(a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Equipment--Any apparatus, device, or simple machine
used to perform a service.
(2) Federal government--The government of the United
States of America and its unincorporated agencies and instrumentalities,
including all parts of the executive, legislative, and judicial branches
and all independent boards, commissions, and agencies of the United
States government unless otherwise designated in this section.
(3) Integral part--An essential element without which
the whole would not be complete. One taxable item is an integral part
of a second item if the taxable item is necessary, as opposed to desirable,
for the completion of the second item, and if the second item could
not be provided as a whole without the taxable item.
(4) Internet hosting service--The provision to an unrelated
user of access over the Internet to computer services using property
that is owned or leased and managed by the service provider and on
which the unrelated user may store or process the user's own data
or use software that is owned, licensed, or leased by the unrelated
user or service provider. The term does not include telecommunications
services as defined in §3.344 of this title (relating to Telecommunications
Services).
(5) Machinery--All power-operated machines.
(6) Mexico--Within the geographical limits of the United
Mexican States.
(7) Purchaser--A person who is in the business of selling,
leasing, or renting taxable items.
(8) Seller--Every retailer, wholesaler, distributor,
manufacturer, marketplace provider, or any other person who sells,
leases, rents, or transfers ownership of tangible personal property
or performs taxable services for consideration. Specific types of
sellers, such as direct sales organizations, pawnbrokers, marketplace
providers, and auctioneers, are further defined in §3.286 of
this title (relating to Seller's and Purchaser's Responsibilities).
(9) Taxable item--Tangible personal property and taxable
services. Except as otherwise provided by Tax Code, Chapter 151, the
sale or use of a taxable item in an electronic form instead of on
physical media does not alter the item's tax status.
(10) Tax-free inventory--A stock of tangible personal
property purchased tax-free for resale, whether from out-of-state
or by issuing a properly completed resale certificate, by a purchaser
who, at the time of purchase:
(A) holds a valid Texas sales and use tax permit;
(B) makes sales of taxable items in the regular course
of business; and
(C) does not know whether the tangible personal property
will be resold in the normal course of business or used in the performance
of a service.
(11) United States--Within the geographical limits
of the United States of America or within the territories and possessions
of the United States of America.
(b) Sale for resale.
(1) Except as provided in paragraphs (3) - (6) of this
subsection, each of the following is a sale for resale:
(A) the sale of a taxable item to a purchaser who acquires
the taxable item for the purpose of reselling it as a taxable item
in the United States or Mexico in the normal course of business:
(i) in the form or condition in which it is acquired;
or
(ii) as an attachment to or as an integral part of
another taxable item;
(B) the sale of tangible personal property to a purchaser
who acquires the property for the sole purpose of leasing or renting
it in the United States or Mexico in the normal course of business
to another person, but not if incidental to the leasing or renting
of real estate, as described in §3.294(k) of this title (relating
to Rental and Lease of Tangible Personal Property);
(C) the sale of tangible personal property to a purchaser
who acquires the property for the purpose of transferring the property
to a customer in the United States or Mexico as an integral part of
a taxable service;
(D) the sale of a taxable service performed on tangible
personal property that the purchaser of the service holds for sale,
lease, or rental;
(E) the sale of tangible personal property or a taxable
service to a purchaser who acquires the tangible personal property
or service for the purpose of transferring it as an integral part
of performing a contract, or a subcontract of a contract, for the
sale, other than the lease or rental, of tangible personal property
with an entity or organization exempted from the taxes imposed by
this chapter under Tax Code, §151.309 (Governmental Entities)
or Tax Code, §151.310 (Religious, Educational, and Public Service
Organizations) only if the purchaser:
(i) allocates and bills to the contract the cost of
the tangible personal property or service as a direct or indirect
cost; and
(ii) transfers title to the tangible personal property
to the exempt entity or organization under the contract or subcontract
and any applicable acquisition regulations;
(F) the sale of a wireless voice communication device,
such as a cellular telephone, to a purchaser who acquires the device
for the purpose of transferring the device as an integral part of
a taxable telecommunication service when the purchase of the service
is a condition for receiving the device, regardless of whether there
is a separate charge for the device or whether the purchaser is the
provider of the taxable service. See §3.344 of this title for
information about telecommunication services; and
(G) the sale of a computer program to a provider of
Internet hosting services who acquires the computer program from an
unrelated vendor for the purpose of selling the right to use the computer
program to an unrelated user of the provider's Internet hosting services
in the normal course of business and in the form or condition in which
the provider acquired the computer program, without regard to whether
the provider transfers care, custody, and control of the computer
program to the unrelated user. The performance by the provider of
routine maintenance of the computer program that is recommended or
required by the unrelated vendor of the computer program does not
affect the application of this subsection. For purposes of this subsection,
the purchase of the computer program by the provider qualifies as
a sale for resale only if:
(i) the provider offers the unrelated user a selection
of computer programs that are available to the public for purchase
directly from an unrelated vendor;
(ii) the provider executes a written contract with
the unrelated user that specifies the name of the computer program
sold to the unrelated user and includes a charge to the unrelated
user for computing hardware;
(iii) the unrelated user purchases the right to use
the computer program from the provider through the acquisition of
a license; and
(iv) the provider does not retain the right to use
the computer program under that license.
(2) To qualify as a sale for resale, the taxable item
must be acquired for the purpose of selling, leasing, or renting it
in the regular course of business or for the purpose of transferring
it as an integral part of a taxable service performed in the regular
course of business.
(3) A sale for resale does not include the sale of
internal or external wrapping, packing, or packaging supplies to a
purchaser who acquires the supplies for use in wrapping, packing,
or packaging tangible personal property, or in the performance of
a service, for the purpose of furthering the sale of the tangible
personal property or the service. See §3.314 of this title (relating
to Wrapping, Packing, Packaging Supplies, Containers, Labels, Tags,
Export Packers, and Stevedoring Materials and Supplies).
(4) A sale for resale does not include the sale of
tangible personal property or a taxable service to a purchaser who
acquires the property or service for the purpose of performing a service
not listed as a taxable service under Tax Code, §151.0101 ("Taxable
Services"), regardless of whether title transfers to the service provider's
customer, unless the tangible personal property or taxable service
is purchased for the purpose of performing a contract, or a subcontract
of a contract, for a service, including a taxable service under Tax
Code, §151.0101, with any branch of the Department of Defense,
Department of Homeland Security, Department of Energy, National Aeronautics
and Space Administration, Central Intelligence Agency, National Security
Agency, National Oceanic and Atmospheric Administration, or National
Reconnaissance Office to the extent allocated and billed to the contract
with the federal government.
Cont'd... |