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A Texas power plant operator’s purchases of turbines, generators, and accessories used to generate electricity did not qualify for the manufacturing exemption from sales and use tax because the operator was unable to prove that the machinery retained its identity as tangible personal property. Instead, the court ruled that the machinery was incorporated into real property. The machinery was connected by bolts to metal plates which were anchored and grounded into the facility’s foundations. The operator claimed that the machinery could be removed by detaching the bolts. Additionally, the machinery was connected to other machinery and equipment by extensive piping and cables. The main consideration in determining whether the machinery was annexed to real property is the purchasing party’s intent. The operator failed to submit sufficient proof of its intent for the machinery. For example, the operator did not submit evidence that the machinery could be removed without damage to the real property. Additionally, it did not submit evidence that the buildings housing the machinery were constructed so that they could be disassembled to allow for removal of the machinery. As a result, the court ruled that the machinery was incorporated into real property and is subject to Texas sales and use tax.
(Decision, Hearing No. 100,507, Texas Comptroller of Public Accounts, November 5, 2010, released March 2011)


Amazon has entered into an agreement with the state of Texas to begin collecting and remitting Texas sales tax on July 1, 2012. Under the agreement, Amazon plans over the next four years to create at least 2,500 jobs and make at least $200 million in capital investments in Texas. The agreement resolves all sales tax issues between Amazon and the state. Both Amazon and the state showed support for the enactment of federal legislation to resolve the tax collection issue on a national level. Click here to see our previous news item on Texas's affiliate nexus bill. (News Release, Texas Comptroller of Public Accounts, April 27, 2012)


On July 19, 2011, Texas Governor Rick Perry signed a fiscal matters bill that includes affiliate nexus provisions for remote sellers. Effective January 1, 2012, the definition of a retailer considered to be engaged in business in Texas for use tax collection purposes is expanded. A retailer is engaged in business in Texas if the retailer holds a substantial ownership interest in, or is owned in whole or substantial part by, a person who maintains a location in Texas from which business is conducted and if the retailer sells the same or a substantially similar line of products as the in-state person and sells those products under a business name that is the same or substantially similar; or the facilities or employees of the in-state person are used to advertise, promote, or facilitate sales by the retailer to consumers or perform any other activity on behalf of the retailer intended to establish or maintain a marketplace for the retailer in Texas, including receiving or exchanging returned merchandise. Additionally, a retailer is engaged in business in Texas if the retailer holds a substantial ownership interest in, or is owned in whole or substantial part by, a person who maintains a distribution center, warehouse, or similar location in Texas and who delivers property sold by the retailer to consumers. In addition, the definition of “seller” and “retailer” is expanded to include a person who has been entrusted with the possession of property and has the power to sell, lease, or rent the property without further action by the owner. Click here for an update on Amazon's agreement to collect sales tax in Texas. (S.B. 1, Laws 2011, First Special Session, effective September 28, 2011, except as noted)


The Texas Comptroller of Public Accounts has enacted the Fresh Start tax amnesty program, which will run from June 12, 2012 through August 17, 2012. During the amnesty period, penalties and interest will be waived for businesses that file delinquent tax reports and pay all taxes due, or amend reports that underreported taxes and pay the taxes due. Only reports originally due before April 1, 2012 are eligible for the amnesty. The amnesty program applies to sales tax, franchise tax, and other state and local taxes and fees administered by the Comptroller’s office, with the exception of Public Utility Commission gross receipts assessments. The amnesty does not cover underpaid tax returns or taxes owed for filing periods that businesses have in audit. (Notice, Texas Comptroller of Public Accounts, March 15, 2012)


Daily deals offered through third parties, such as radio stations and social media networks, are treated as gift certificates for sales tax purposes. Sales tax is not due on the third-party sale of a deal. When the deal is redeemed for a taxable item, the deal is treated like cash given for the purchase. If the item that is purchased with the deal is taxable, sales tax is due on the full sales price, including any amount covered by the deal. Tax should not be calculated on the reduced price of the deal value but rather on the original selling price. (Tax Policy News, Texas Comptroller of Public Accounts, June 2011)



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