| (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.
Cont'd... |
