34 Tex. Admin. Code § 3.287 - Exemption Certificates
(a)
Definition. Exemption certificate--A document that, when properly executed,
allows the tax-free purchase of an item that would otherwise be subject to tax.
Except as otherwise stated, the exemption certificate described in this section
refers to the Texas Sales and Use Tax Exemption Certification, Form 01-339
(Back) or a document substantially in the same format. There is no provision in
Tax Code, Chapter 151 (Limited Sales, Excise, and Use Tax) for an exemption
number or a tax exempt number to be issued or used in connection with the Texas
Sales and Use Tax Exemption Certification, Form 01-339 (Back).
(b) Who may issue an exemption certificate.
An exemption certificate of the type described in this section may only be
issued by one of the following:
(1) an
organization that has qualified for exemption under Tax Code, §
151.309
(Governmental Entities) or §151.310 (Religious, Educational, and Public
Service Organizations). See §
3.322 of
this title (relating to Exempt Organizations); or
(2) a person purchasing an item that is
exempt under Tax Code, Chapter 151, Subchapter H (Exemptions).
(c) Exemptions addressed by other
sections of this title: Direct payment permit holders, maquiladoras,
agriculture, timber, qualifying data centers, qualified research, prior
contracts and sales for resale.
(1)
Purchasers using direct pay permits should refer to §
3.288
of this title (relating to Direct Payment Procedures and
Qualifications).
(2) Purchasers
using maquiladora exemption permits should refer to §
3.358 of
this title (relating to Maquiladoras).
(3) Purchasers claiming an agriculture
exemption should refer to §
3.296
of this title (relating to Agriculture, Animal Life, Feed, Seed, Plants, and
Fertilizer).
(4) Purchasers
claiming a timber exemption should refer to §
3.367
of this title (relating to Timber Items).
(5) Purchasers claiming a qualifying data
center exemption should refer to §
3.335
of this title (relating to Property Used in a Qualifying Data Center or
Qualifying Large Data Center Project; Temporary State Sales Tax
Exemption).
(6) Purchasers claiming
a qualified research exemption should refer to §
3.340 of this
title (relating to Qualified Research).
(7) Purchasers claiming a prior contract
exemption should refer to §
3.319
of this title (relating to Prior Contracts) and §
3.334
of this title (relating to Local Sales and Use Taxes).
(8) Purchasers claiming a sale for resale
exemption should refer to §
3.285
of this title (relating to Resale Certificate; Sales for Resale).
(d) Accepting an exemption
certificate.
(1) All gross receipts of a
seller are presumed subject to sales or use tax unless a valid and properly
completed resale or exemption certificate is accepted by the seller. A properly
completed exemption certificate contains the information required by subsection
(f) of this section. Resale certificates are addressed in detail in §
3.285
of this title.
(2) A seller does
not owe tax on a sale, lease, or rental of a taxable item if the seller accepts
a properly completed exemption certificate in good faith. An exemption
certificate is deemed to be accepted in good faith if:
(A) the exemption certificate is accepted at
or before the time of the transaction;
(B) the exemption certificate is properly
completed, meaning that all of the information required by subsection (f) of
this section is legible; and
(C)
the seller does not know, and does not have reason to know, that the sale is
not exempt. It is the seller's responsibility to be familiar with Texas sales
tax law as it applies to the seller's business and to be familiar with the
exemptions that are available for the items the seller sells.
(3) A person commits an offense if
the person: intentionally or knowingly makes a false entry in, or a fraudulent
alteration of, an exemption certification; makes, presents, or uses an
exemption certificate with knowledge that it is false and with the intent that
it be accepted as a valid exemption certificate; or intentionally conceals,
removes, or impairs the verity or legibility of an exemption certificate or
unreasonably impedes the availability of an exemption certificate.
(A) If the tax evaded by the invalid
certificate is less than $20, the offense is a Class C misdemeanor.
(B) If the tax evaded by the invalid
certificate is $20 or more but less than $200, the offense is a Class B
misdemeanor.
(C) If the tax evaded
by the invalid certificate is $200 or more but less than $750, the offense is a
Class A misdemeanor.
(D) If the tax
evaded by the invalid certificate is $750 or more but less than $20,000, the
offense is a felony of the third degree.
(E) If the tax evaded by the invalid
certificate is $20,000 or more, the offense is a felony of the second
degree.
(4) The seller
should obtain the properly executed exemption certificate at the time the
transaction occurs. All certificates obtained on or after the date the
comptroller's auditor actually begins work on the audit at the seller's place
of business or on the seller's records after the entrance conference are
subject to verification. All incomplete certificates will be disallowed
regardless of when they were obtained.
(A)
The seller has 90 days from the date written notice is received by the seller
from the comptroller, or until a later date agreed to in writing by the
comptroller and the seller, referred to in this section as "the period," in
which to deliver the certificates to the comptroller. Written notice shall be
given by the comptroller no earlier than the filing of a petition for
redetermination or claim for refund.
(B) For the purposes of this section, written
notice given by mail is presumed to have been received by the seller within
three business days from the date of deposit in the custody of the United
States Postal Service. The seller may overcome the presumption by submitting
proof from the United States Postal Service or by other competent evidence
showing a later delivery date.
(C)
Any certificates delivered to the comptroller during the period will be subject
to independent verification by the comptroller before any exemptions will be
allowed. Certificates delivered after the period will not be accepted and the
exemption will not be granted. See §
3.282
of this title (relating to Auditing Taxpayer Records) and §
3.286(relating
to Seller's and Purchaser's Responsibilities) of this title.
(5) A seller may accept a blanket
exemption certificate given by a purchaser who purchases only items that are
exempt. For information on blanket exemption certificates received for
agricultural exemptions, see §
3.296
of this title. For information on blanket exemption certificates received for
timber items see §
3.367
of this title.
(6) An exemption
certificate is not acceptable when an exemption is claimed because tangible
personal property is exported outside the United States. For proper
documentation required for proof of export, see §
3.323 of this
title (relating to Imports and Exports) and §
3.360
of this title (relating to Customs Brokers).
(7) Exemption certificates are subject to the
provisions of §
3.281
of this title (relating to Records Required; Information Required). A seller is
required to keep exemption certificates for a minimum of four years from the
date on which the sale is made and throughout any period in which any tax,
penalty, or interest may be assessed, collected, or refunded by the comptroller
or in which an administrative hearing or judicial proceeding is
pending.
(e) Taxable use
of items purchased under an exemption certificate; improper use of an exemption
certificate.
(1) When an item purchased under
a valid exemption certificate is used in a taxable manner, whether the use is
in Texas or outside the state, the purchaser is liable for payment of sales tax
based on the value of the tangible personal property or taxable service for the
period of time used. If the exemption certificate was invalid at the time of
its issuance, the purchaser owes tax on the original purchase price.
(2) The value of tangible personal property
is the fair market rental value of the tangible personal property. The fair
market rental value is the amount that a purchaser would pay on the open market
to rent or lease the tangible personal property for use. If tangible personal
property has no fair market rental value, sales tax is due based upon the
original purchase price.
(3) The
value of a taxable service is the fair market value of the taxable service. The
fair market value is the amount that a purchaser would pay on the open market
to obtain that taxable service. If a taxable service has no fair market value,
sales tax is due based upon the original purchase price.
(4) At any time, the person who purchased
tangible personal property or a taxable service under a valid exemption
certificate and is using the tangible personal property or taxable service in a
divergent taxable manner may stop paying tax on the value of tangible personal
property or taxable service and instead pay sales tax on the original purchase
price. When the person elects to pay sales tax on the purchase price, credit
will not be allowed for taxes previously paid based on value.
(5) Sales tax is not due when a taxable item
purchased under a valid exemption certificate is donated to an organization
exempt from tax under Tax Code, §
151.309 or
§
151.310(a)(1)
or (2), provided the purchaser does not use the donated tangible personal
property or the donated taxable service.
(6) This subsection is not applicable when an
item purchased under Tax Code, §
151.318
(Property Used in Manufacturing) is used in a taxable manner. A purchaser who
uses such items in a taxable manner is liable for sales or use tax and should
refer to §
3.300
of this title (relating to Manufacturing; Custom Manufacturing; Fabricating;
Processing).
(f) Content
of an exemption certificate. An exemption certificate must show:
(1) the name and address of the
purchaser;
(2) a description of the
item to be purchased;
(3) the
reason the purchase is exempt from tax;
(4) the signature of the purchaser and the
date; and
(5) the name and address
of the seller.
(g)
Purchases of taxable items by agents of the Federal Deposit Insurance
Corporation (FDIC). The FDIC may purchase items tax-free for use in operating a
property or business to which it has title. An exemption certificate may be
issued by the FDIC or by persons acting as agents for the FDIC when purchasing
items that are incorporated into or used on the property or business being
managed. The certificate must state that the purchases are being made by or for
the FDIC. The FDIC or persons managing property or a business for the FDIC may
issue an exemption certificate when:
(1) the
FDIC provides documentation to the person managing the property or business
showing that title to the property or business being managed was transferred to
the FDIC; and
(2) the FDIC has
entered into a written agreement with the person managing the property or
business that designates that person as its agent and authorizes that person to
make purchases on its behalf. The agreement must be in the person's files for
review by the comptroller. It is not necessary to provide a copy of the
agreement to suppliers.
(h) Form of an exemption certificate. An
exemption certificate must be in substantially the form of a Texas Sales and
Use Tax Exemption Certification, Form 01-339 (Back). Copies of the form may be
obtained from the Comptroller of Public Accounts, Tax Policy Division or by
calling 1-800-252-5555. The form is also available online at
https://comptroller.texas.gov/forms/01-339.pdf.
Notes
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