34 Tex. Admin. Code § 3.346 - Use Tax
(a) Definitions.
The following words and terms, when used in this section, shall have the
following meanings, unless the context clearly indicates otherwise.
(1) Storage--The keeping or retention of
tangible personal property in Texas for any purpose other than:
(A) transporting property out of state to a
location outside Texas for use solely outside of Texas; or
(B) processing, fabricating, or manufacturing
of tangible personal property into other property or attaching the tangible
personal property to or incorporating the tangible personal property into other
property that will be transported outside Texas for use solely outside of
Texas.
(2) Use--The
exercise of a right or power incidental to the ownership of tangible personal
property over tangible personal property, including tangible personal property
other than printed material that has been processed, fabricated, or
manufactured into other property or attached to or incorporated into other
property transported into this state. With respect to a taxable service, use
means the derivation in this state of direct or indirect benefit from the
service. The term does not include the following:
(A) the sale of tangible personal property or
a taxable service in the regular course of business;
(B) the transfer of a taxable service as an
integral part of the transfer of tangible personal property in the regular
course of business;
(C) the
transfer of tangible personal property as an integral part of the transfer of a
taxable service in the regular course of business;
(D) the exercise of a right or power over
tangible personal property for the purpose of subsequently transporting the
property outside Texas for use solely outside of Texas; or
(E) the exercise of a right or power over
tangible personal property for the purpose of processing, fabricating, or
manufacturing of tangible personal property into other property or attaching
the tangible personal property to or incorporating the tangible personal
property into other property that will be transported outside Texas for use
solely outside of Texas.
(3) Use tax--A nonrecurring tax that is
complementary to the sales tax and is imposed on the storage, use, or other
consumption of a taxable item in this state.
(b) Imposition of the use tax.
(1) Out-of-state purchases. Use tax is due on
taxable items purchased out of state that are stored, used or consumed in
Texas.
(2) Direct payment permit
purchases. Use tax is due on taxable items purchased under a direct payment
permit that are stored, used or consumed in Texas. See §
3.288 of this title (relating to
Direct Payment Procedures and Qualifications) and subsection (g) of this
section.
(3) Construction
contracts.
(A) Use tax is due on taxable
items used, consumed or incorporated into real property in Texas by a
contractor in the performance of a lump-sum contract for construction of a new
improvement to realty or for repair and remodeling of a residential improvement
to realty. See §
3.291 of this title (relating to
Contractors).
(B) Use tax is due on
taxable items used or consumed in Texas by a person in the performance of a
lump sum or separated contract for nonresidential repair or remodeling, or in
the performance of a separated contract for construction of a new improvement
to realty or for repair or remodeling of a residential improvement to realty.
See §
3.357 of this title (relating to
Nonresidential Real Property Repair, Remodeling, and Restoration; Real Property
Maintenance) and §
3.291 of this title.
(4) Shipments of taxable items
from out-of-state suppliers and sellers to purchaser's designees. Use tax is
due on taxable items, such as gifts, catalogs and promotional goods purchased
outside this state by a purchaser engaged in business in this state if the
taxable items are delivered at the direction of the purchaser to a location in
Texas designated by the purchaser.
(A) A
purchaser is engaged in business in Texas if the purchaser is required to
collect sales or use tax under Tax Code, Chapter 151 or if the purchaser has
nexus or is engaged in business in Texas as defined in §
3.286 of this title (relating to
Seller's and Purchaser's Responsibilities, including Nexus, Permits, Returns
and Reporting Periods, Collection and Exemption Rules, and Criminal
Penalties).
(B) Local use taxes
(city, county, transit, special purpose district) are also due, but only to the
extent that the purchaser is engaged in business in the local taxing
jurisdictions into which deliveries are made.
(5) Raw materials manufactured or
incorporated into other tangible personal property. Use tax is due on raw
materials (tangible personal property), other than printed materials as
provided under paragraph (6) of this subsection, purchased outside this state
that have been processed, fabricated, or manufactured into other property or
attached to or incorporated into other property outside this state and
subsequently transported into this state, and, except as provided by Tax Code,
§
151.056(b)
regarding property incorporated under a separated contract for the improvement
of realty, includes the incorporation of tangible personal property into real
estate or into improvements of real estate whether or not the real estate is
subsequently sold.
(6) Printed
materials.
(A) Use tax is due on the total
cost of printed materials, including printing, paper and ink, purchased out of
state, such as a book, brochure or catalog, and then shipped or delivered into
Texas. An example of such printed material is a catalog where either the
purchaser or the printer of the catalog first purchased ink and paper outside
of Texas that was then printed and bound before being mailed to Texas residents
in the form of a catalog. The item being used by the purchaser in this state is
the catalog and since the catalog is not incorporated into another item, use
tax is due on the total cost of the catalogs delivered into Texas.
(B) Use tax does not apply to printed
materials purchased outside of this state that have been processed, fabricated,
or manufactured into other property or attached to or incorporated into other
property transported into this state. An example would include the purchase of
printed pages by a Texas customer from an out-of-state printer who ships the
items directly to another out-of-state firm that binds the items into a manual
or book. The charge by the out-of-state binder to the Texas customer is subject
to tax. The charge by the vendor that sold the printed materials to the Texas
customer is not taxable since the printed materials have been processed,
fabricated, or manufactured into other property or attached to or incorporated
into other property transported into this state.
(7) Occasional sales.
(A) A person who holds or is required to hold
a sales and use tax permit must accrue use tax on the purchase of a taxable
item from a person entitled to the occasional sale exemption from sales tax
provided by Tax Code, §
151.304(b)(1)
and remit it to the comptroller. Tax Code, §
151.304(b)(1)
relates to one or two sales during a 12-month period by a person who does not
habitually engage, or hold himself out as engaging, in the business of selling
taxable items at retail.
(B) A
purchaser who holds or is required to hold a sales and use tax permit is not
required to accrue use tax and remit it to the comptroller on a purchase from a
person entitled to claim the occasional sales exemption from sales tax provided
by Tax Code, §
151.304(b)(2) -
(5). Tax Code, §
151.304(b)(2)
relates to the sale of the entire operating assets of a business or of a
separate division, branch, or identifiable segment of a business; Tax Code,
§
151.304(b)(3)
relates to the transfer of all or substantially all the property used by a
person in the course of an activity if after the transfer the real or ultimate
ownership of the property is substantially similar to that which existed before
the transfer; Tax Code, §
151.304(b)(4)
relates to the sale of not more than 10 admissions for amusement services
during a 12-month period by a person who does not hold himself out as engaging,
or does not habitually engage, in providing amusement services; Tax Code,
§
151.304(b)(5)
relates to sales of items purchased for use by an individual who does not hold,
and is not required to obtain a sales and use tax permit. In order to be exempt
from sales tax, total sales by the individual must not exceed $3,000 per
calendar year. See §
3.316 of this title (relating to
Occasional Sales; Joint Ownership Transfers; Sales by Senior Citizens'
Organizations; Sales by University and College Student Organizations; and Sales
by Nonprofit Animal Shelters).
(c) Inapplicability of use tax.
(1) Use tax is not applicable if the
purchaser of a taxable item paid sales tax to a Texas seller or owes sales tax
to a Texas seller who failed to collect it. The comptroller may proceed against
the seller or the purchaser for the sales tax owed by either.
(2) Use tax is not applicable to the storage,
use, or other consumption of taxable items in this state if the sale, lease, or
rental of the taxable items would be exempt from the sales tax had the items
been purchased within Texas.
(d) User liability, payment of the tax and
credit for tax paid to another state.
(1) The
person storing, using, or consuming a taxable item in this state is liable for
the tax imposed under this section, and except as provided by paragraph (2) of
this subsection, the liability continues until the tax is paid to the
state.
(2) The liability may be
extinguished by payment of the Texas use tax directly to the comptroller or to
a seller authorized to collect it. See the use tax permit requirements for
out-of-state sellers in §
3.286 of this title.
(3) The basis of the use tax is the total
purchase price of the taxable item, including any related charges such as
shipping and handling fees, regardless of whether such fees are separately
stated. See §
3.303 of this title (relating to
Transportation and Delivery Charges).
(4) The tax must be reported and remitted to
the comptroller with the return covering the period in which the taxable items
are first stored, used, or otherwise consumed in Texas as provided by §
3.286 of this title. Purchasers
without a sales and use tax permit should refer to §
3.286 of this title to view the
tax responsibilities of non-permitted purchasers.
(5) Credit is allowed against the use tax
liability to the extent that a similar sales or use tax was legally due and
paid to another state under the conditions provided in Tax Code, Chapter 141
and Chapter 151, §151.303. See §
3.338 of this title (relating to
Multistate Tax Credits and Allowance of Credit for Tax Paid to
Suppliers).
(e)
Presumption.
(1) Tangible personal property
that is shipped or brought into this state by, or at the direction of, a
purchaser is presumed, in the absence of evidence to the contrary, to have been
purchased from a seller for storage, use, or consumption in this state. A
taxable service used in this state is presumed, in the absence of evidence to
the contrary, to have been purchased from a seller for use in this
state.
(2) Tangible personal
property purchased out of state and used for its intended purpose outside of
Texas for more than one year before the date of entry into Texas will not be
presumed to have been purchased for use in Texas. This presumption applies only
if the use outside Texas is substantial and constitutes a primary use for which
the property was purchased. Either the comptroller or the purchaser may
introduce evidence to establish the intent or absence of intent to use the
taxable items in Texas at the time of purchase.
(3) If tangible personal property is shipped
outside of Texas by the seller such that the transaction is exempt from sales
tax under Tax Code, §
151.330(a),
and the property is outside of Texas for less than one year before reentering
Texas, the presumption is that the property is purchased for use in
Texas.
(f) Local use tax
is due to the jurisdictions where taxable items are first stored, used, or
consumed.
(g) Direct payment permit
holders - election to pay use tax at time of first storage or upon first
removal from storage for use in Texas. If, at the time an item is purchased and
stored in the state, it is not known if the item will be used in Texas or
removed from the state for use elsewhere, a direct payment permit holder can
elect to either pay state and local use tax at the time an item is first
removed from storage for use in Texas or elect to pay state and local use tax
on the item when first stored in Texas. This election must consistently apply
to all stored items once the election is made and consistently apply to all
state and local taxes that are due. Local tax is due to the jurisdictions where
the item is first stored regardless of which election is chosen. A direct pay
permit holder who elects to pay Texas use tax when items are first stored may
claim a refund as provided by other sections of this title of taxes paid on
items that are removed from storage in Texas for use elsewhere.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.