental contract under exemptions pro- provider as defined by Utilities Code, §66.002. vided this subsection shall be deemed be new contract no exemption will apply. (5) Imposition city sales tax transit tax on certain
military installations; El Paso Fort Bliss. Pursuant Tax Code, (5) Records. Persons claiming exemption provided §321.1045 (Imposition Sales Use Tax Certain Federal Military this subsection must maintain records which can be verified Installations), purposes local sales use tax imposed under comptroller exemption will be lost. Tax Code, Chapter 321, city El Paso includes area within boundaries Fort Bliss extent it city's extraterritorial (6) Exemption certificate. An identification number re- jurisdiction. However, El Paso transit authority does include quired on prior contract exemption certificates furnished sellers. Fort Bliss. See Transportation Code, §453.051 concerning Creation The identification number should be person's 11-digit tax- Transit Departments. payer number federal employer's identification (FEI) number. (m) Restrictions on local sales tax rebates other economic agency certifies legal counsel has reviewed pro- incentives. Pursuant Local Government Code, §501.161, Section 4A posal found it within state agency's legal authority 4B development corporations may offer provide economic adopt. incentives, such sales rebates authorized under Local Gov- ernment Chapters 381, persons whose business consists Filed Office Secretary State April 2024. primarily purchasing taxable items using resale certificates then TRD-202401427 reselling those same items related party. related party means Jenny Burleson person entity owns least 80% business enterprise Director, Tax Policy use taxes would rebated part economic in- Comptroller Public Accounts centive. Earliest possible date adoption: May (n) Prior contract exemptions. provisions §3.319 this For further information, please call: (512) 475-2220 title (relating Prior Contracts) concerning definitions exclusions ♦ ♦ ♦ apply prior contract exemptions. TITLE 43. TRANSPORTATION (1) Certain contracts bids exempt. No taxes due sale, use, storage, other consumption state tax- PART 3. MOTOR VEHICLE CRIME able items used: *182 PREVENTION AUTHORITY (A) performance written contract executed prior effective date any if contract may modified because tax; PROPOSED RULES April
T AB
I TITLE 34. PUBLIC FINANCE Jenny Burleson Director, Tax Policy Division PART 1. COMPTROLLER OF PUBLIC Comptroller of Public Accounts
ACCOUNTS Effective date: July 4, Proposal publication date: April 19, CHAPTER 3. TAX ADMINISTRATION For further information, please call: (512) 475-2220 SUBCHAPTER O. STATE AND LOCAL SALES ♦ ♦ ♦ AND USE TAXES TAC §3.334 TAC §3.334 The Comptroller of Public Accounts adopts new §3.334, con- cerning local sales and use taxes, without changes the pro- The Comptroller of Public Accounts adopts the repeal of §3.334, posed text as published the April 19, 2024, issue of the Texas concerning local sales and use taxes, without changes the Register (49 TexReg 2442). The rule will not be republished. The
proposed text as published the April 19, 2024, issue of the comptroller adopts new §3.334 replace the existing §3.334 Register (49 TexReg 2440). The rule will not be repub- that the comptroller is repealing. The new §3.334 includes the lished. The comptroller repeals existing §3.334 replace it with text of existing §3.334, with the addition of subsection (b)(6) and new §3.334. The repeal of §3.334 will be effective the date the supporting definitions. new §3.334 takes effect. In addition soliciting written comments, the comptroller held Brief explanation of the rulemaking. public hearing on May 9, 2024. The comptroller received oral It has been called the comptroller's attention that the October and/or written comments regarding adoption of the rule from the 27, 2023, notice of proposed rulemaking did contain state- following persons: ment of fiscal implications for small businesses rural commu- John Christian, Ryan, LLC, against the rule. nities as required Government Code, Chapter 2006. See (48 TexReg 6340) (October 27, 2023). Therefore, the comptroller re- TJ Gilmore, Mayor the City Lewisville, against the rule. peals the adopted rule proposed the October 27, 2023, no- Jim Harris, on behalf the Coalition for Appropriate Sales tice proposed rulemaking. The comptroller is simultaneously Tax Law Enactment (CASTLE) and its members, the cities readopting the text the rule effective on January 5, 2024, with Coppell, Farmers Branch, Grand Prairie, Humble, Kilgore, amendments, under same number and title, with repeal Lancaster, and Lewisville, against rule. be effective date adopted rule. John Kroll, HMWK, against rule. Comments Mike Land, City Manager City Coppell, against rule. The comptroller received comments from James Harris on behalf Coalition for Appropriate Sales Tax Law and its members, Wes Mays, Mayor City Coppell, against rule. cities Coppell, Carrollton, Desoto, Farmers Branch, Hum- Stephan L. Sheets, Attorney City Round Rock, against ble, Kilgore, Lancaster, and Lewisville, favor repeal rule. all revisions rule, starting with version adopted May 2020. The comptroller addresses criticisms revisions Rich Whitehead, Mayor City Helotes, against rule. §3.334 preamble new §3.334, which comp- Summary Principal Reasons For Against Adoption troller will adopt effective concurrently with repeal. Rule Statement statutory other authority under which rule- The comptroller's principal reason adoption rule is making adopted. provide guidance taxpayers auditors regarding appli- The repeal adopted under Tax Code, §§111.002 (Comp- cation local sales use tax consummation statutes. troller's Rule; Compliance; Forfeiture), 321.306 (Comptroller's The principal reasons alleged against adoption are: that rule Rules), 322.203 (Comptroller's Rules), 323.306 (Comptrol- needed, rule will hurt cities taxpayers, ler's Rules), authorize comptroller adopt rules rule departure prior comptroller policy, stated implement tax statutes. reasons adoption have no factual basis, rule incon- Sections articles code affected. sistent with local sales use tax consummation statutes, notice rulemaking did comply require- The repeal affects Tax Code, §151.0595 (Single Local Tax Rate ments Administrative Procedure Act. Remote Sellers); Tax Code, Chapter 321, Subchapters A, B, C, D, F; Tax Chapter 322; Tax Code, Chapter The subsequent discussion provides reasons adopting 323. rule without changes related comments received. The agency certifies legal counsel has reviewed adop- Summary Factual Bases Rule - Background tion found it valid exercise agency's legal au- In January 2020, comptroller initiated rulemaking update thority. its sales use tax rule. comptroller subsequently adopted amendments 2020, 2023, 2024. (49 TexReg Filed Office Secretary State June 14, 2024. 53) (January 5, 2024), (48 TexReg 391) (January 27, 2023), (45 TRD-202402640 3499) (May 22, 2020). amendments implemented House Bill 86th Legislature, placed TRIAL EXHIBIT CP Ex-40 D-1-GN-21-003198 use collection responsibilities marketplace providers. *184 ADOPTED RULES June 28, 2024 49 4797 Ultimately, the statutory test is a combination of elements -- The amendments also implemented House Bill 2153, 86th Leg- whether a facility is an established outlet, office, or location op- islature, 2019, which set a single local use tax rate that remote erated by a seller for the purpose of receiving orders for taxable sellers may elect use. The amendments also expanded the items. The statutory references an "established outlet, office, local sales tax collection responsibilities of sellers based the United States Supreme Court decision in South Dakota v. Way- or location," operation "by the retailer or the retailer's agent or fair, Inc., S. Ct. (June 21, 2018). These amendments employee," and "receiving orders for taxable items" all suggest that the presence of sales personnel is a reasonable criterion have been noncontroversial. for evaluating whether a facility is a "place of business." The rulemaking made other revisions the text, which are now the subject of litigation in Cause No. D-1-GN-21-003198, City of Subsection (a)(18) defines "place of business of the seller" as Coppell, Texas, et al. v. Glenn Hegar, the 201st District Court follows: of Travis County Texas. The Plaintiff cities claim that the agency "(18) Place of business of the seller - general definition--A place did not comply with the rulemaking procedures Government of business of the seller must be an established outlet, office, or Code, §2001.024 and Government Code, Chapter 2006. The location operated by a seller for the purpose of receiving orders comptroller initiated this rulemaking address those claims by for taxable items from persons other than employees, indepen- proposing the readoption of the rule, with amendments, along dent contractors, and natural persons affiliated with the seller. An with a more complete statement of the elements required by 'established outlet, office, or location' usually requires staffing by Government Code, §2001.024 and Government Code, Chapter one or more sales personnel. The term does not include a com- 2006. puter server, Internet protocol address, domain name, website, or software application. The 'purpose' element of the definition The comptroller is addressing comments received the current may be established by proof that the sales personnel of the seller rulemaking, well as the prior local tax rulemakings 2020, receive three or more orders for taxable items at the facility dur- 2023, and 2024. The orders adopting the prior rulemakings are available for inspection the Register, and contain addi- ing calendar year. Additional criteria for determining when a location is a place of business of seller are provided sub- tional explanations that augment this document. section (b) of section for distribution centers, manufacturing Summary of Factual Bases for Rule - Subsection (a)(18) plants, storage yards, warehouses similar facilities; kiosks; - The definition of "place of business of seller." purchasing offices. An outlet, office, facility, or any location that contracts with a retail or commercial business process Local sales use taxes are generally sourced where a sale for that business invoices, purchase orders, bills of lading, or or use is "consummated." Tax Code, §321.203 §321.205. There are about three dozen sourcing provisions. Id. And, there other equivalent records onto which sales tax is added, including an office operated for purpose of buying selling taxable are three potential locations where sales tax can be soured: goods be used or consumed by retail or commercial busi- location where order was received, location where ness, is not a place business of seller if comptroller order was fulfilled, location where order was deliv- ered customer. Id. The sourcing outcome can be affected determines that outlet, office, facility, or location functions or exists avoid tax legally due under Tax Code, Chapters 321, by whether an order is placed person at, received at, or ful- 322, or exists solely rebate a portion tax im- filled at a seller's "place business" Texas. posed by those chapters contracting business. An outlet, Tax Code, §321.002(3)(A) uses words define "place busi- office, facility, or location does not exist avoid tax legally ness retailer": due under Tax Chapters or solely rebate portion tax imposed by those chapters if out- "(3)(A) 'Place business retailer' means an established let, office, facility, or location provides significant business ser- outlet, office, or location operated by retailer or retailer's vices, beyond processing invoices, contracting business, agent or employee purpose receiving orders for taxable including logistics management, purchasing, inventory control, items includes any location at three or more orders are or other vital business services." received by retailer during calendar year. warehouse, storage yard, or manufacturing plant is not 'place business The first sentence subsection (a)(16) states: "A place busi- retailer' unless at least three orders are received ness seller must be an established outlet, office, lo- retailer during calendar year warehouse, storage yard, cation operated seller purpose receiving orders manufacturing plant." taxable items from persons other than employees, indepen- dent contractors, natural persons affiliated seller." The term "place business retailer" is term art be- This definition tracks statutory definition but adds qualifier cause term is more limited than its plain ordinary mean- prior rule allows facility make in-house cour- ing. Many business activities can be conducted location tesy sales without becoming place business. without location becoming "place business" sourcing. The definition specifically includes concept The second sentence definition "place business receiving orders taxable items. For example, corporate seller" subsection (a)(16) states: "An 'established out- headquarters company may not be "place business" if no let, office, location' usually requires staffing one more orders received there. Additionally, location "place sales personnel." word "usually" clarifies presence business" simply because it receives orders. If were sales personnel an absolute requirement, but rather, case, legislature could have defined phrase those important factor will often determine whether an outlet, very few words, can counted one hand. And, office, location "place business." In subsequent sub- final sentence indicates business locations such ware- sections rule, comptroller describes some examples. houses, storage yards, manufacturing plants may comptroller adding sales personnel language pro- "places business." vide objective criterion buyers, sellers, auditors con- sider. Does facility have personnel? If it does, it likely
49 TexReg 4798 June 28, 2024 Register order. The physical locations of computer servers that receive a "place of business" -- an established outlet, office, or location website orders are often random, variable, and uncertain. The operated by a seller for the purpose of receiving orders for tax- best way to treat computer servers consistently and coherently able items. If the facility does not have sales personnel, it is likely is uniformly recognize that they are not "established" places not a "place of business." of business of the seller. The reference sales personnel is also consistent with the gen- The fourth sentence of the definition of "place of business of the eral objectives of the tax statute. "It is a fundamental prin- seller" subsection (a)(16) states: "The 'purpose' element of ciple of statutory construction and indeed of language itself that the definition may be established by proof that sales personnel
words' meanings cannot be determined isolation but must be drawn from the context which they are used." TGS-NOPEC of the seller received three or more orders for taxable items at the Geophysical Co. v. Combs, S.W.3d (Tex. 2011). facility during the calendar year." This language is consistent with the statutory language that a "'place of business of the retailer' ... The context for the "place of business" definition is not limited includes any location at three or more orders are received the consummation statutes. It also extends the sales tax per- by the retailer during a calendar year." mit requirement. The requirement of a sales tax permit for each "place of business" suggests that presence of sales personnel is The remaining sentences of the definition of "place of business a reasonable factor consider. of the seller" are noncontroversial. The third sentence the definition of "place of business" Mr. Gilmore, Mr. Kroll, Mr. Land, and Mr. Mays do not be- subsection (a)(16) states: "The term does not include a com- lieve that this definition simplifies sourcing. However, puter server, Internet protocol address, domain name, website, the comptroller is under no illusions that the definition will elim- or software application." This sentence is consistent with the inate all ambiguities. In some instances, the determination will concept that a "place of business" usually requires the presence depend upon the particular facts. But many instances, it will of personnel receive order. Even a broad, every-day us- be clear. And, rule also makes clear that mere hardware age of term "place of business" does not include computer installations are not "places of business of seller." To that ex- servers, Internet protocol addresses, and websites. Many sell- tent, rule will help taxpayers understand how comptroller ers house their computer servers at a co-location facility or rent interprets intends apply statute. computer server space at a managed hosting site. An ordinary Summary of Factual Bases for Rule - Subsection (b)(5) - person would not consider physical locations of these com- A facility without sales personnel is usually not a "place of busi- puter servers be places of business of seller. Similarly, ness of seller." an ordinary person would not perceive an Internet protocol ad- dress, a domain name, or a website as an "established outlet, Subsection (b)(5) provides: office, or location" so as constitute a place of business or- "(5) A facility without sales personnel is usually not a 'place of dinary usage. And, this statutory context, is narrower business of seller.' A vending machine is not an 'established than ordinary usage, comptroller has concluded that leg- outlet, office, or location,' does not constitute a 'place of busi- islature could not have intended that receipt of an order by ness seller.' Instead, a vending machine sale is treated as an automated mechanical device would make device an "es- a sale by an itinerant vendor. See subsections (a)(10) (c)(6) tablished outlet, office or location operated by retailer." section. However, a walk-in retail outlet with a stock In addition being a reasonable interpretation statute goods available for immediate purchase through a cashier-less consistent with precedent, comptroller's interpretation that point sale terminal at outlet would be an 'established out- computer servers software applications that run let, office, or location' so as constitute a 'place business servers are not places business, is a practical interpretation seller' even though personnel are not required for ev- that will facilitate uniformity ease administration for tax- ery sale. A computer that operates an automated shopping cart payers auditors. Website orders can be received at multiple software program is not an 'established outlet, office, or location,' physical addresses - any locations that have Internet access. A does not constitute 'place business seller.' com- website order sent an Internet protocol (IP) address. An puter operates an automated telephone ordering system IP address not permanent physical address. It series 'established outlet, office, or location,' does not con- numbers assigned device, such as computer server. Web- stitute 'place business seller.'" sites may use dynamic IP addresses are assigned by Subsection (b)(5) provides examples application network upon connection change over time. The public definition "place business seller," factual IP address website may simply be routing orders differ- bases subsection (b)(5) same for definition. ent, private IP addresses. Load balancers may change IP In addition, treatment vending machines consistent addresses communicate customers. Conversely, mul- treatment vending machines prior versions rule. tiple websites may be hosted at single IP address. Reasons Why Comptroller Disagrees With Commenters' The computer server receiving order may belong seller Submissions Proposals - Subsections (a)(10) (b)(5). it may belong third party. The computer server may be sit- uated seller's premises, it may be situated co-location Some commenters asserted "place business" does facility operated by third party, it may be situated web have operated purpose receiving orders tax- hosting facility operated third party. computer server able items. According comments submitted CASTLE:
may one multiple servers serve same website "The statutory definition 'place business,' Tax different physical addresses part cloud distribution net- §321.002(3)(A), describes five different place business cat- work. computer server may route order multiple other egories: established outlets; established offices; established servers load balancing purposes. Conversely, single com- locations operated retailer retailer's agent puter server may serve multiple websites. Also, seller may employee purpose receiving orders taxable items; may know physical address server receiving ADOPTED RULES June
CP Ex-40-0003 of 0012
retailer's employee in the definition of "place of business of the any location at which three or more orders are received by the retailer." retailer during a calendar year; and warehouses, storage yards, or manufacturing plants that receive three or more orders in As previously stated, the comptroller is adding the sales person-
a calendar year. Tax Code, §321.002(a)(3)(A). The first two nel language to provide an objective criterion for buyers, sellers, categories need not have as a purpose receipt of orders and do and auditors consider. Does a facility have sales personnel? not need receive orders be a place of business." If it does, it is likely a "place of business" -- an established outlet, office, or location operated by a seller for the purpose of receiv-
CASTLE further commented that the function of an "established ing orders for taxable items. If the facility does not have sales office" is "business." This interpretation would mean that any fa-
personnel, it is likely not a "place of business." This objective cri-
cility operated by a seller for a business purpose would be a terion is supported by the previously explained legislative history "place of business" -- executive offices, administrative offices, of the statute. research development laboratories, maintenance facilities, vehicle garages, etc. The comptroller rejects interpretation Mr. Sheets, citing former §3.334(h)(3)(B), commented that "the as unreasonable. The 1979 legislation, adopted the def-
prior version of Rule 3.334 recognized that an Internet order is inition of "place of business," required each "place of business" received at a place of business while the proposed amendments have a sales tax permit. See 66th Legislature, 1979, Ch. 624, cause Internet orders be received nowhere." §3. That requirement is now in Tax §321.303. It is unrea-
The comptroller responds that comment overstates effect sonable think that legislature intended that a maintenance of prior rule misunderstands effect of adopted facility would be required have a sales tax permit. more rule. Prior 2020 amendments, §3.334(h)(3)(B) provided: reasonable interpretation is that a "place of business," whether it is an outlet, office, or location, "must be operated by a seller "(B) Order received at a place of business in Texas, fulfilled at for purpose of receiving orders for taxable items," as rule a location that is not a place of business.
When an order that
requires.
is placed
over telephone,
through Internet,
or by any means other than in person
is received by seller at a place
Mr. Mays other commenters also alleged that there is no
of business in Texas,
seller fulfills order at a loca-
reason for comptroller amend its rule. But, CASTLE's in-
tion that is not a place of business of seller in Texas, such as terpretation "purpose" requirement illustrates need a warehouse or distribution center, sale is consummated at clarification. The CASTLE interpretation may work at cross-pur-
place business at order taxable item poses with other commenters who claim right source all received." their sales their "single place business." If every taxpayer facility with a business purpose fact a "place business" (41 TexReg 260, 265) (2016) (former 34 TAC §3.334(h)(3), em-
CASTLE suggests, many these commenters may have mul-
phasis added); (39 TexReg 9597, 9606) (2014) (former 34 TAC tiple places businesses. The adopted rule states comp-
§3.334(h)(3), emphasis added). troller's interpretation, sets stage definitive court The former language only meant that place business may resolution conflict between competing commenters. receive an order through Internet, or any other method Mr. Christian commented portion definition "place communication except in-person communication. For example, business" that excludes orders "employees, independent sales representative at place business Texas could re-
contractors, natural persons affiliated with seller." He ceive an order through Internet form VOIP call commented that language was "extra-statutory." The comp-
an email. But, former language did not mean that every In-
troller disagrees. The language has been rule since 2014, ternet order automatically received at place business, when it was adopted without adverse comment. It allows fa-
illustrated by following comptroller rulings before after cility make in-house courtesy sales workers at facility comptroller adopted §3.334 2014. without facility becoming place business. Courtesy sales Comptroller Letter Ruling (STAR Accession No.) 200510723L workers are insufficient conclude that facility was estab-
(2005) stated: lished purpose receiving orders. "The location server does not create 'place business' Mr. Christian other commenters observed that statutory purposes tax collection." definition "place business" does not mention sales person-
nel. However, an agency rule need not limited parroting And Comptroller Letter Ruling (STAR Accession No.) words statute. The courts have said that rule may not 200605592L (2006) similarly stated: impose additional burdens, conditions, restrictions excess inconsistent with relevant statutory provisions.
State
"The location server does not create 'place business'
Office Pub. Util. Counsel v. Pub. Util. Comm'n Tex.,
131 purposes tax collection." S.W.3d 314, 321 (Tex. App.--Austin 2004, pet. denied). And Comptroller Letter Ruling (STAR Accession No.) implication statement rule may impose burdens, 201906015L (2019) similarly stated: conditions, restrictions are consistent relevant statutory provisions.
E.g., id.
at 342 (court approved "formulaic "COMPANY operates **************'s online marketplace (Web-
site) various apps used Texas customers make online means" not specified statute). Previous cases have ap-
orders. ... Orders placed Website through COMPANY's proved comptroller rules articulated requirements were explicitly stated statute.
Perry Homes v. Strayhorn,
apps processed routed servers are received
specifically referenced "Dunigan Tool Supply v. Bullock" 633 (Tex. Civ. App.-Texarkana, writ ref'd n.r.e.), at least partly in one of those suits. The analysis is available at the Legislative reaction to that case. And if that be so, then the legislature did Reference Library website at https://lrl.texas.gov/scanned/hro- not want warehousing storage facilities (many of which BillAnalyses/66-0/SB582.pdf. outside city limits) to be the places where sales were consum- In the Dunigan litigation, sales personnel took orders that were mated local sales tax purposes unless orders were actually forwarded to pipe storage facilities where the orders were ful- received there by personnel working there, but wanted the of- filled. At the time of the 1979 legislation, the district court had fice location out which the salesman operated be the place ruled that the transactions should be sourced the pipe stor- where the sales were consummated." age facilities. Bullock v. Dunigan Tool & Supply Co., 588 S.W.2d CASTLE commented: "The Comptroller misreads the decision." 633, 635 (Tex. Civ. App. - Austin, Sept. 6, 1979, writ ref'd But, the text the decision speaks itself: "the legislature ... n.r.e.). Therefore, when the 1979 House Study Group bill anal- wanted the office location out which the salesman operated ysis stated that bill was intended protect the state from be place where sales were consummated." consequences Dunnigan litigation, analysis meant that legislation was intended reduce circumstances in Second, text former §3.334(h)(3) indicated that a fulfill- which transactions would be sourced fulfillment warehouses, ment center is not automatically a "place business" local which at time were often located in rural areas not subject sourcing (emphasis added): sales tax. The legislature accomplished this objective by "(3) Consummation sale. The following rules, taken Tax adding a definition "place business" that was limited a §321.203 §323.203, apply all sellers engaged in location operated "for purpose receiving orders," by business in this state, regardless whether they have a place adding a provision sourcing transactions where order business in Texas or multiple places business in state. was received. Acts 1979, 66th Legislature, Ch. 624, Art. 1, §3. ... Mr. Kasner a previous rulemaking proceeding commented that proposed rule reverses effect Dunigan de- (B) Order received at place business Texas, fulfilled at cision. He is correct, because rule attempts follow location is not place business. When order subsequent legislation, which was intended reverse effect is placed over telephone, through Internet, or any Dunigan decision. means other than person is received seller at place business Texas, seller fulfills order at loca- In subsequent October 2, 1980, Interim Report House tion is not place business seller Texas, such Ways Means Committee, committee considered whether warehouse distribution center, sale is consummated at allow recently adopted statutory definition "place busi- place business at which order taxable item is ness" expire. The committee described consequence: received. "The location sale would no longer be tied permitted outlets, salesmen's locations, sales offices." Interim Report at 20. ... committee understood phrase "operated purpose (D) Order fulfilled within state at location is place receiving orders" meant sales activities ancillary ac- business. When order is received seller at any location tivities necessary subsequently effectuate sale. other than place business seller state, To be clear, under 1979 legislation today, fulfillment seller fulfills order at location Texas is place warehouse could can "place business." legis- business seller, then sale is consummated lature set low threshold: "A warehouse, storage yard, manu- ADOPTED RULES June 28, TexReg sale is consummated location Texas order location order shipped delivered, shipped. See §3.334(h)(3)(D). For Scenario One, location where it transferred purchaser." use due based location where order (41 TexReg 260, 265) (2016) (former TAC §3.334(h)(3), em- delivered." STAR Accession No. 201906015L (June 2019) phasis added); (39 9606) (2014) (former TAC *190 (emphasis added). §3.334(h)(3), emphasis added). Each of these documents, which predate the rulemaking, and Third, the consummation rules in former §3.334(h)(3) were aug- which the comptroller indexed and made available for public in- mented with an explicit provision for fulfillment centers, which spection on the State Tax Automated Research (STAR) System, the former rule referred to as "distribution centers" (emphasis is consistent with the statement in the rule that the location from added): which a product is shipped shall not be used in determining the location where the order is received by the seller. "(2) Distribution centers, manufacturing plants, storage yards, warehouses, and similar facilities. Reasons Why the Comptroller Disagrees With Commenters' Submissions and Proposals - The use of language from the (A) distribution center, manufacturing plant, storage yard, SSUTA in subsection (c)(7). warehouse, or similar facility operated a seller at which the seller receives three or more orders for taxable items during the In the rulemaking that adopted subsection (c))(7), the comptroller calendar year is a place of business. received comments that are discussed below. (B) If a salesperson who receives three or more orders for tax- Mr. Kroll commented: "The Texas Legislature, (the entity with able items within a calendar year is assigned to work from, or to constitutional responsibility for the state's Tax Policy), has had work at, a distribution center, manufacturing plant, storage yard, nine regular sessions to adopt the SSUTA's preferred origin warehouse, or similar facility operated a seller, then the facil- sourcing model found in SSUTA 3.10.1. The Legislature has ity is a place of business. not acted, even in 2013 when then Senator Hegar was chairing the Senate Finance, Subcommittee Fiscal Matters Tax (C) If a location that is a place of business of the seller, such policy responsibility." as a sales office, is in the same building as a distribution center, manufacturing plant, storage yard, warehouse, similar facility CASTLE similarly commented: "the Legislature, in general, re- operated a seller, then the entire facility is a place of business jected the Comptroller's efforts to become a member and be sub- of the seller." ject to the Agreement, and, more specifically, declined to adopt the language of 3.10.1 and change the definition of what is a (41 TexReg 260, 263) (2016) (former TAC §3.334(e)(2), em- 'place business.'" phasis added); (39 TexReg 9597, 9605) (2014) (former TAC §3.334(e)(2), emphasis added). Mr. Land commented: "By not adopting the agreement, the legislature was rejecting very language the Comptroller pro- If a distribution center were automatically a "place business" poses to adopt..." for local tax sourcing as Plaintiff cities contend, subpara- graphs (B) and (C) would not be required - there would be no Clyde Hairston, Mayor City Lancaster, commented: need for a salesperson a sales office to "then" make dis- "Rule changes refer to Streamline Sales and Use Tax Agree- tribution center a "place business" tax sourcing pur- ment. States participating in this agreement do not seem to have poses. similar economic issues as State Texas. If intent rule change is to position state to participate in Sales Fourth, in addition to its rule, comptroller distributed Publi- Use Tax Agreement, further research is needed to better support cation 94-105, sometimes called "Local Sales Use Tax rationale this action." Bulletin - Guidelines Collecting Local Sales Use Tax," "Tax Topics - Guidelines Collecting Local Sales Use And, Rolin McPhee, City Manager City Longview, com- Tax" (Guidelines). These Guidelines were posted comp- mented: "This sentiment runs counter to story Texas. Yes, troller's website indexed in comptroller's State Tax Au- we should look learn from other states, but Texas should tomated Research System. Since at least 2007, Guidelines lead not follow. We should not implement statewide policies referred a "location within state that is not a place busi- because 'everyone else is doing it.'" ness (such as a warehouse distribution center)." E.g., STAR David Bristol, Mayor City Prosper, had similar com- Accession No. 200902596L (February 2009). The Guidelines ments. were intended as a general guide not as a comprehensive resource. But, an ordinary reader would not walk away Although legislature declined adopt SSUTA, it would impression that a taxpayer's fulfillment center was automatically be an overstatement suggest legislature specifically "place business" purposes sourcing. rejected language single subsection SSUTA. As CASTLE pointed out: "Therefore, prior December 31, 2007, Fifth, in 2016, comptroller rewrote Guidelines even Legislature had agree quoted 3.10.1 language, as more specific regarding fulfillment centers: "The warehouse from step in allowing Texas subject Agreement. But doing which person ships those items is not place business, so would have required not only Legislature radically re- unless warehouse separately qualifies place busi- vise statutory definition 'place business' but make many ness." STAR Accession No. 201606995L (June 1, 2016). other changes sections Tax Code addressing sales And, sixth, in comptroller letter ruling discussed ful- use tax." fillment centers, referring former rule, then in effect: Texas has unique, composite consummation statute, "Scenario One: Taxpayer Retailer operates fulfillment centers are sometimes sourced where order is received, Texas not open public. ... When an order sometimes sourced where order is fulfilled, sometimes is received at location is place business is fulfilled Texas at location is place business, sourced where order is delivered. Adoption SSUTA June Register Tax §321.203 establishes hierarchy among places would require fundamental changes this composite consum- business involved transaction, subject certain ex- mation statute, comptroller is advocating pro- moting. However, there is one area overlap. Both systems ceptions. hierarchy described summary chart use receipt order factor sourcing. In area Comptroller's Guide Sellers. See https://comptrol- overlap, it entirely appropriate consider how SSUTA ler.texas.gov/taxes/publications/94-105.php (Local Sales does it. Use Tax Collection - A Guide Sellers). If order fulfilled place business seller Texas, sale comptroller has considered language SSUTA consummated location even if order received *191 concluded that it is a reasonable and practical method of deter- another place of business in Texas (except for orders received mining where and when an order is received. And, the SSUTA in person). Conversely, an order is consummated at the place language has the added benefit of being a concept that other of business of the seller in Texas where the order is received states have acknowledged, and a concept with many tax- only if the order was not fulfilled from a place of business in payers will already be familiar. Texas (except for orders received in person). Subsection (c) of Summary of the Factual Bases for the Rule - Subsection (c) - the comptroller rule reflects this hierarchy. Application of the consummation rules. The statutory provision in Tax Code, §321.203(b), for a seller with a single place of business in Texas, is simply a recogni- Subsection (c) states in relevant part: tion that the hierarchy is not required in those circumstances. "The following rules, taken from Tax Code, §321.203 and The outcome will be the same regardless of whether the order §323.203, apply all sellers engaged in business in Texas, is received, fulfilled, or received and fulfilled from that place of regardless of whether they have no place of business in Texas, a business, regardless of whether the order is placed at that
single place of business in Texas, or multiple places of business location in person - the sale will be consummated at that place in Texas." of business. The language of subsection (c) tracks the language in the prior But the place of business must have a discrete connection 2014 2016 versions of the rule: the sale the sale be consummated there. Tax Code, §321.203(b) cannot reasonably be interpreted mean that a "The following rules, taken from Tax Code, §321.203 sale is consummated at the seller's single place of business in §323.203, apply all sellers engaged in business in this state, Texas, even if that place of business did not receive the order regardless of whether they have a place of business in Texas or from the customer, did not fulfill the order the customer, multiple places of business in the state." was not the location where the order was delivered. (41 TexReg 260, 265) (2016) (former 34 TAC §3.334(h)(3); (39 Suppose a reseller has a single place of business, located in TexReg 9597, 9606) (2014) (former 34 TAC §3.334(h)(3)). City A, that consists only of a sales office. The reseller also has
Reasons Why the Comptroller Disagrees With Commenters'
fully-automated shopping website hosted by a server in City
Submissions Proposals - Subsection (c).
B that receives processes an order from customer in City C. The order is then fulfilled from third-party manufacturer's Mr. Sheets commented that the rule changes how Internet or-
warehouse in City D shipped the customer in City C. To ders are sourced retailers with single place business in make the customer in City C pay sales tax City A, ju-
Texas. However, the language subsection (c) has the same risdiction that had no relation the customer or the transaction, effect as language in prior 2014 2016 versions would be an unreasonable reading statute that Leg-
rule - no special treatment vendors with single "place islature could not have intended. See,
Castleman v. Internet
business."
Money Ltd.,
business such that it had a single sales office in City A that had workforce of today." And Brian Pannell, North America Tax Di-
nothing to do with the transaction. rector for Dell Inc., commented that subsection (b)(4) deviates from Tax Code, §321.203(d)(2) and "effectively changes sourc-
Mr. Sheets commented that procedural due process require-
ing rules for salespersons who are assigned regional places ments do not apply because Tax Code, §321.203(b) is the result of business but do their principal work-related activities at other of legislative action. However, the comptroller's statutory inter-
pretation is based on substantive due process. See,
Patel,
469 locations." S.W.3d at 75. The comptroller disagrees these comments. Tax Code, §321.203(d) does not impute an order the location where a Mr. Sheets also proposes add a "special" exception for sell-
salesperson is "assigned." Instead, the statute provides that in ers a single place of business in Texas. The comptroller certain circumstances, an order may be imputed the "place of declines make the proposed revisions for the reasons stated business from which the retailer's agent or employee who took the preceding paragraphs. The City of Round Rock is chal-
the order operates." And, although an order may be imputed lenging the comptroller's interpretation the pending litigation. a place of business of the retailer if the agent or employee oper-
Again, it is appropriate state the comptroller's interpretation ates out of that place of business, the statute does not mandate rule so that those who disagree may challenge interpre-
that an agent or employee be assigned to, or operate out of, a tation court. place of business. If agent or employee does not operate out
Summary of Factual Bases Rule - Subsection (b)(4)
of a place of business, Tax Code, §321.203(d) has no applica-
- Order received by a salesperson who is not at a place of busi-
tion. And, it would be unreasonable allow a vendor source
ness when salesperson receives order.
sales a place of business by merely "assigning" a salesperson that location absence of any physical connection. Subsection (b)(4) provides:
Summary of Factual Bases Rule - Subsection (b)(6)
"(4) An order that is received by a salesperson who is not at a
-small and micro-businesses.
place business of seller when salesperson receives order is treated being received location from which The comptroller adds subsection (b)(6) former rule: salesperson operates. Examples include orders that a sales-
"If a small business or a micro-business operates a single lo-
person receives by mail, telephone, including Voice over Internet cation out which it conducts all its business activities, Protocol and cellular phone calls, facsimile, and email while trav-
comptroller will presume that location is a place business eling. The location from which salesperson operates is seller." principal fixed location where salesperson conducts work-re-
lated activities. The location from which a salesperson operates The comptroller also adds following supporting definitions sub-
will be a place business seller only if location meets section (a): definition a 'place business a seller' subsection "Independently owned operated business--a self-controlling (a)(16) this section on its own, without regard orders entity that is not a subsidiary another entity or otherwise sub-
imputed that location this paragraph." ject control another entity, is not publicly traded." Tax Code, §321.203(d) provides consummation a local "Micro-business--a legal entity, including corporation, partner-
sale place business "from which retailer's agent ship, or sole proprietorship, that: or employee who took order operates." Prior 2020 amendment, rule did not define location from which (A) is formed purpose making profit; salesperson operates. The third sentence subsection (b)(4) (B) is independently owned operated; now provides part: "The location from which salesperson operates is principal fixed location from which salesper-
(C) has more than employees." son conducts work-related activities..." physical connection be-
tween salesperson place business reasonable "Small business--a legal entity, including corporation, partner-
interpretation location from which salesperson operates. ship, sole proprietorship, that: The final sentence subsection (b)(4) clarifies princi-
(A) formed purpose making profit; pal fixed location from which salesperson conducts work-re-
(B) independently owned operated; lated activities may may place business seller, depending upon whether location meets defini-
(C) has fewer than employees less than $6 million an-
tional requirements subsection (a)(16). For example, if nual gross receipts." entrepreneur conducts sales operations from entrepreneur's The definition "independently owned operated business" residence, entrepreneur will operating out place taken from Government Code, Chapter 2006, Small Busi-
June 28, Register
Subsection (i)(3) implements House Bill 2153, 86th Legislature, nesses Rural Communities Impact Guidelines, updated 2019, sets single use tax rate remote sellers December 2017. may elect use. The definitions "micro-business" "small business" The comptroller received no negative submissions proposals taken Government Chapter 2006. regarding this subsection. comptroller cannot make location "place business"
Summary Factual Bases Rule - Subsection (k)(5) -
rule if statute does allow it. But, agency can presume
Marketplace sales.
location "place business" based on indicative facts, such small, independent business conducts all its Subsection (k)(5) implemented House Bill 86th Legisla-
business operations out single location. ture, places use collection re-
Reasons Why Comptroller Disagrees With Commenters'
sponsibilities marketplace providers.
Submissions Proposals - Subsection (b)6).
comptroller received no negative submissions proposals regarding subsection. Mr. Sheets commented subsection does nothing reduce adverse economic effects small microbusi-
*193
Reasons Why the Comptroller Disagrees With Commenters'
nesses. Mr. Land commented that there is no rational policy
Submissions and Proposals - Public benefits and costs.
reason for treating businesses differently based upon size or Mr. Christian commented that there will be a significant fiscal im-
revenue, and Mr. Gilmore questioned the reasoning behind the plication for businesses that must invest in reprogramming soft-
differentiation. CASTLE commented that the presumption is ware for enhanced local tax compliance, and the economic cost contrary to the law and factually unsupported. And, Mr. Chris-
to the public must be estimated. Mr. Gilmore, Mr. Land, Mr. tian commented that the presumption should be expanded. Sheets, and Mr. Mays also commented that the rule will increase The comptroller responds that the agency routinely uses pre-
business compliance costs. sumptions in applying statutes, and the courts have honored The comptroller acknowledges that there may be additional com-
them. word search the Texas Administrative Code produces pliance costs, since it is conceivable that the rule may cause over 60 instances in which the comptroller rules use presump-
some vendors to realize that they are noncompliant. If the ven-
tions. For example, the Austin Court Appeals recognized that dors come into compliance by changing from single-location re-
"repainting is presumed to be a taxable activity unless the tax-
porting to multiple-location reporting, their compliance burden payer affirmatively shows that the repainting meets the specific requisites maintenance set out in the rule."
GATX Termi-
may increase. And if vendors change from multiple-location re-
nals Corp. v. Rylander,
location seller Texas. Physical presence in local ju- Code, §2001.024 has never been interpreted any agency or risdiction no longer required. These expansions local any court require individual estimates. There are over 1,700 sales tax collection responsibilities sellers are based local governments Texas local sales tax. In all prior United States Supreme Court decision South Dakota v. Way- rulemakings, comptroller has never estimated loss fair, Inc., S. Ct. 2080 (June 21, 2018). increase local sales tax revenue for each local government local sales tax. And, comptroller unaware The comptroller received no negative submissions proposals any other agency that has made individual estimates for each regarding these subsections. local government. Summary Factual Bases Rule - Subsection (i)(3) - Single local tax option remote sellers. Furthermore, statute does not require comptroller ar- ticulate methodology individual estimates that agency required make. If individual jurisdiction wants con- ADOPTED RULES June 28, TexReg applicable where transactions were formerly sourced, there duct its own investigation, preamble proposed rule ex- would be reduction aggregate tax levies con- plained data jurisdiction would have obtain, sequent reduction state service charge revenues under Tax preamble explained how consultant used data his Code, §§321.503, 322.303, 323.503. study. See, (49 2443) (April 19, 2024). Statement statutory other authority under rule CASTLE suggests comptroller could develop sample adopted. governments. The comptroller responds Govern- ment Code, §2001.024 does require sampling. Furthermore, Tax Code, §§111.002 (Comptroller's Rule; Compliance; Forfei- aggregate estimate based sample individual jurisdic- ture), 321.306 (Comptroller's Rules), 322.203 (Comptroller's tions would do little tell individual jurisdictions how they would Rules), 323.306 (Comptroller's Rules) authorize comp- affected. troller adopt rules implement statutes. Mr. Sheets suggested comptroller could have under- Sections articles code affected. taken alternatives, such making estimates top twenty Tax Code, §151.0595 (Single Local Tax Rate Remote Sell- most populated jurisdictions making estimates cities ers); Tax Code, Chapter Subchapters A, B, C, D, F; Tax involved lawsuit. The comptroller responds Govern- Code, Chapter 322; Tax Code, Chapter affected. ment §2001.024 does require selective, individual es- timates. agency certifies legal counsel has reviewed adop- tion found it valid exercise agency's legal au- Administrative Procedure Act only requires fiscal note *194 thority. showing "the estimated loss or increase revenue to state or local governments as a result enforcing or administering Filed with Office Secretary State June 14, 2024. rule." Government Code, §2001.024(a)(4)(C). The comp- troller has done that. In addition, rulemaking process has TRD-202402641 disclosed types cities taxpayers that may be most Jenny Burleson affected - cities receiving substantial tax revenues from fulfill- Director, Tax Policy Division ment centers, such as CASTLE group, cities receiving Comptroller Public Accounts substantial tax revenues taxpayers sourcing all their sales Effective date: July 4, 2024 a single location, such as City Round Rock. Proposal publication date: April 19, 2024 Reasons Why Comptroller Disagrees With Commenters' For further information, please call: (512) 475-2220 Submissions Proposals - Local employment impact state- ♦ ♦ ♦ ment. CASTLE commented that comptroller "fails provide a CHAPTER 5. FUNDS MANAGEMENT non-conclusory explanation why impact cannot be deter- (FISCAL AFFAIRS) mined." The comptroller disagrees. The explanation stated preamble proposed rule. SUBCHAPTER D. CLAIMS PROCESSING--
Reasons Why Comptroller Disagrees With Commenters' PAYROLL Submissions Proposals - Government growth impact state- ment. TAC §5.46
CASTLE comments that preamble proposed rule "fails The Comptroller Public Accounts adopts amendments discuss any meaningful way" government growth state- §5.46 concerning deductions paying membership fees ment required by Government §2001.0221. Comptroller certain state employee organizations, without changes Rule 11.1(d) states that an agency shall "reasonably describe" proposed text as published May 2024, issue effect government growth. TAC §11.1(d). Historically, Texas Register (49 TexReg 2985). The rule will be repub- reasonable descriptions published by comptroller, well lished. other agencies, consist statements no effect without ex- The amendments add a definition CAPPS new subsection planation, statements effect brief explanations. The (a)(1) renumber subsequent provisions accordingly. comptroller followed historical approach rulemaking. The amendments subsections (b)(1)(C) (b)(2)(B) add CASTLE comments rule will create or eliminate gov- second method establishing, changing or cancelling pay- ernment program if local government loses significant local roll deduction state employee organization membership fees. tax revenue. The comptroller responds rule it- These provisions currently allow state employee establish, self does create eliminate government program. The change cancel payroll deduction by submitting written au- creation elimination local government programs thorization form employer's human resource officer pay- discretion local governments. roll officer. The amendments these provisions also allow CASTLE also comments "the Comptroller has already ad- state employee establish, change cancel payroll deduc- mitted there will decrease fees he receives." tion submitting an electronic authorization through CAPPS. comptroller acknowledges extent transactions amendments subsection (b)(2)(D) make conforming previously sourced within an incorporated municipality would change require state agencies notify affected eligible sourced unincorporated area without cumulative tax organization if state employee submits electronic authoriza- rate levied municipal (pursuant limited purpose annexa- tion form through CAPPS cancelling payroll deduction state tion agreement), county, and/or special purpose taxing authori- employee organization membership fees. ties commensurate cumulative rate levied municipal, county, and/or special purpose taxing authorities June Register
T AB J 2024 STATUTORY DEFINITION OF PLACE OF BUSINESS HOW THE STATUTORY DEFINITION OF PLACE OF BUSINESS OF THE RETAILER READS UNDER THE 2024 VERSION OF RULE 3.334 "Place of business of the retailer" means an established outlet, office, or location operated by the retailer or the retailer's agent or employee for the purpose of having sales personnel receive orders for taxable items and includes any location at which three or more orders are received by sales personnel of the retailer during a calendar year. Any such established outlet, office, or location operated by the retailer or the retailer's agent or employee cannot include a computer server, Internet protocol *196 address, domain name, website, or software application and must be the location where an order is initially received by or on behalf of the seller and not where the order may be subsequently forwarded, accepted, completed or fulfilled. An order is received when all of the information from the purchaser necessary to the determination whether the order can be accepted has been received by or on behalf of the seller by sales personnel. The location from which a product is shipped shall not be used in determining the location where the order is received by the seller. A warehouse, storage yard, or manufacturing plant is not a "place of business of the retailer" unless at least three orders are received by the retailer as set forth above during the calendar year at the warehouse, storage yard, or manufacturing plant. 14 Automated Certificate of eService This automated certificate of service was created by the efiling system.
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Richard Phillips on behalf of Richard Phillips Jr.
Bar No. 24032833
Rich.Phillips@hklaw.com
Envelope ID: 106158677
Filing Code Description: Brief Requesting Oral Argument
Filing Description: Coppell Parties' Opening Brief as Appellants
Status as of 9/29/2025 7:24 AM CST
Case Contacts
Name BarNumber Email TimestampSubmitted Status
Richard Phillips 24032833 Rich.Phillips@hklaw.com 9/26/2025 10:33:15 PM SENT
Bryan Dotson 24072769 bryan.dotson@chamberlainlaw.com 9/26/2025 10:33:15 PM SENT
Ray Langenberg 11911200 ray.langenberg@cpa.texas.gov 9/26/2025 10:33:15 PM SENT
Reed Randel 24075780 Reed.Randel@hklaw.com 9/26/2025 10:33:15 PM SENT
Stephen Fink 7013500 Stephen.Fink@hklaw.com 9/26/2025 10:33:15 PM SENT
James Harris 9065400 jim.harris@hklaw.com 9/26/2025 10:33:15 PM SENT
Kyle Counce 24082862 Kyle.Counce@oag.texas.gov 9/26/2025 10:33:15 PM SENT
Cynthia Bourland 790343 bourland@bourlandlaw.com 9/26/2025 10:33:15 PM SENT
Brandon L.King brandon.king@hklaw.com 9/26/2025 10:33:15 PM SENT